Podcast appearances and mentions of michael albaum

Why This Episode Is a Must-Watch Real estate investing is one of the most powerful wealth-building tools available, and this episode of Inspired Money dives deep into how you can leverage rental properties to build long-term wealth. Whether you're just starting out or looking to expand your portfolio, this episode offers valuable insights and actionable strategies to help you succeed in today's market. Meet the Expert Panelists Kathy Fettke is a real estate investor, educator, and co-founder of RealWealth, where she helps investors build passive income through smart real estate strategies. She is the author of Retire Rich with Rentals and co-author of Scaling Smart: How to Design a Self-Managing Business, as well as the host of the popular podcasts The Real Wealth Show and Real Estate News for Investors. Jason Hartman is a real estate investor, entrepreneur, and CEO of Empowered Investor, specializing in helping people build wealth through income property investments across the United States. As the host of the Creating Wealth Podcast and a sought-after speaker, he educates investors on market cycles, financing strategies, and long-term wealth-building through his Complete Solution for Real Estate Investors™ system. Michael Albaum is a real estate investor, educator, and founder of MyFI Academy, specializing in long-distance rental investing and financial independence. He is also the co-founder of Bold Street AI, providing data-driven insights for smarter real estate investments, and the host of The Remote Investor podcast, where he shares expert advice on building wealth through real estate. Starting as a fire protection engineer, Michael built a portfolio of 61+ units using strategies like BRRRR and turnkey investing, helping others achieve financial freedom through informed decision-making. Monick Halm is a real estate investor, syndicator, and founder of Real Estate Investor Goddesses, a community dedicated to helping women build wealth through real estate. With over 20 years of experience and $350 million in real estate transactions, she is the bestselling author of The Real Estate Investor Goddess Handbook and Invest Like a Goddess, as well as a TEDx speaker and host of the Real Estate Investor Goddesses Podcast. Key Highlights: Understanding Market Indicators Kathy Fettke emphasizes the importance of investing in growth areas with strong population and job increases. She states, "You want to be in areas that are growing... You need so much more information than just a pro forma." Leverage and Inflation Jason Hartman explains how inflation can be a hidden benefit for real estate investors, noting that "inflation basically pays our debt down for us" by allowing us to pay back loans with weaker future dollars. Creative Financing Options Monick Halm discusses various financing strategies beyond traditional loans, including debt service coverage and non-qualified mortgages, making real estate investing accessible even for those who may not qualify for traditional bank loans. The Power of Partnerships Michael Albaum highlights the significance of partnerships and syndications, encouraging investors to collaborate and leverage shared resources to achieve financial freedom and expand their portfolios. Call-to-Action Find one potential rental market that interests you and start researching. Look at job growth, population trends, and rental demand. Even if you're not ready to invest today, building your market knowledge will help you spot the right opportunities when they come. Share your findings with us on LinkedIn! Find the Inspired Money channel on YouTube or listen to Inspired Money in your favorite podcast player. Andy Wang, Host/Producer of Inspired Money

Is now the right time to dive into multifamily commercial real estate? Join us as we explore this crucial question with expert investor, Michael Albaum. We'll break down current market trends, analyze potential opportunities, and provide you with actionable insights to make informed investment decisions. Don't miss this essential guide! #multifamily #commercialrealestate #realestateinvesting #michaelalbaum #realestatetrends. Michael Albaum is a real estate investor who has a great story to share and words of wisdom to impart for both beginning and veteran investors alike, so grab your pen and paper, buckle up and enjoy the ride.Want to become financially free through commercial real estate? Check out our eBook to learn how to jump start a cash flowing real estate portfolio here https://www.therealestateinvestingclub.com/real-estate-wealth-book Enjoy the show? Subscribe to the channel for all our upcoming real estate investor interviews and episodes. ************************************************************************ GET INVOLVED, CONNECTED & GROW YOUR REAL ESTATE BUSINESS LEARN -- Want to learn the ins and outs of real estate investing? Check out our book at https://www.therealestateinvestingclub.com/real-estate-wealth-book PARTNER -- Want to partner on a deal or connect in person? Email the host Gabe Petersen at gabe@therealestateinvestingclub.com or reach out on LinkedIn at https://www.linkedin.com/in/gabe-petersen/ WATCH -- Want to watch our YouTube channel? Click here: https://bit.ly/theREIshow ************************************************************************  ABOUT THE REAL ESTATE INVESTING CLUB SHOW  Hear from successful real estate investors across every asset class on how they got started investing in real estate and then grew from their first deal to a portfolio of cash-flowing properties. We interview real estate pros from every asset class and learn what strategies they used to create generational wealth for themselves and their families. The REI Club is an interview-based real estate show that will teach you the fastest ways to start and grow your real estate investing career in today's market - from multifamily, to self-storage, to mobile home parks, to mix-use industrial, you'll hear it all! Join us as we delve into our guests career peaks and valleys and the best advice, greatest stories, and favorite tips they learned along the way. Want to create wealth for yourself using the vehicle of real estate? Getting mentorship is the fastest way to success. Get an REI mentor and check out our REI course at https://www.therealestateinvestingclub.com. #realestateinvesting #passiveincome #realestate  Send us a textInterested in becoming a passive investor in one of our projects? Kaizen Properties, is looking for passive investors for our upcoming deals. We invest in what are known as “recession resistant assets”: self storage, MH & RV parks, and industrial properties. If you are interested, go to the website and click on the “Invest with Us” button at the bottom of the page.Support the show

With today's technology, becoming a real estate investor is possible without ever seeing the properties you buy. This is the path many would-be investors take when they live in more expensive areas like California. Today's guest is one such investor. On this episode of Zen and the Art of Real Estate Investing, Jonathan sits down with Michael Albaum, a professional real estate investor with over 12 years of experience. Michael is an Airbnb Superhost and the founder of myFI, which stands for financial independence. Jonathan and Michael begin their conversation by delving into Michael's path to remote investing through a property in Southern California. Michael shares how he began to scale his business as he better understood costs in various parts of the country. You'll hear how coliving with roommates helped Michael get his business off the ground, the importance of finding an unbiased party to evaluate properties for you remotely, and what drew him to multifamily and mixed-use properties as he expanded. He also outlines the difference between financial independence and financial freedom, the benefits of retaining a W2, and Michael's recommendation to put in offers on homes even when you know they will be rejected. Finally, he shares why he loves midterm rentals and what he sees changing for them in the future. Real estate can be prohibitively expensive for investing in some parts of the country, but Michael Albaum teaches others how to find investing opportunities in lesser-known areas and create opportunities to build a legacy. In this episode, you will hear: Michael Albaum's path to remote investing and his early interest in real estate The fears surrounding remote investing and how systems can help mitigate the fear His first property in Southern California and how his dad helped him evaluate the property with numbers instead of emotions Scaling the business and understanding costs in various parts of the country Coliving and community living while investing in real estate Finding an unbiased eye to help evaluate properties for you when buying remotely Moving into multifamily and mixed-use The difference between financial independence and financial freedom and the role a W2 plays in that Why it's okay not to have all the answers when you start and making offers you know will be rejected The importance of firsthand experience Michael's plans for the future and his focus on his coaching and education business What he likes about midterm rentals versus short-term and long-term Follow and Review: We'd love for you to follow us if you haven't yet. Click that purple '+' in the top right corner of your Apple Podcasts app. We'd love it even more if you could drop a review or 5-star rating over on Apple Podcasts. Simply select “Ratings and Reviews” and “Write a Review” then a quick line with your favorite part of the episode. It only takes a second and it helps spread the word about the podcast. If you enjoyed this episode, we've created a PDF that has all of the key information for you from the episode. Just go to the episode page at https://zenandtheartofrealestateinvesting.com/podcast/218/ to download it. Supporting Resources: myFI academy - www.myfiacademy.com Find Michael Albaum on Instagram - www.instagram.com/myfimike Connect with Michael on LinkedIn - www.linkedin.com/in/michaelalbaum Michael on X - x.com/MichaelAlbaum Website - www.streamlined.properties YouTube - www.youtube.com/c/JonathanGreeneRE/videos Instagram - www.instagram.com/trustgreene Instagram - www.instagram.com/streamlinedproperties TikTok - www.tiktok.com/@trustgreene Zillow - www.zillow.com/profile/StreamlinedReal Bigger Pockets - www.biggerpockets.com/users/TrustGreene Facebook - www.facebook.com/streamlinedproperties Email - info@streamlined.properties Episode Credits If you like this podcast and are thinking of creating your own, consider talking to my producer, Emerald City Productions. They helped me grow and produce the podcast you are listening to right now. Find out more at https://emeraldcitypro.com Let them know we sent you.

Joining us in this episode of Living Off Rentals is someone who has spent the last decade mastering remote real estate investing across a range of property types. Michael Albaum is a seasoned real estate investor who began his journey in 2012 and has since built a portfolio spanning various asset classes. As the creator of MyFI (Financial Independence) Academy, he now helps others achieve financial independence through real estate investing. In this episode, Michael shares how his early mindset shifts led him to multifamily investing, why he decided to focus on just a few markets, and how he managed to invest remotely—even while traveling internationally and living on the road. He also dives into his definition of financial independence, the sacrifices he made along the way, and his advice for anyone looking to get started in real estate. Enjoy the show! Key Takeaways: [00:00] Introducing Michael Albaum and his background [06:02] Michael's mindset shifts in real estate [08:45] The hardships of real estate [17:34] His journey after that first deal! [22:06] You can diversify within a particular market [28:45] Being a professional remote real estate investor [30:54] Michael's definition of financial independence [38:20] His best deal! [42:09] Connect with Michael Albaum Guest Links: Website: https://www.myfiacademy.com/  Show Links: Living Off Rentals YouTube Channel – youtube.com/c/LivingOffRentals  Living Off Rentals YouTube Podcast Channel - youtube.com/c/LivingOffRentalsPodcast  Living Off Rentals Facebook Group – facebook.com/groups/livingoffrentals  Living Off Rentals Website – https://www.livingoffrentals.com/  Living Off Rentals Instagram – instagram.com/livingoffrentals  Living Off Rentals TikTok – tiktok.com/@livingoffrentals   

Michael Albaum began his real estate investing journey over a decade ago with turnkey single-family homes. Recognizing the power of real estate, he has spent the last 10+ years owning and operating a diverse portfolio, including condos, small and commercial multifamily properties, value-add projects, NNN-leased properties, and short- and mid-term rentals—even expanding into international investments.   While building his portfolio remotely, Michael worked a full-time job and developed a curriculum to teach others how to achieve financial freedom through real estate. He has since worked with thousands of investors worldwide, helping them navigate the complexities of investing and successfully build their own real estate portfolios.   In this episode, we talked to Michael about his journey on how he evolved as an investor, managing out-of-state properties, his investment strategies, value-add multifamily vs. triple net leases, his education program, and much more.   Get ready for REWBCON 2025, happening from April 10th to 12th! Use my code JOHN at checkout for 10% off your ticket.   Scaling in Real Estate;   02:31 Michael's background; 11:26 An insight into his evolution as an investor; 15:23 Tips on managing out-of-state assets; 18:57 More about Michael's investments; 21:14 Value-added multifamily vs. triple net leases; 23:08 About his education program; 25:57 Round of Insights   Announcement: Learn about our Apartment Investing Mastermind here.   Round of Insights   Apparent Failure: A redevelopment project going sideways. Digital Resource: Microsoft Excel. Most Recommended Book: Rich Dad Poor Dad. Daily Habit: Doing push-ups every morning. #1 Insight for scaling in real estate: It's not as hard as it looks, just get started. Best place to grab a bite in San Francisco, CA: Burma Superstar.   Contact Michael: Website   Thank you for joining us for another great episode! If you're enjoying the show, please LEAVE A RATING OR REVIEW,  and be sure to hit that subscribe button so you do not miss an episode.

We'd love to hear from you. What are your thoughts and questions?In this conversation, Michael Albaum shares his inspiring journey into real estate investing, detailing the pivotal moments that ignited his passion and the challenges he faced along the way. He discusses the common fears and misconceptions surrounding real estate, emphasizing the importance of education and mentorship in overcoming these barriers. Michael introduces his program, MyFi Academy, designed to help new investors navigate the complexities of real estate investing and achieve financial independence. He also reflects on his experiences with his first investment deal and the lessons learned from navigating challenges in the industry.Main Points:Michael's journey began with his first real estate deal over a decade ago.Many people have misconceptions about real estate investing due to past experiences.Education and understanding risks are crucial for successful investing.MyFi Academy aims to help new investors get started in real estate.Choosing a mentor with current experience is vital for success.Investing in real estate can be done with minimal capital.Consolidating investments in one market can lead to better results.Real estate investing requires a mindset shift to overcome fears.Challenges in real estate can be managed with the right knowledge and support.Building a network is essential for successful investing.Connect with Michael Albaum:https://www.myfiacademy.com/https://www.linkedin.com/in/michaelalbaum/https://www.instagram.com/myfimike/https://x.com/MichaelAlbaumhttps://www.youtube.com/@TheRemoteInvestor

Ever wonder what happens when real estate investing does not go according to plan?  In today's episode, we have Michael Albaum, a successful real estate investor and educator with a proven track record of success. After achieving financial independence early through smart investments, Michael experienced some bumpy roads and severe economic loss. Michael had to rebuild his empire from the ground up and return even stronger and more successful. Michael will share strategies that led him to become one of the top figures in the real estate sector and what mindset helped him bounce back from hitting rock bottom. He will reveal several fundamental investment principles applied to build lasting wealth and transform setbacks. You are going to love Michael's inspiring story. You can learn so much from his incredible journey. But most of all, find out from him how your challenges can become opportunities for growth and success. Listen to the full episode and get inspired! PODCAST HIGHLIGHTS: [01:00] Discuss the first couple of deals Michael made and the challenges he faced initially. [03:40] How Michael achieved financial independence, lost it, and the steps he took to regain stability. [07:20] Real estate investing challenges and how entrepreneurship shaped Michael's approach to long-term success. [12:45] Michael's commitment to self-education in real estate and how it helped him overcome early setbacks. [16:30] Insights into Michael's first deal, including that investment's strategy, process, and outcome. [21:45] Tenant management problems Michael encountered and the key lessons learned from those early experiences. [26:10] Importance of selecting the right tenants and how poor choices can impact real estate investments. [32:30] Real estate appreciation, market trends, and how property value growth contributed to Michael's portfolio. [38:00] How Michael went from one property to owning multiple real estate investments. [43:15] How financial independence allowed Michael to travel the world and experience life abroad. [48:40] The one project that caused Michael to lose financial independence and its long-term effects. [53:10] The emotional and psychological impact of losing financial independence and how Michael coped. HOST Craig Curelop   

Today's Flash Back Friday episode is from #463 that originally aired on July 18, 2022. Real estate investment expert, and fellow podcaster, Michael Albaum. Michael is a real estate investor and Program Manager/Head Coach of Roof-stock Academy, which is one of the world's leading real estate investment marketplaces and has exceeded more than $6 billion in transactions and continues to disrupt the industry with cutting-edge technology and innovations.  In the last decade, Michael has done a variety of deals ranging from single-family homes to longer-term NNN lease properties with national chain tenants. After years of investing, he found his niche in long-distance, value-add multifamily investing. Michael recently left the 9-5 world and prior to the pandemic was traveling around the world with his wife, who is also able to work remotely.   Quote:   “As I grew organically in the real estate space, my purview grew as well. And I found short-term rentals are an asset class that can make a lot of sense for a lot of people.” Highlights:   05:45: Why getting laser-focused on particular markets led to Michael's success 07:45: The systems and processes Michael uses to manage investments remotely 09:50: How Michael manages his multi-family investments 13:05: Getting multi-family units ready to lease using property management companies 17:05: How the pandemic and today's financial market impacted Michael's investment strategy 22:00: Getting funding for rehab projects 28:10: How short-term rentals have been impacted by increases in post-covid travel 31:35: Finding financing for short-term rental investments 32:40: What advice Michael would give to himself 10 years ago Guest Website: https://www.roofstockacademy.com/   Recommended Resources: Accredited Investors, you're invited to Join the Cashflow Investor Club to learn how you can partner with Kevin Bupp on current and upcoming opportunities to create passive cash flow and build wealth. Join the Club!   If you're a high net worth investor with capital to deploy in the next 12 months and you want to build passive income and wealth with a trusted partner, go to InvestWithKB.com for opportunities to invest in real estate projects alongside Kevin and his team.    Looking for the ultimate guide to passive investing? Grab a copy of my latest book, The Cash Flow Investor at KevinBupp.com.    Tap into a wealth of free information on Commercial Real Estate Investing by listening to past podcast episodes at KevinBupp.com/Podcast. Learn more about Kevin's investment company and opportunities for Lifetime Cashflow at sunrisecapitalinvestors.com.

Today's Flash Back Friday episode is from episode #585, which originally aired on 5/1/23.   Real estate investor Michael Albaum splits his time between full-time real estate investor as well the program manager for Roofstock Academy. His experience runs the gamut of single family investments all the way to NNN properties with national credit tenants and a little bit of everything in between. Additionally, Michael has built an expertise at long-distance, value-add multifamily investing and has structured lifestyle that has allowed him to continually invest while traveling the world with his wife.      Quote:  Don't pretend you know everything, because you don't. Be humble and willing to ask questions and to learn.    Highlights:  04:55: Getting laser focused on one market to get better results 07:35: Utilizing local, state and national grants to help buy and fix up properties 15:10: The work Michael does teaching real estate investors at Roofstock 17:25: How Roofstock's mission and business model has shifted to adjust to the current market 20:15: Why mid-term rentals have helped Michael weather current market conditions 25:25: How Michael traveled full-time in a van while managing his investments 27:30: Where Michael's business is headed in the next five years 33:25: The types of mid-term rentals that are most in-demand   Guest Website: https://www.roofstock.com/   Recommended Resources:  Accredited Investors, you're invited to Join the Cashflow Investor Club to learn how you can partner with Kevin Bupp on current and upcoming opportunities to create passive cash flow and build wealth. Join the Club! If you're a high net worth investor with capital to deploy in the next 12 months and you want to build passive income and wealth with a trusted partner, go to InvestWithKB.com for opportunities to invest in real estate projects alongside Kevin and his team.  Looking for the ultimate guide to passive investing? Grab a copy of my latest book, The Cash Flow Investor at KevinBupp.com.  Tap into a wealth of free information on Commercial Real Estate Investing by listening to past podcast episodes at KevinBupp.com/Podcast. Learn more about Kevin's investment company and opportunities for Lifetime Cashflow at sunrisecapitalinvestors.com.

Going Long Podcast SERIES HIGHLIGHT Episode 323: How to Successfully Navigate The Long Distance Investing Landscape To see the Video Version of today's conversation just CLICK HERE. In this special SERIES HIGHLIGHT episode with today's guest, Michael Albaum, you'll learn the following:   [00:37 - 04:09] Show introduction with comments from Billy. [04:09 - 07:08] Guest introduction and first questions. [07:08 - 14:20] The backstory and decisions made that led Michael to this point in his journey. 14:20 - 20:31] Why Michael made the contrarian decision to invest beyond his own backyard and out of State in Real Estate rather than sticking with his local market locations, and how you can know if it's the right thing for you to do too.. [20:31 - 23:29] How Michael's real asset investing is aligned with the way he likes to live his life. [23:29 - 28:59] What Michael means when he says “If it's not easy to do now, it's not worth doing”. [28:59 - 36:02] Some of the tactical elements of investing that Michael helps his students with. [36:02 - 49:05] How people are using technology to facilitate their long distance investments, and what some of the risks can be in not being local to where you investment properties are. Here's what Michael shared with us during today's conversation:    Where in the world Michael is based currently: San Francisco Bay, California. The most positive thing to happen in the past 24 hours: Michael found out that he may be able to buy his neighbor's property which has just come up on the market. Favourite European city: Sagres, Portugal. A mistake that Michael would like you to learn from so that you don't have to pay full price: Get out there and make some mistakes, learn from those mistakes and alo learn from the mistakes and success of other people. Book Recommendation: Rich Dad Poor Dad, by Robert Kiyosaki. Be sure to reach out and connect with Michael Albaum by using the info below:   LinkedIn: https://www.linkedin.com/in/michael-albaum-297a8534  Websites: https://www.roofstockacademy.com/ and https://www.roofstock.com/  Twitter: https://twitter.com/MichaelAlbaum?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor    To see the Video Version of today's conversation just CLICK HERE.   How to leave a review for The Going Long Podcast: https://youtu.be/qfRqLVcf8UI    Start taking action TODAY so that you can gain more Education and Control over your financial life.   Are you an Accredited Investor that's tired of getting crushed by paying so much in income tax? Find out how we're helping others like you keep Uncle Sam out of your pocket. Go to https://www.firstgencp.com/goinglong   Be sure to connect with Billy!  He's made it easy for you to do…Just go to any of these sites:   Website: www.billykeels.com Youtube: billykeels Facebook: Billy Keels Fan Page Instagram: @billykeels Twitter: @billykeels LinkedIn: Billy Keels

Real estate investor Michael Albaum splits his time between full-time real estate investor as well the program manager for Roofstock Academy. His experience runs the gamut of single family investments all the way to NNN properties with national credit tenants and a little bit of everything in between. Additionally, Michael has built an expertise at long-distance, value-add multifamily investing and has structured lifestyle that has allowed him to continually invest while traveling the world with his wife.      Quote:  Don't pretend you know everything, because you don't. Be humble and willing to ask questions and to learn.    Highlights:  04:55: Getting laser focused on one market to get better results 07:35: Utilizing local, state and national grants to help buy and fix up properties 15:10: The work Michael does teaching real estate investors at Roofstock 17:25: How Roofstock's mission and business model has shifted to adjust to the current market 20:15: Why mid-term rentals have helped Michael weather current market conditions 25:25: How Michael traveled full-time in a van while managing his investments 27:30: Where Michael's business is headed in the next five years 33:25: The types of mid-term rentals that are most in-demand   Guest Website: https://www.roofstock.com/   Recommended Resources:  Accredited Investors, you're invited to Join the Cashflow Investor Club to learn how you can partner with Kevin Bupp on current and upcoming opportunities to create passive cash flow and build wealth. Join the Club! If you're a high net worth investor with capital to deploy in the next 12 months and you want to build passive income and wealth with a trusted partner, go to InvestWithKB.com for opportunities to invest in real estate projects alongside Kevin and his team.  Looking for the ultimate guide to passive investing? Grab a copy of my latest book, The Cash Flow Investor at KevinBupp.com.  Tap into a wealth of free information on Commercial Real Estate Investing by listening to past podcast episodes at KevinBupp.com/Podcast. Learn more about Kevin's investment company and opportunities for Lifetime Cashflow at sunrisecapitalinvestors.com.

In this episode, I am joined by Michael Albaum, an expert in real estate investing and how you can get started with your first investment property, whether remotely or on the ground. Michael shares his philosophy on investing and why its best to get started as early as possible, how to invest remotely in a property, and the importance of financial literacy. He also shares his experiences living full-time in a van and how he house hacks his way to financial freedom. Connect with MichaelTwitter: twitter.com/MichaelAlbaumFacebook: facebook.com/michael.albaum.3Connect with NicoleNomadNeeks on Instagram @nomadneeksNomadNeeks on Facebook @nomadneeksNomadNeeks on YouTube @nomadneeksNomadNeeks on Twitter @nomadneeksNomadNeeks Blog & Website⁠Digital Nomad Facebook Group⁠--- Send in a voice message: https://podcasters.spotify.com/pod/show/workwealthtravel/message

In this episode we call "Living in a Van Down by the River," NARPM(R) Radio host Pete Neubig interviews “Roofstock” real estate investor podcast host/Roofstock Academy director Michael Albaum , who discusses what it takes to live in a van down by the river! Michael lived in a van with his wife and traveled the country while working full time. Roofstock is a platform that helps real estate investors purchase single-family homes all over the country. Roofstock works with thousands of real estate investors ranging from newbies to experienced. Learn what investors are looking for in a property manager, why they self-manage and how to overcome it.

This episode features the masterminds behind Roofstock OnChain, Geoffrey Thompson, and Sanjay Raghavan. We discuss the revolutionary product of tokenized real estate, how it works, the problems it solves, the incredible scaling power of this new technology, and who it is for.   Geoff Thompson built his career at top-tier law firms practicing in the areas of capital markets, banking and credit, structured finance, private equity, and cross-border transactions. Geoff's prior role at Roofstock was as general counsel where he advised on partnerships, product innovation, fundraising, deal structuring, real estate matters, securities law, international expansion, and all other legal and compliance matters. Sanjay Raghavan is the Head of Web3 Initiatives of Roofstock onChain where he leads the real estate investing platform's blockchain initiative. After being accepted into Cypher Accelerator, Sanjay continues to build connections between real estate investing and blockchain. Sanjay is also an advisor at Pudgy Penguins NFTs. Roofstock onChain is the Web3 subsidiary of Roofstock, the leading digital real estate investing platform for the $4 trillion single-family rental home sector. Relevant links: https://mobile.twitter.com/eth_sanjay https://mobile.twitter.com/_gthomps     Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone, Michael Albaum here from the Remote Real Estate Investor, we're actually in the midst of a pivot and so we're changing the name of our show to be the SFR show. Reason being is we really want to double down on the single family rental industry as a whole and so we wanted to pick a title and a name that's reflective of that. So join us here on the new show, the SFR show where we're gonna be bringing you everything you need to know about SFR investing from what the market is doing at the micro and macro level, to what the factors are influencing and changing the space. So let's kick it off with this first episode. We hope you enjoy.   Hey everyone, welcome to the SFR show. We're going to be talking today with Geoff and Sanjay on Roofstocks web three team about cryptocurrency tokenization, alternative investments, portfolio theory and risk management just to name a few. So with that, let's just jump straight into it.   Geoff and Sanjay, good to see you both. How have you been?   Sanjay: Great. Good to see you again and, Michael, you look really different from the last time we spoke and so much younger and much more refreshed, I think after the holidays.   Michael: Thank you. Yeah, I came back from the holidays ready, you know, cut, put some 10 pounds on and took 10 years off my face. So I'm doing the best I can, so…   Geoff: That's it.   Michael: That's it. So for anyone who didn't catch our prior episode together, I'd love if you could give a really quick intro who you guys are and what is it that you're doing here at Roofstock.   Geoff: So yeah, we are co leading the web three business unit every stock. I'm Geoff Thompson, this is Sanjay Raghavan and we have been at Roofstock for several years and over the last year, we've spent all of our time focusing on how to use blockchain and web three technology to improve the real estate transaction process and to generally make single family rentals more accessible and asset class.   Michael: And for anyone who isn't familiar with what web three is definitely go back and give that prior episode a listen. Sanjay gets into it and kind of what the technology is. So I'm curious gents where we are today, where are you seeing blockchain and tokenization playing a role in the single family space.   Sanjay: So first of all, we had a sale of our Genesis property in mid-October. So for your audience who may have read about it on crypto Twitter or on media publications, that was a very successful launch of this product, we spent about 10 months working on legal and tax analysis of how to structure this product so that it would be compliant and when somebody was purchasing this property in a web three as a web three home, they were in fact getting, you know, ownership of the underlying assets. So that took us about 10 months to engineer and the sale. The first sale that happened in mid-October was a huge success, went viral on crypto Twitter, and was picked up by all the leading crypto and non-crypto publications and the reason for that was because for the first time, what really happened in crypto and blockchain, which, if your followers are looking at the market, in general, this has been a really particularly bad year in the industry for the stock market. Inflation has been at a 40 year high feds have been drastically, like we went to 475 basis point interest rate hike and so, you know, we're going through this very tumultuous time in the industry and crypto has not been an exception, either, they've, you know, Krypto has been having an unprecedented winter, where either like Bitcoin and Aetherium lost 60% of their value since last year to this year and then a bunch of crypto companies went insolvent, because of various either it was just poor risk management or just, you know, for whatever other reasons, you know, they didn't have the capital to withstand the, this bear market. So during these times, you know, this was sort of like a ray of light in this industry, because we had successfully demonstrated that it was actually possible to sell a single family rental property, which normally is a three four week closing process was done instantaneously using battery technologies. But we were also able to find a leverage partner who was able to provide a loan for that property at a 65% LTV and so the combination of all of this really was a very positive thing in the industry, and we got a lot of outreach because of that.   Michael: Hopefully it wasn't FTX, right…   Sanjay: No, the leverage partner was not FTY, it was Dehler finance. But specifically, you know, about your question about, you know, with respect to blockchain tokenization, what does that really mean for real estate is that, you know, we've been able to now demonstrate that it is possible to have a better sale experience, right? When you typically look at the three week closing process on a real estate transaction, there's a bunch of contingencies on an offer, both the buyer and seller are extremely nervous about what happens during the diligence period in those three weeks. You know, like, for example, as you're aware, you know, the inspection results come in, and then you find out something about the property that you were not aware of before and then there's typically some kind of negotiation that goes on the offer price after the fact. There's an appraisal, contingency financing contingency, and, you know, so anything can happen during this three week period, the seller and buyer, even though an offer was accepted, may have a disagreement later on, you know, based on the results of further analysis, and sometimes the offer can be rescinded and then you're back to the drawing board trying to relist the property and sell it. So it's a particularly stressful time, both for the buyer and seller and doing it through this web three mechanism essentially allows us to take a lot of that diligence, which still has to happen, but we're just moving it, you know, upfront in the process, so the buyer and seller have access to the same information about the property, and the buyer is able to perform all of their diligence upfront. The way Geoff talks about his experiences, you may spend a week or two looking at Amazon Prime to figure out what you want to buy for Christmas. But once you've made that decision, you want it to be delivered, you know, on Amazon Prime, same day or next day, you don't want to wait four weeks for it to be then shipped from China to you know, get to Los Angeles, and then from there to be transported to, you know, San Francisco. So, you know, we really want to make this process easy for people, right. So you do all your diligence upfront, but when you decide to make that purchase decision, it happens instantaneously and on top of that, when you add that financing in a way that's asset based and not based on your personal credit underwriting, you're not trying to find a lender and you know, sending them two years of tax returns and bank statements and as you as you're aware, Michael, what happens in this process is you send all this information, you get a pre underwriting approval and then as you're getting ready to close on the property a month or two have elapsed, and all your information is outdated, and you're resending all the information back to the lender. So you know, you want to avoid all of this as well, because that's also incredibly stressful as you're going through a purchase process and here, because it's a rental property, it's cashflow generating, you based on the value of the asset, you can actually underwrite the loan and say, you know, it's a $200,000 property, I'm comfortable giving you $100,000 loan against it and that makes the lending paradigm a lot simpler as well. So overall, it's generally a better experience, both for the seller and the buyer, when you bring in the battery technology into this process.   Michael: This is mind blowing, you guys. So, I'm curious, like, how are you seeing really or rather, are people doing this at scale? I mean, is this we did it once we've, we've proven that it can be done once. But what is the scalability factor look like here? For both buyers and for sellers?   Geoff: It is yeah, I can jump in here. It is scalable. It's scalable in the same way that buying and selling homes today can be done, you know in bulk, or you can assemble your own portfolio over time. It's not you know, there isn't a delayed production process in creating these and preparing them to be sold on the blockchain. We do get that question a lot. Well, how much does it cost to mint a token? You know, is it 10s of 1000s of dollars? No, that's, that's essentially free. How long does it take, it's essentially instantaneous. The work that we do to prepare this to be sold is, is what Sanjay alluded to the diligence and inspection making sure everything photos have been taken, taxes have been paid HOA square all of those things. That's what we do up front, which has to happen in any real estate transaction, we just package that up in a very short timeframe of you know, call it five or 10 days, once the home has been purchased, and rehabbed and you know, it's ready to be listed for sale. So this can be this can be scaled and then once the home has been put on chain, then this is where the seller really is going to feel the scalability and the ease of interaction because imagine that you own five or 10 or you know some number of homes, you want to rebalance your portfolio. Maybe you want to get into one market and get out of another market. Right now you know, you'd have to do that through the traditional process. It might take a few months and involved a number of different intermediaries. In our case, if you if you own those homes as tokenized properties, we can get them ready for sale in five or 10 days, and then they can be listed immediately and once they've been listed on an NFT marketplace, the sale can happen with one click. So you don't as the seller, you don't have to go through a you know, a prolonged and painful back and forth with the buyer countering after they get the inspection and you know, trying to haggle on the price or trying to get a discount here, whatever it might be. That's all taken care of up front. So in that sense, it's it does make this much more scalable and much more liquid than the traditional process.   Michael: Should audience and listeners be thinking about crypto almost like a foreign currency and so just quick anecdote. So I've invested in Portugal, I signed my purchase agreement to purchase the property in Portugal back in 2020, just before the pandemic, then where the dollar was really strong against the euro than the Dollar tanked against the Euro and so I changed money after the fact and just got totally hosed on the exchange rate. How should people be thinking about exchange rate, if you will, between cryptocurrency and whatever currency there?   Sanjay: Yeah, that's a that's a really good question, right and when you think about a cryptocurrency, like Bitcoin or Aetherium, these are the two sort of more commonly discussed cryptocurrencies, in a way it is, you can make the analogy that these are almost as though they are, you know, sovereign currencies of their own and there is an exchange rate between the US dollar and Bitcoin or Aetherium. The only difference here being that, you know, unlike Euro, or the British pound, where they have their own fiscal and monetary policies that, you know, determine what happens to their bank against the dollar, in the case of cryptocurrencies, they are highly volatile and we see that there's, they're very, actually strongly correlated to the stock market today. So, when, for example, the, there was an indication that the feds might slow down the rate at which they're increasing the interest rates and I think the expectation for, I believe this week the Fed is meeting and the expectation is that this week, it will be a 50 basis point taken sort of a 75 basis point high, the stock markets rallied and sorted Bitcoin with that and however, even though they're kind of strongly correlated, they're also highly volatile and so when we talk about people having cryptocurrencies that they can use to buy these properties, we actually suggest that they buy and keep their money in stable coins, which are pegged against the US dollar and there are companies such as circle which have USDC, and Paxos which has its own version of dollar pegged stable coin. And having your money in stable coins means that you're not subject to the same volatility, as Bitcoin or Aetherium might be which can drop or go up in value by 20-30% in a single day and that's, that's how we will really think about it. If people want to, you know, have an allocation, if somebody is really long on Bitcoin or Aetherium, and they want to have an allocation in that asset class, that's fine. As long as they're aware that those are highly volatile and in the short term, they could be, you know, fluctuating quite a bit.   Michael: Yeah and that makes sense and so when are you seeing people make the change from the stable coin to whatever coin they're going to be using to purchase the properties?   Sanjay: So the stable, you can actually purchase properties with stable coins and because, you know, we have a way to when we received those stable coins, for example, if we are the seller of the property, and, you know, property is purchased using, let's say, serpents, USDC. Once were paid in USD C, we have a way to convert that back into US dollars. So that's, you know, it makes essentially, you can think of the stable coins as programmable money meaning this whole transaction is happening on the blockchain, and it's happening through a piece of computer code, there's no you know, you and I are not sitting across the table signing documents and you know, giving a check and receiving title and in return. So, this is all happening because a piece of computer code is transferring money from you to me and transferring the, the LLC through the NFT giving you the LLC that I own, which has this property and since this is all being executed by computer code, this stable coin is really, you know, we refer to it as programmable money because a piece of computer program is able to move money from you to me, and, and allow this transaction to happen in that one click process that Geoff was talking about earlier.   Geoff: You know, it feels like this is the way things should work, right? If you think about the system that we have right now for closing property transactions. It's basically inherited from England 800 years ago. You know, we've made small advancements, but not really and it shouldn't you know, it all of everyone who is involved in these transactions, and every step that's taken is taken for a reason it's solving a particular problem. But if you stop and rethink how this is done, you realize that by reordering some things, and maybe, you know, using a splash of new technology here, you can actually dramatically change the experience for everyone and it's not necessarily, you know, a zero sum game, I think it's best, it's better for everyone, everyone who's in the industry is going to be better off, there will be more transactions, because it's easier to transact, there'll be more demand because people are interested in getting in, if they know they can get out easily, right? Right now, you know that if you're looking at buying a property, you're probably going to have to hold it at least five years to recover your closing costs and wait for it to appreciate a little bit and you know, it's going to be a headache, when you do have to sell, if you don't have those constraints, you know, transaction fees are less and the time involved is less, you'll be more inclined to get in the market, because you know, you can get out when you need to.   Sanjay: And, you know, I'll also add one more thing to that, right. So Michael, if you think about, you know, back in the day, when there were these kind of all day, buyers, a lot of them were like businessmen that, you know, one year, they might have made half a million dollars, but you know, then another year, it was only 150, or something and so it's very hard to underwrite those types of folks through a traditional underwriting process, because you're looking at two years of, you know, income and tax returns, and all of that, and a lot of them may not can qualify for more conventional financing. However, in an asset based lending type solution, you know, as long as you have the money, and, you know, you're not constrained by, you know, your income for the last two years or three years, as long as you have the money to buy the, you know, to put in as down payment on the product, and the asset itself has the value, you're able to borrow against it much more easily. So, you know, we just talked about the complexity of closing a real estate transaction, in general. But once you add in the financing layer, on top of that, it gets even harder because, you know, there's, again, in a in a, you know, when the market is going up, you just, you just don't know, if you know the max, you want to make the best offer, you can but at that offer, you don't know if you will qualify for the loan, because the also the rate might have moved since the time, you initially got underwritten and suddenly, with the new rate, you don't qualify anymore for that and you have to find that little bit more down payment to offset it or buy some points. You know, you and I have gone through this numerous times in our lives. But you know, you can avoid all of those types of issues because in an asset based lending program, you know, that when you buy this asset, which is worth $200,000, there's a lender, if they're willing to come in at 65%, LTV, you know that based on the value of the asset, you're going to get that loan.   Michael: And if we just decouple the crypto piece of this and blockchain piece of this, I mean, asset based lending, is that available for regular folks?   Sanjay: So in the traditional finance world, it is available, right, but it becomes it becomes harder, because when you're buying an investment property. As you know, Fannie Mae puts limitations on how many investment properties you can get financing for as an individual. Once you get past that limit, then you're looking at pretty much private money, hard money type lending solutions, until you can get up to a scale where you have enough properties where Citibank or Wells Fargo or Goldman Sachs might be interested in working with you. But there's this pocket where after you know, your first 10 properties till you get to a few 100, we are primarily working with, you know, non-bank lenders who are generally, you know, where the rate could be 10 or 12% and then, oftentimes, some of these lenders will also ask for a personal guarantee on top of it. So it's not, you know, while it is possible to get financing on investment properties in the traditional finance world, at some point, it doesn't scale very well and, you know, you're sort of in that desert for until you can somehow figure out a way to get to 200 properties when suddenly the larger lenders are willing to talk to you. So that problem goes away when you're using Blockchain, and specifically decentralized finance or defy as we refer to it, because they're incrementally each property that you're buying is getting financed based on asset value and so you know, you're able to get a much more sort of a pleasurable experience to get through the lending process on the blockchain than on the traditional work.   Michael: Let's pivot just a little bit and talk about risk management and portfolio theory and as folks are starting to scale their portfolio or really as institutions have already a sizable portfolio, where does tokenization fit in to their playbook? When's the appropriate time? When should people be thinking about it in general?   Sanjay: The way I like to answer this question is if you as an individual, if you went to your financial advisor, and said, okay, you know, I have, you know, a million dollars, I want to invest, and I want to make sure there's, you know, come up with a portfolio allocation, that makes sense for me, typically, they're going to, like, in the old days, it was just a sort of a 60,40 rule, there was 60%, in stocks, 40%. In bonds, yeah, but I think people have gotten smarter over the last 10 years and nowadays, when you go to a financial advisor, they're going to say, some allocation in stock, some allocation in fixed income bond products, and then an allocation to alternative investments, because that's where, you know, you can get non correlated yields, because the stock market moving in one direction should not and like, you know, God forbid, if you have an emergency, and you need some cash, like this would be a, you know, if you bought at the height of the market last year, this would be a really bad time to sell, you know, your S&P 500 shares to, to, you know, pay for whatever you had to write, whether it's a wedding, a doctor's thing, education, whatever it is. So, generally speaking, financial advisors these days suggest that you should have an allocation in alternative investments that are non-correlated to the stock and bond markets and, you know, you can access that pool of capital, you know, when you need to, right. So from that, from that perspective, diversification, and then when you talk about alternatives, there's, obviously, there's a wide range of assets there. But real estate is on top of mind, for almost all the, you know, anytime we talk about alternatives, real estate, sort of is one of the top things people talk about. So from that perspective, you know, almost every investor should probably be looking at some allocation, and it will depend on their individual circumstances, whether their age, their income, their marital status, and you know, their need for cash there, this cauldrons and all that, but, you know, advisors might ask you to put five to 10% or, or more into alternative asset classes and so the same financial hygiene should also be applied by corporations and institutions, because you're sort of being asked to manage the treasury of your company, let's say you are a venture funded company, and you just raised $100 million, well, you are going to keep a good portion of that money in cash and cash like instruments, money market, and so on, because you have working capital, you have other things that you need to be spending on. But some allocation of that you might put in US Treasuries, for example, right and in the crypto world, crypto institutions may keep some allocation in Bitcoin and Aetherium and other protocols that they have high conviction and but nevertheless, whether it's a web two institution or a crypto institution, it's just basic financial hygiene to have an allocation in alternative asset classes and specifically, with our product, being a web three product, you know, that money can stay, you know, essentially, the token they're purchasing is a is an NFT and it is part of the blockchain ecosystem, so they can keep their assets within the crypto world without having to continuously off ramp into US dollars and then on ramp it back into crypto when they need to switch back and forth with respect to how they receive rental income, of course, you know, if your properties are managed by a property manager, which they should be because institutions are not in the business of managing properties, you can collect your rent in cash if you have, you know, if you have to, if you have expenses that need to be paid out in US dollars, but also if you want to collect your rent and USDC or DDM, you have the option to do that as well.   So whether you're a two institution or a web three institution, depending on your cash needs and your crypto needs, now you can have a yield generating crypto asset, and the yield can be collected in Fiat or in or in cryptocurrency. So, you know, it is good financial health to do it. We encourage everybody to have some allocation, whether it's through Roofstock, or through any other channel channels that they would like to pursue, but they should have some allocation and alternatives if it just makes sense. Geoff, if you'd like to add something back?   Geoff: No, that's it. I mean, in our case, because we've designed a solution that allows you to transact with crypto natively. This is something that we've heard from a number of crypto or web three institutions that it's potentially very interesting for them, as opposed to maintaining all of their assets in a cryptocurrency or a stable coin, this isn't a way to get access to, you know, a diversified asset that does create yield and it does have a price appreciation component. So there are a lot of, you know, we've heard from the web three community in particular that this is a perfect diversification play.   Michael: And if I'm someone that owns a sizable portfolio, maybe I own it all in cash, because that's been my mantra and I do need that quick capital injection. I mean, could I tokenize these properties and then go get asset based lending and convert that into cash very quickly.   Geoff: Yes, that's your thinking ahead, I like that. Yes, the properties can be tokenized. Basically any point in their lifecycle. If you own them, now, you bought them through a traditional sale and settlement, you can, you know, basically what it means is you have to drop it into an LLC and the LLC has a particular structure that we've worked out, it is very particular. So you know, we'll work with you to set that create that LLC, to help transfer the property into the LLC. In most states, I think the vast majority of states that transfer from an owner to an LLC that's owned by the owner doesn't create transfer tax obligations. So there's, you know, there's a little bit of the traditional closing costs, recreation fee, or whatever that might be part of that. But it is perfectly possible to onboard existing assets that you own into the system and similarly, for if we're talking about other points in the lifecycle for builders, we've had a few builders reach out and say they're close to completing a community and they might want to try to sell some of these as in an NFT form, those can those new assets as new properties that really have never been titled before, those can also be titled directly into an LLC. So it's a very flexible structure, it accommodates property at whatever stage of the lifecycle it's in.   Michael: Anyone who's got conventional financing experience under their belt might be listening to this and saying, Well, you're talking about lending or talking about LLCs. Those two things often don't jive play nice get in the sandbox. So the acid base lender that we're working with, or that we are going to be working with, I would imagine has no issue lending to an LLC. Is that right?   Geoff: Yes, that's exactly right. The lenders that we're working with are the web three lenders, we have talked to numerous traditional lenders, and some of them expressed a lot of interest in digital assets and maybe they've even created a team. But in most cases, the underwriting aspect of it isn't, isn't there yet. They're not ready to take this to credit committee and make a loan on the structure that we're proposing here but that's okay because there are there's a lot of money that's available in the web three space, and it is more flexible in terms of what it requires. They don't necessarily need to have all of the same checks and balances that a traditional lender would be in terms of underwriting against the individual. They can be comfortable underwriting against the asset, because they're comfortable that in the event of default, that asset, it is already in their vaults. So it's in the lenders wallet at the time of default and because we're building this system where you can sell them through an NFT marketplace, there is liquidity that there wouldn't otherwise be if you were holding this you know the traditional way so you to your to your question. Are Trade Fi lenders, the traditional finance space interested? Yes, we've heard some say they're interested we haven't seen anyone actually show up to engage in detail. But there is an entirely separate pool of capital into web three space that's much more flexible and willing to work with Blockchain structure.   Michael: I think my last question, guys before I let you out of here is like I'm sold this sounds obviously like a really great product, like a really cool technology that exists. Who isn't this for who, who listening to this should think about that. It's not a good fit for me because XY and Z.   Sanjay: Yeah, I mean, I can start with a couple of things and then Geoff, you can add to that as well. So if the property already has financing in the Trade Fi world, this structure is hard, because we can't really transfer unencumbered property into an LLC and then tokenize it right because there's a traditional mortgage on the property and there's a whole kind of thing that's a fillip off chain, in terms of financing. So it's not going to work. If primarily you're looking to get off chain financing, then this is not for you. You have to you know, sort of follow the traditional sense. But anybody that's open to purchasing this as a web three property and open to looking at web three financing alternatives. For those people, this absolutely should be something they should consider. The one kind of drawback or question we've heard from a lot of people as they need to become familiar with how to use crypto wallets and how to essentially convert money into USD C or some stable coin, and then use that to go and make a purchase. We're here to help with those types of Q&A, right? The, you know, until you do it for the first time, it's hard, but after you've done it, then it's you know, it's easy, right? Just like when we, the, you know, iPhones first game, and people didn't know, you know, how do you which way do you swipe to do what, but then over time you get used to it and so we're absolutely happy to help anybody that's staying in the sidelines, purely because they don't understand the technology aspects of it, we can help them out. But for people that have financing constraints or other things, and you know, for them, it is until they can, you know, overcome those issues and look at sort of a pure web unencumbered property in the web three world with, then financing added to it on the blockchain. So for those audiences, that might, you know, until they figured out that, it might be a challenge.   Geoff: I'd also add for owner occupants, the financing isn't fully worked out yet. So the financing that we added to the initial home sale a few weeks ago, that was very much geared towards an investment property, and for the immediate future, to the extent that we're building out the different options for defi lending, it looks like most of them will be focused on these as investment properties, as opposed to owner occupant properties and that's for lending law reasons, not wanting to cross over into a mortgage lending licensing requirement and it also just dealing with, you know, the people that are different in the, at that point, the underwriting is different as well, because it's not as easy to necessarily sell that asset if the owner is living in it and so that type of thing. So for at the at the moment, we're thinking of this mostly for investment property, use cases.   Michael: Really, really cool stuff. For people that have questions that want to reach out that want to learn more, what's the best way for them to do so?   Geoff: Reach out on Email or Twitter. We're, we can drop our emails here, but it's: gthompson@roofstock.com or is it sraghavan, right?   Sanjay: Yeah, it's a sraghavan, so: S R A G H A V A N @roofstock.com. I'm also @eth_sanjay, Sanjay, Y on Twitter, so you can also reach out to me there. One thing before we sign off for today, we're super excited to say that we are in the process of closing our second property, that's going to get tokenized. Soon, this one's going to be in Georgia, at CES Atlanta suburb and we'll be going through the process as soon as this is closed in the next few days, we will be going through the process of documenting what the property looks like when we bought it and any Rehab we end up doing on it and you know, they'll be you know, talking about it on social media quite a bit as well as people who are new to real estate investing, maybe this is an opportunity for them to understand, well, you know, what are the kinds of things people should be looking at when they're analyzing a rental property and so as we go through the process of rehabbing this will sort of document that a little bit. But that, you know, once the rehab is completed that that'll get, they'll get tokenized soon, but once the rehab is completed, we'll have it available for sale.   Michael: Awesome, we'll definitely have to keep my eyes peeled for the process and for the property once it's finished. That's super exciting. Well, guys, it's always a pleasure, great seeing you both. Thanks for hanging out with me.   Sanjay: Thanks for having us.   Geoff: Always great to chat.   Sanjay: Bye!   Michael: Take care and talk soon. Hey, everyone. That was a wrap to our show. Thank you so much to Geoff and Sanjay. Super, super, super interesting stuff. Definitely leave us a rating or review wherever it is you get your podcasts and definitely reach out to those guys if you have any questions about web three, about tokenization about cryptocurrency home purchases. Again, really cool stuff. We look forward to seeing you on the next one. Thanks so much for listening. Happy investing…

Episode #270 - Learn how to invest remotely in rental properties from a long distance. In this interview, Coach Carson interview Michael Albaum, host of the Remote Real Estate Investor podcast and head coach at the Roofstock Academy. Michael lives in California and invests all over the country, including turnkey rentals, short-term rentals, and remote remodel projects. COMPANION ARTICLE/SHOW NOTES: https://www.coachcarson.com/remoteinvestor/ Michael's LinkedIn: https://www.LinkedIn.com/in/Michael-Albaum Michael's Twitter: https://www.twitter.com/MichaelAlbaum https://www.roofstock.com ______________________

Is a fear mindset holding you back from success? In this episode, Nathan talks with Michael Albaum, a former fire protection engineer and now a veteran real estate investor with experience in everything from single-family buy-and-hold to commercial real estate, NNN lease, and short-term rentals. He invests in the USA as well as internationally. Michael is also the head coach of the Rooftstock Academy and primarily lives out of his van with his wife as they travel the country. Michael talks to us about how he found success in real estate and overcame not one but two fires in the same building he was rehabbing from a distance. It nearly destroyed him, but he tells us how he returned stronger on the other side. He walks us through the meaning of success and how you can change a fear mindset into a success mindset, turning your dreams into reality. HIGHLIGHTS FROM THE EPISODE 0:00 Coming up 0:11 Intro 1:00 Welcome Michael to the show 1:30 Michael's story- how he found success in real estate investing 3:27 His saving rate before he started investing 7:00 His first investing story and how he was able to scale quickly 7:57 What success means to him 9:50 Will his definition of success change in the future? 12:54 what is his worst-case scenario, and how does it shape his decisions 14:00 How he overcomes his fears when investing in new asset classes 15:22 His most difficult experience and what he learned from it 21:28 You can't be enamored by the shiny end product because there is everything in between 23:20 If he could go back in time and fast-track his success, what would he do differently 25:36 How to change a negative mindset into a success mindset 28 How Nathan and his family help keep a positive perspective by saying what they are thankful for 29:00 Your brain looks for what you focus on 29:28 One secret that helped him unlock his success 32:09 Book recommendations 32:51 Tool, tech, or app recommendations 34:07 Help and connect with Michael 35:20 What is Roofstock academy? 36:49 Final thoughts LINKS FROM THE EPISODE Roofstock Academy: https://www.roofstockacademy.com/ Stessa: https://stessa.com/ Book Recommendation: The Go-Giver by John David https://amzn.to/3NXEJoi Book Recommendation: Give and Take: Why Helping Others Drives Our Success by Adam Grant https://amzn.to/3hyKdtk Our favorite deal analyzer - DealCheck (PROMO CODE: UNDOOR): https://dealcheck.io/?fp_ref=n8m28 CONNECT WITH THE GUEST https://twitter.com/MichaelAlbaum Remote Real Estate Investor Podcast: https://remoterealesateinvestor.podbean.com/ Roofstock Academy: https://www.roofstockacademy.com/ CONNECT WITH THE HOST Nathan Murith is a husband, father, technologist, remote real estate investor, coach, and podcast host. Get in touch with Nathan: https://undoor.com/links Follow us on social media @the.gentle.art.of.crushing.it Listen, like, subscribe, comment: http://thegentleartofcrushingit.com/

If you're like me - you don't want to be fixing toilets at 3am. In fact I'd prefer to not fix toilets in general. Not because I'm afraid to get my hands dirty - I'm just not super handy. A simple fix would likely turn into a full bathroom remodel. Which is why I work a property manager who helps ensure simple fixes are just that (a simple fix). Property Managers can be incredibly helpful - allowing you to not focus on the day to day of your portfolio. Instead of managing a ton of rentals - you mange the manager managing those rentals (clear as mud right?). The trick is that there are a ton of awful property managers out there. Which can be a nightmare for both you and your tenants. This week we will be hearing from a seasoned remote real estate investor who has worked with countless property managers. I'm talking about Michael Albaum, the head coach of the Roofstock academy. Where he will share his experiences on how to vet, manage, and (if need be) fire a property manager. This is a must listen for all investors who either invest out of state or are looking to free up their time. Links: DealMachine - 7 Day Free Trial (100 Free Skip Traces or 25 Free Mailers) Doorward - Social Media for Real Estate Investors Michael Albaum's Twitter The Remote Real Estate Investor Podcast Signup for the Newsletter Contact / Advertising Inquiry

Want to earn more and work less? You up for the challenge? Sign up for the 20x Profit Challenge hosted by Neil Timmins at www.20xProfitChallenge.com To access a FREE collection of resources, go to www.RealGritVault.com   Did you know there's a way to live your dream of traveling the world full-time without compromising your business? You'll discover it in this episode with Michael Albaum sharing how he buys and manages assets remotely. Tune in and learn more about his exciting backstory, valuable lessons, and how you can profitably leverage his investment strategy!   Key Takeaways From This Episode The mindset behind remote investing Possible setbacks from doing multiple property development projects What to keep in mind when virtually managing a property    Actual cash value vs. replacement cost insurance  How Roofstock Academy helps real estate starters and scaling investors   References/Links Mentioned Rich Dad Poor Dad by Robert Kiyosaki | Paperback  and Mass Market Paperback BiggerPockets Real Estate Podcast   About Michael Albaum Michael Albaum is a real estate investor and Head Coach of Roofstock Academy. He has done various types of deals from single-family homes to long-term lease NNN properties with national chain tenants. After years of investing, he has finally found his niche in long-distance investing. Michael recently left the 9-5 world and is currently traveling around the world with his wife, who is also able to work remotely. Having seen the benefits that real estate can provide, Michael is extremely passionate about helping others to achieve their goals using real estate as a vehicle.   Connect with Michael Website: Roofstock Academy LinkediIn: michael albaum Twitter: @MichaelAlbaum   Neil J. Timmins is on a mission to make a deep personal impact in the lives of his team members and business partners through his work as a real estate investor and mentor. He started as a traditional real estate agent where his team was recognized by the Wall Street Journal as a Top 100 team. Eventually, he made the transition from Realtor to full time investor.  Over the course of his career, Neil has been involved in over $300,000,000 in real estate transactions. Neil's portfolio depth includes assets ranging from houses to industrial properties. Recently, Neil and his team launched the Legacy Impact Partner Program where they partner with fix and flip investors from around the country. Neil's team brings capital to fund and fix rehabs, operational expertise, and years of experience catapulting their partner's business to new heights. Want to partner? You can learn more and book a call with Neil at www.LegacyImpactPartners.com.   Connect with Neil Website: Real Grit LinkedIn: Neil J. Timmins Facebook: Neil Timmins

Tune in for today's episode where Michael and Lori answer questions that we have received from listeners and members of the Roofstock Academy. We cover questions on property management, appraisals on all cash offers, editing lease agreements, wire transfers on EMDs, insurance assumptions, and renter's insurance. Please submit your questions as comments on YouTube for the next round! --- Transcript   Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Pierre: Hey, everyone, and welcome to the Remote Real Estate Investor Podcast. Today I'm joined by Michael Albaum and it is my distinct honor and pleasure to welcome Lori Ruddle. Lori, welcome to the podcast for the first time.   Lori: Thank you.   Pierre: Do you want to give a brief introduction for yourself?   Lori: Let's see right now, I am the Roofstock membership concierge and also one of the coaches.   Michael: Yeah, you are!   Pierre: Today we're going to be tackling some more questions that we got from members of the Roofstock Academy and also some listener submitted questions. So let's hop right into it.   All right, so let's jump right into the questions. So I'll just pitch these out to you and whoever's excited about responding to the question, feel free to pipe in.   Michael: Let's do it.   Pierre: First one here. Can you have a property manager, only qualified tenants?   Michael: Ooh, Lori… You are all over this!   Lori: Yes, I will do my best! You have the ability to do like have them do everything that they would normally do or you can piecemeal it out and do everything ala carte. So you prefer to do the screening, which is very uncommon, but perhaps you prefer to do the screening and then you can do the screening and have them handle the month to month. So like collection of rents, all those different kinds of things, so you can definitely piecemeal it out.   Michael: And then if you because I've had this question come up to if you wanted someone to only do the leasing piece of it, do you think that most property managers are open to doing that, like with a leasing agent, and then you do the actual management yourself?   Lori: It depends upon the location, like some location, you know, it depends on where you're located, because some locations, some areas have a higher percentage of you know, leasing done by realtors and others have a higher percentage that are done by property managers. So it really kind of depends upon where you're located. Like in my area, it's not very common for realtors to do leasing, so…   Michael: Yep, yeah, same for me. I was super surprised to learn that that was like something that Realtors did. I was totally foreign to me.   Lori: Yeah, so it depends.   Michael: Yeah. Okay, so I guess kind of, like so many things, ask reach out to the property manager, ask them? Is that something that they're open to and what the fee structure would look like if they are?   Lori: Yeah, and definitely check with the realtor that you've been using, if you're using one in that area, because maybe it's cheaper, maybe they do it one off, you just never know, it's just good to kind of find out which way is going to work better for you.   Michael: Yeah, super good point and even to that point, I love working and I've chatted with a lot of people about this in the academy. But I love working with agents who are also property managers, or vice versa. Because I always say you date your agent, and you marry your property manager and so if your agent sells you a crummy deal, they're off to the next transaction, you might never hear or see them again, but a property manager there with you for the long haul, assuming it's a good working relationship and so having an agent that also spotted manager, they're not going to want to sell you their own headache and something that I've also encountered is if they are if they do wear both hats, asking the property manager, hey, what is your leasing fee look like if I buy through you. So I actually worked with a couple property managers that didn't charge me a tenant placement fee, because I bought the property through them. So there could be some additional added benefits you can stack on just by using the same folks and personnel.   Lori: For sure and it's also you know, if you are utilizing a property manager or leasing or realtor, depending upon, you know, it may be more cost effective for you to do all of it versus just take out one small piece of it. So depending upon the pricing structure.   Michael: Super great point. So hopefully that was a very long winded way of getting to a semblance of an answer but great question.   Pierre: Let's stretch out that wind a little longer, I have one more…   Michael: Yeah, let's do it!   Pierre: A nugget to drop on there. Yeah, I know. We're we can't make recommendations of who you go to on this the show in particular, but you can look up this property management light companies as well, that allow you that provide exactly this service. So we've had a property manager on the show before that, that showed their product, which is very much like this. It's very minimal fees, and you could employ them to the degree that you want them involved in your property.   Michael: Yeah, yeah. Since you were appointed yeah, those companies it's kind of tech enabled companies are coming becoming more popular seemingly to for the ala carte style.   Pierre: Exactly.   Michael: Sweet.   Pierre: I consider that sufficiently answered…   Michael: Closed, signed, sealed onto the next one.   Pierre: All right, next one here. Can you add or change verbiage in a lease?   Michael: Oh Lori, this is your this is right up your alley too.   Lori: Yeah, this is right up my alley! Yeah. 100%. Um, they usually property managers, or if it's the realtor, they have, like a pre canned version that they use. But, you know, usually it's best to say, okay, have you included something about this or about that something that's important to you and usually, it's covered in the leases that they have but if not, you can absolutely added it.   Michael: So Lori, question for your pop fire question. Yeah, I had a really bad experience with a tenant. They trashed the house on the way out and so I want a $20,000 deposit security deposit for my next tenant. Is that something that I can add to the lease?   Lori: Well, you could try, but that's never going to happen. No one's ever going to agree to that.   Michael: Yeah, I think I think it's a super good point, like, is it within the realm of possibility. Another caveat, I would add is also make sure that it's legal to do because there are some things that, you know, if you added it to a lease, and someone signed it, and this is your kind of binding legal agreement, and then you had to go to court for some reason, someone could look at the lease and say, hey, this is illegal, like, you can't, this is an unenforceable lease, and the whole thing becomes moot. So definitely, don't just be adding things willy nilly work with your property manager working with local attorney to find out hey, is this is this legal in the state of which the lease is being enforced?   Lori: Yeah, and one of the things I always like to add is a rent increase for the next year. So you kind of like, kind of, you know, hit that before you even begin, you know, like, okay, if you stay in, if you want to sign on for a second year, then this is going to be the amount the increase will be.   Michael: That's so good!   Lori: …known entity, and you don't have to have that discussion, which can be awkward sometimes, or, you know, feel like that you have to negotiate some sort of rent increase. It's just a done deal.   Michael: It's just this is plain black and white language. I love that, I love that. One instance of when this happened, actually, not with regard to the rent increases, but I was listening to a podcast, and they were talking about this exact issue about adding certain things to the lease and so it was like a hold harmless clause about litigation, and the tenant basically waives the right to sue people. So I called my property manager and was like, hey, is this in our leases and he goes, I'm not sure let me check and he got with the attorney. He was like, dude, like, great call out. We're adding it to all of our leases now. So don't think that just because you're hearing about it for the first time that other people aren't as well and don't be afraid to ask those questions or make those suggestions.   Lori: But keep in mind with something like that. Yes, it's a hold harmless for sure. But that may or may not stand up in court.   Michael: Right, fingers, fingers crossed…   Lori: And it doesn't stop anybody, right. It definitely deters it and but it doesn't necessarily stop anyone from suing you.   Michael: Right as landlords often know, all too well.   Lori: Yeah, yeah   Michael: Signed, sealed, delivered. Next.   Pierre: Yeah, check. Let's go. Buying with all cash, is it a recommended practice to pay for a professional appraisal before making an offer?   Lori: You should take this on Michael.   Michael: So before making an offer, I wouldn't say so. I don't think I've never gotten an appraisal prior to making an offer oftentimes, that especially in today's market, we're recording this mid-August 2022, you also have to shoot first ask questions later, sort of a thing. So get your offer out there, get it accepted, get into the due diligence phase, and then figure out all of your questions that need answering and I actually have also never used an appraisal contingency when making an all cash purchase. A lot of agents will tell you investors will tell you that every contingency you have and your part of your offer weakens the offer. So the offer with the least amount. Is that Is that fair to say Lori?   Lori: 100%!...   Michael: Yeah, so…   Lori: …A realtor! Yeah, for sure. Never seen it!   Michael: Yeah. You've never seen it. You oh, you've never seen it with an all cash offer and appraisal contingency?   Lori: No, never.   Michael: Well, there you have it, folks. So I think it's maybe a wise thing to do for yourself, if that's something you need to do. But the I think the thought process behind it is that oftentimes, if you're making an all cash offer, you might be buying the property for less than market value or less than list and so you're building in some buffer there and so the appraisal doesn't really mean anything other than you're buying it based on what an appraiser thinks is fair market value, so all that to say…   Lori: Because, yeah, and the whole reason to buy with cash is because you can get a better deal, you know, yeah, and usually that negates a need for are any sort of appraisal anyway…   Michael: Yeah, I will send me I guess there's an argument to be made of will, hey, we're in a super-hot market properties listed for 100 but I come in 110, all cash. So I'm overpaying and if the appraisal did come back at 100, I mean, maybe there's an argument to be made that, hey, I can, I can negotiate with the seller to reduce the price to 100. But, again, you're just adding more contingencies to your offer. So it all comes down to like, how comfortable are you with the offer you're making with the market value that you can determine with the other tools and resources that you have at your disposal and then, like, if you're wrong, if the number if the market value is lower than what you're actually buying it for? Do you care? Does that mean if you're gonna buy and hold the thing for 10 years, which is my intent for a lot of these properties? I don't really care because like property, still cash flows really well. So, Lori, do you have thoughts kind of in that regard?   Lori: Yeah, I mean, I feel like with the, you know, anytime you're adding anything to be able to get out of the deal, you're lessening your bargaining power 100%. You know, like, you might as well just do it with a loan than why buy with cash, the whole point of cash is, so you have bargaining power…   Michael: Yeah, that's a great, that's a great question. I mean, what about putting in that as part of your offer, as, hey, I reserved, you know, this is an all cash offer, but I reserve the right to go get financing, if I decide to do that. Have you ever seen that?   Lori: You know, I've seen that and it didn't I mean, then then you're just like every other offer, you know, that's looking for a loan, you know, it's like, okay, well, then why would they, you know, you start getting the buyer, the seller, or the agent starting to question like, why are they doing that? Why are they adding that in there? Why are they adding one more obstacle to the purchase?   Mchael: Yeah, I love it.   Lori: Because it's a totally different ballgame. If you have a lender, then you have so many more hoops, you have to jump through…   Michael: Yeah and I think, too, and thinking about this, like, let's try to take off our investor hats for a minute and put on the seller hat and think about, okay, if I'm in the seller seat, and I get this these two offers, one has an appraisal contingency and one doesn't. How would I How would I respond and when we can think about that, and think about how do we set ourselves apart from all the other offers that the seller is seeing that helps shed light on the scenario as well…   Lori: Oh, 100%! Yeah, if I, when I've had multiple offers on one of my investment properties, I'm not looking at anything has any sort of contingency, and I definitely have preferred cash and picked cash because I know I can close in a couple of weeks.   Michael: Yeah and you probably took lower offers in cash than you would find the next one, man, we're just lining these up, knocking them down   Lori: and giving long answers…   Pierre: All right.   Michael: Big meaty answers, that's important!   Pierre: That's good, though, you know, you need to provide all the contexts around them. All right, next one here. How often does a buyer use the same property manager that the seller was using?   Lori: I would say like 70-80% of the time I've seen it. It also depends on how forthcoming the current property manager has been to the new buyers, I've had where, you know, the current property manager was a nightmare and didn't want to disclose anything they didn't have to and that didn't set them up. Well, they didn't get to manage the property moving forward with the new buyer.   Michael: What, as a follow up Lori, when do you think, like, what are the pros and what are the cons of staying with the same property manager, if you're an investor buying the property from a seller.   Lori: If you, if you keep that current property manager, they already know the property, they know the issues of the property. The negative would be that you're inheriting any issues that may have been a communication between the property manager and the tenant, you could have all sorts of you just don't know for sure, you know, so I'd say, you know, definitely favor the possibility of using the current property manager, but definitely do your research and make sure you have the best option available.   Michael: Totally. Yeah, I agree. 100% and one other thing I would add to that is if you are changing property managers, like stuff gets fumbled all the time. Like there's a lot of moving pieces, it just a real estate transaction and now we're adding a tenant and property management into the equation and so there's like a physical key handoff that has to happen once you close and then there's documents that have to get handed off and the tenant has to know where are they paying their rent and maybe they have to get on to a new property managers lease so there's just stuff that has to happen so it's not necessarily as plug and play as if you keep the same property manager so I guess I'm going to think about is even if you don't love the new property manager, stick it out for 30 days 15-30 days whatever just get the transaction piece done, let the dust settle and then you can go switch things are less likely to get missed I would I would get I would garner…   Lori: Or even wait till you know you it's time to renew the lease because the lease is going to follow the tenant. So they're not going to change, the lease doesn't get changed necessarily right away, it would follow the tenant. So if you know the lease was only a couple of months in, then you still have 10 months, so you have to follow that lease as the new owner and property manager.   Michael: Sweet! Pierre's speaking from experience.   Pierre: And don't be shy to change your property manager, though, if I'm speaking from experience, what we're going through right now, in this moment, I think we wait, we waited a little too long. We're paying the price, so…   Michael: You're not a real investor and so you fired a property manager…   Pierre: Is it simple for an account holder at your typical bank to wire the EMD online from your bank's website?   Michael: Great question. It depends. I've got, you know, I have I had that ability with my bank. But I don't think every bank offers that. So I would say just do your homework ahead of time and determine what that looks like for you and your bank and if it's physically possible, because if it is great, if it's not, that could be a problem. But the other piece of that I would say to as a follow up is not just the end, but the rest of your deposit. So my bank has an online weekly wire limits, which I've exceeded at times trying to do a deal and I was like, oh, crap, like, I gotta get into a physical bank branch to send the wire because they don't like doing that stuff over the phone. So just make sure that you've got your T's crossed, and I's dotted with regards to how you're physically going to get the money from where it currently is to where it needs to go well in advance of when it actually has to happen.   Lori: Yeah and also be really careful about wire transfers, because I have seen it happen and it was horrendous, where a person had like, they just emailed and got the wire information. But somebody had intercepted it and gave them a different wire transfer information and they wired, I think it was about 100,000 to a bank, never saw the money again. No, just be I'm just saying yeah, make the call. Call the institution that your wire transferring to, and make sure you get like someone telling you the information because I've seen it happen. It's not pretty!   Michael: Yes, we had, we had someone on the podcast a while back, and we were talking about this exact thing and so what Lori is talking about is when you receive the wire instructions, it's probably going to be from the title or escrow company, pick up the phone and call that title or escrow company and say, hey, tell me what you just sent me, I want to confirm the wire instructions and they're going to tell you the account number, the routing number, the bank address where it needs to go and then you can feel more confident that hey, this okay, I'm talking to the person that's on the other end the receiving end of this, as opposed to just a bank in the Seychelles or wherever off the coast…   Lori: Yeah, because once that wire transfer is done, it's done.   Michael: It's gone, yeah.   Pierre: Yeah. Nuts are just Bitcoin.   Michael: Oh, there you go but I guess if you transfer Bitcoin to an account that you didn't want it to, could you…   Pierre: You can get one character wrong, and that those bitcoins will never be asked, and again.   Michael: Bye, bye…Best day ever to wake it up…   Lori: Where the hell did this come from?   Pierre: Yeah. All right, we're gonna go to the next one here. Do lenders typically fund 80% of the appraised value, 80% of the purchase price or whichever is lower?   Michael: Lori, you want it?   Lori: Whichever is lower? Yeah... Any way they cannot give you more money…   Michael: Yes. It's the sad reality. So you got to take your purchase price, and then your appraised value, if you're getting an appraisal, but of course, if you're using a lender, they're going to make you get an appraisal and so we're going to take 80% of that and whichever is lower and a lot of lenders do, by the way, like aren't going up to 80%. LTV, I'm seeing 70 or 75%. LTV. So the 8020 rule is not a rule, I would say it's kind of a guideline and so ask your lender. Hey, how much what LTV? Can I get out? I got anything else on that one? Yeah, that's, that was an easy way to stay straightforward.   Pierre: Yeah, that's a that's an easy one. Next one here: What is a rough rule of thumb for calculating insurance costs for a rental when you are evaluating properties during that time before you're making offers?   Michael: I'll take a stab at this one! Yeah, so I have kind of two, two thresholds one is for a property purchase price of 150k or less, and the other is for 150k or more, and so on 150k or less, I see for like, strong quality insurance point eight to 1.2% of the purchase price. So if we just roll that straight up the middle on $100,000 house, if you're paying about 1000 bucks a year Insurance, I'd say that's probably pretty close. Now, could you go get insurance for 500 bucks 600 bucks a year? Probably that that exists, I would imagine. But what's it going to cover is the question we need to be asking and so if we're trying to save 2, 3, 4-100 bucks a year on insurance costs, but we're cutting out a huge subset of the coverages or taking a really high deductible, it might come back to bite us in the butt and so you don't need to become an insurance expert to invest in real estate. But you definitely want to have a base level of understanding of okay, what are the coverages that are available? What do they actually cover? So not just, hey, these are the checkboxes, I'm checking for coverage but what do they mean? How do they come into effect and then what do they cost and you'll see like, there are some really expensive coverages that might not be worthwhile and there might be some really cheap coverages that, absolutely, you should be paying the extra 20 bucks a year to get and so I think that point eight to 1.2%, will get you within the realm of closeness and insurance costs change over time to like, just like property values change over time, insurance markets harden and soften and I come from this world, for better or for worse and so the market has been hardened in like the last eight, nine years or so and so costs are going up. Now, we'd go to the subset of properties 150k, or more in terms of purchase price, and we're probably in that point five to point seven ballpark range. So if you're buying a property for $280,000, I would be shocked if you were paying $2,500 a year in insurance, you might be at the 14-15 $1,600 price point, again, for some really great coverage and so a lot of the reasoning behind that is might be getting too deep in the weeds here. But there's just a minimum policy amount that insurance companies charge, baseline doesn't really matter how little the coverage is. So you could be getting an insurance policy for a $10,000 house or an $80,000 house, those two policies might cost fairly similarly, because they're on the lower tier just of cost for the insurance company to issue that policy. As you start getting higher and higher, your cost of insurance tends to go down on a percentage, or $1 threshold dollar per square foot threshold. So Lori, I hope I didn't just get too deep in the weeds there. But any, any thoughts?   Lori: No, no, you are the insurance expert, I leave that to you…   Michael: If I am the expert here then we are all in trouble. But that's again, just a very rough ballpark rules of thumb, I would say and that's going to be for your dwelling policy itself. There are lots of different kinds of insurances that people can get. But the kind of the big ones are the dwelling fire or the landlord policy is what people often refer to that covers, like the structure itself, and then also some liability for the owner. But there are both on insurance policies as well that don't come standard and so you really need to understand, hey, if you're getting this insurance policy, what's not covered and that's a really great question to ask of your insurance carrier, it's often going to be but not entirely limited to, that's my legalese disclosure there, flood is going to be a separate policy as his earthquake, wind can or cannot be depending on the area. So you again, you need to really understand what are the natural hazards that are affecting this area? Is it in a flood zone? If it is, and you have a loan lender is likely going to require that you get flood insurance…   Lori: 99% of the time! Yeah!   Michael: Right, so if you're the person that's using all cash, and not getting their appraisal, I guess an appraisal probably wouldn't pick that stuff up. But if you're using an all cash offer, you want to be darn certain about if you're in a flood zone or not because no one might come to your rescue and tell you, oh, hey, by the way, investor, this is in a flood zone, please go get flood insurance. So you just again, want to understand what the exposures are in the area and talking to a local insurance agent is going to be I think one of the best ways to do that, if that's something you're not comfortable doing on your own, unless you're like a total NAT has nerd like me, which I hope no one else out there is…   Lori: Well, and flood zones are super common in certain areas, like we have in where I live, you know, it's like there's some definite flood zones, and then those are prime investor properties because nobody wants to purchase them to live in as their primary because you have to pay for flood insurance, and it can be quite cost prohibitive for someone who's, you know, in that income range and living in those properties. So, you know, but as an investor, it's absolutely doable.   Pierre: And Mike, so does fire insurance come standard in your current policy at your primary?   Michael: Yes. And so that's the biggest hazard that's being protected against in in a standard dwelling policy or landlord policy.   Pierre: And then a separate question across your portfolio. Do you require all of your renters to have renter insurance?   Michael: That's a really good question. Yes, I think like technically by the letter of the law they are supposed to, whether they are get it or not is a different issue I really pushing to have that kind of be the uniform across the board. But it's I think, if you asked me today a gun to my head does every single one your renters have it? I would probably say no…   Lori: I know that like, and different college towns, I know that they require it. So it's like, if you don't already have it, and you have to prove that you have it, then you have to purchase through them. So through the property manager, so that's also an option too.   Pierre: Yeah and is there like a standard process because I know that when you're renting, you kind of as you're signing the lease and collecting all of the papers, you require them to submit their insurance? What about when you renew the lease? Are you asking them to send in updated insurance proof for each renewal of the lease?   Lori: I mean, it's definitely a good idea to do, so. You know, it can just be you know, when you know, because you'll have a copy of their current renter's insurance and you'll see when it expires, and you can just say, hey, you know, part of the process, you know, you just put it in as an extra clause in the lease.   Michael: I think it's a great idea.     Pierre: All right. Final question from this lesson, I think we'll wrap up on this one, who will replace the property in case of total property loss as a part of replacement costs? Will the insurance company construct or pay cash to rebuild…   Michael: I love that everyone's asking this insurance questions. So it's gonna go like this. So I had two fires in a property.   Pierre: I was gonna throw that in the question, if your property catches fire, Michael, yeah, twice, what do you do   Michael: What do you do? So the insurance company is you are the insurance companies client and so the property manager can assist in this whole process and it is a process getting everything squared away and corrected. But the idea is that the insurance company is going to read pay to have the property rebuilt, they are not going to go find the contractors, they're not going to go pull permits, they're not going to work with the city to make that happen, that's going to be on you as the owner. So if you have a total loss strap in, because it's probably going to suck, but it can, it can be okay, like, don't freak out, something I would absolutely recommend doing is if the insurance company is not playing ball with you go get a public adjuster. This is someone who's an advocate for you as a client, they're often paid based on commission. So however much additional they're able to help you collect from the insurance company, they'll get a cut of that it's worth every stinking Penny, because without them, you wouldn't have a dime more than the insurance company is willing to give you. That being said, so the insurance company is going to pay to have the house rebuilt up to the limit of the policy, and the policy limit that's stipulated in the policy itself. So that's kind of the guiding light, if you will, as to how much the insurance company is going to pay.   Now, they are often going to give you a check to get the property construction started to kind of get the process underway. But if you opt to not rebuild the property, the amount of money that you're going to walk away with is likely going to be less than the number listed on your policy. So if you have $100,000 policy, and the house burns down, do not expect a check for $100,000. They're gonna say, okay, well, here's $40,000, to start get the property rebuilt and as you do that, they're likely going to give you incremental draws on the policy as the property is getting rebuilt or they might say, hey, you know what, here's 90 grand, you get the other 10% once the property is completed, or once the construction is X percent done, because they're going to say, hey, if you don't rebuild the property, if you're going to take the cash, we're going to give you less. So that's kind of in a nutshell how it works. It's a lot more nuanced than that the policy can respond in a number of different ways and so policy language is really beyond the scope of this show, and my knowledge to because every policy is little bit different. But if you have a replacement cost policy, that's likely how it's how it's going to go. If you have an actual cash value policy and ACV policy, it's going to be a little bit different. They're going to look at that $100,000 house and say, hey, it's 30 to 2030 years old, it's only worth 60 grand. Here's a check. 60 grand, thank you very much best of luck to you and so I think it's very, very, very important to evaluate, especially if you have a loan, especially if you have a loan, what type of insurance policy you're getting is a replacement cost or is it actual cash value? Replacement Cost is the stronger of the two. It's the safer of the two I would argue but it's the more expensive of the two on most single family homes are see replacement cost is for sure the way to go on multifamily if you can get it like I have. I have properties that were built in 1908. The insurance company didn't even give me the option for replacement costs it was here's the actual cash value, take it or leave it kind of a thing and with partial losses, that's where you can get in to real, real trouble. So again, I'm gonna step off my soapbox here for a minute and leave you all with that.   Pierre: Lori, do you have anything to add on that one or did Mike just…   Lori: No really, me it's pretty straightforward. I always like it, just simplify it. I always just say, you know, think about when you have a car and it gets, you know, you have an accident or whatever, it's the same kind of thing, you know, like, they're not going to go find you a new car, you know, to purchase, they're gonna give you the money and you have to handle the rest of yourself. So, yeah, so like a simplified version.   Pierre: Excellent. Thanks, Lori, for joining us. We're happy to have you back on.   Lori: Thanks.   Pierre: And thank you all for submitting your questions, keep them coming. We love answering your questions. You can submit them on iTunes or as comments on YouTube and we will catch you on the next episode.   Michael: Happy investing…

Today's Guest: Michael Albaum Michael has been investing in real estate for the last decade. He has done a variety of deals ranging from single-family homes to longer-term NNN (stands for the net net net which is the property's operating expenses) lease properties with national chain tenants. After years of investing, he found his niche in long-distance, value-add multifamily investing. Michael left the 9-5 world and, prior to the pandemic, was traveling around the world with his wife, who is also able to work remotely. Michael is also the Program Manager and Head Coach of Roofstock Academy and the host of The Remote Real Estate Investor Podcast, which interviews RE industry professionals about remote real estate investing. He is currently investing in short-term rentals and small multi-family real estate remotely while embodying the nomadic lifestyle of living in a van and traveling with his wife full time. Highlights From The Show: We begin the episode with Michael sharing his background story and how he ended up in real estate. Michael shares that he is just a regular guy who grew up in California and did the things most of us were told to do. Go to school, get good grades and get a good job, and then you will be set out for life. Michael loved his engineering job, but he realized that it was not going to get him where he wanted to go fast enough. He got his hand on Rich Dad Poor Dad, which transformed his perspective about money. Being an engineer, real estate investing really resonated with him. Michael played with some spreadsheets, self-educated for about two years, and eventually got his first property. When the first rent showed up, he knew he had solved the Rubik's Cube. Michael set himself bigger goals and bought properties in different markets. However, things started becoming overwhelming. He was chasing down 60 property managers for 60 different properties, which was a pain. So he decided to narrow down and be laser-focused on two markets, which he says has been amazing. We then talk about Michael's nomadic investing experience, how it came about and how it works. Michael shares that in 2018 his father passed away, and he requested a completely remote plan to work from home, and it was accepted. He wanted to support his mom for about 3 to 4 months, and when he returned to work, he felt he needed a mental break. He asked for a six-month break to unplug and do a mental reset but was denied. The next step was quitting his 9-5 in 2019, after which his wife suggested they travel for a year to explore and live in other countries. Michael shares that it was a perfect time to do it, they had the real estate backing them up, and his wife had a totally remote job. They went all over the place, had amazing experiences, and in the process, Michael picked up remote freelance work to make more money. However, during the pandemic, they were forced back home as flights were closing down. They were not yet done traveling, so they bought a van, designed it, moved into the van full-time, and rented out the house they were living in. Next, we talk about Michael's business and his current goals. Michael shares that as he was evolving in his career, he went out of state and got involved in multifamily fairly quickly. He was in growth mode for a long time, and he started by buying various sized multifamily properties to get to 100 units portfolio, and again he hit the inflection point. Things started getting heavy, and he realized this was not his goal. Michael started scaling back on the acquisition and the value he had on projects to focus on doing more with less. Now he's at 61 units after selling off some of the properties to get leaner and easier in managing properties. Michael believes that if it doesn't feel easier, takes up more mental bandwidth, or takes you away from the things you want to do, it's pulling you in the wrong direction, it's not worth it. We then talk about how doing short-term and long-term works for Michael. Michael shares that doing both short-term and long-term is totally counter-intuitive, but management is the silver bullet. For him, he doesn't manage 99% of his portfolio of short-term rental properties, and from a remote perspective, he has handed everything to property managers. According to him, you have to run your numbers and be super diligent. Michael also shares that he always tries to learn from the past and not to make the same mistakes again. For the same reason, he's not investing in short-term rentals all over. His focus is on the Smoky Mountains in Tennessee, a super hot market, very easy to plug and play, and the experience is great. Next, we discuss how you can build a side hustle and eventually escape from your 9-5. Michael shares that it's super important to plan it out. You also have to analyze how much you earn in your job, your real estate investments, and your expenditure before quitting your job. Michael also shares that he was willing to prioritize his mental health over the financial security that he wanted. He knew he could always get another job if everything crashed down and his plan didn't work. After quitting his job, Michael was also doing supplemental work as a freelancer to be on the safe side if things went sideways. He recommends that you get something going on the side you can quickly grab on to if need be. Lastly, we talk about small multifamily properties and why Michael chose to focus on this range of properties that are often overlooked. Michael shares that he didn't know that small multifamily was no man's land when he got involved. He went to a new market and found an 8-unit property valued the same as a single family, a niche he was investing in at the time. Michael was working with an agent, and there were other properties, but the price points of the property resonated with him. It only pushed him a little outside his comfort zone, and getting his head around the value addition through physical renovation was easier. People like him who were doing single-family thought this was too big for them, and for those who were doing multifamily, this was too small for them. Make sure you don't miss another amazing episode of the Just Start Real Estate Podcast with Michael Albaum and get valuable information on how to start investing in real estate on your own terms to support the lifestyle you want! Notable Quotes: “When investing in properties, diversity of scale can make you lose economy of scale and efficiency by being so spread out.” Michael Albaum “If it doesn't feel easier, takes up more mental bandwidth, or takes you away from the things you want to do, it's pulling you in the wrong direction, and it's not worth it.” Michael Albaum “Investing in both short-term and long-term rentals is totally counter-intuitive, but the silver bullet is management.” Michael Albaum “The best time to invest in real estate was 10 years ago, but the next best time is today.” Michael Albaum Thank You for Listening! Connect with Mike on Twitter, Instagram, YouTube, Linkedin, Facebook Help Out the Show: Leave an honest review on iTunes. Your ratings and reviews really help, and I read each one. Subscribe on iTunes. Resources and Links From Today's Show: The Remote Real Estate Investor Podcast Michael on LinkedIn Roofstock on LinkedIn Michael on Twitter Roofstock Instagram Roofstock Youtube More Resources From Mike: Level Jumping: How I Grew My Business to Over $1 Million in Profits in 12 Months WINNING DIRECT MAIL - How to CRUSH IT with direct mail! 7 Figure Investor Video Course - Scale your business to 7 figures. I'll show you how!

You will want to explore adding multifamily investing to your portfolio at some point especially after you listen to this episode.A multifamily property is any private property that contains more than one lodging/housing unit. No matter how you decide to put resources into a multifamily property, this venture can be an extraordinary financial building tool.Michael Albaum is our guest on Unstoppable REI Wealth to discuss how he invests in multi-family real estate properties, remotely, while embodying the nomadic lifestyle of living in a van and traveling with his wife full time. Michael Albaum is a real estate investor and Program Manager/Head Coach of Roof-stock Academy. In the last decade, he has done a variety of deals ranging from single-family homes to longer-term NNN lease properties with national chain tenants. After years of investing, he found his niche in long-distance, value-add multifamily investing. Michael recently left the 9-5 world and before the pandemic was traveling around the world with his wife, who is also able to work remotely. Having seen the benefits that real estate can provide, Michael is extremely passionate about helping others to achieve their goals by using real estate as a vehicle. Michael is also the host of The Remote Real Estate Investor Podcast, which interviews RE industry professionals about remote real estate investing.  Below are the topics that Michael discussed in the show to educate the listeners:• Nomadic Investing - How to manage/invest in RE while living in a van/traveling full time• Hands off NNN vs Remote Value Add Multifamily - Why Michael landed on Multifamily• How much passive income is needed to live nomadically and travel constantly?• How to start investing in RE as a side hustle while having a full-time job to fund purchases.• How to make the mental mindset shift around never seeing, or touching an investment property before purchasing or ever during the lifecycle of ownership.• Why I dove headfirst into the commercial multifamily asset class (5+ units)• What actionable steps do you need to take today to get yourself on the road to investing in rental properties?• How to scale your side hustle investment properties into a portfolio that could give you financial freedom.If you want to connect with Michael Albaum, here are his social links:Michael Albaum LinkedIn - https://www.linkedin.com/in/michael-albaum-297a8534/Michael Albaum Twitter - https://twitter.com/MichaelAlbaumThe Remote Real Estate Investor Podcast - https://apple.co/3MAgH1JRoofstock LinkedIn - https://www.linkedin.com/company/roofstock/ (12.1k followers) Thank you all for listening and I will see you in the next episode.When you're ready, head on over tohttps://easysell411.comhttps://billyalvaro.comhttps://billyssecrets.comTo get some neat (and FREE) Tools | Tips | Tricks to help you in REI!

Using an LLC is a powerful way to protect yourself from the liabilities inherent in owning rental property. We have had the discussion of whether you should use an LLC or an umbrella policy on the show before so we will dive into the details of setting one up. Today, Emil asks Michael about the process of creating and managing LLCs in regard to real estate investing.   Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Emil: Hey, everyone, welcome back for another episode of the Remote Real Estate Investor. My name is Emil Shour and today I'm joined by…   Michael: Michael Albaum   Emil: and on this episode, I'm going to be putting Michael in the hot seat and asking him questions about putting his properties in an LLC. We'll quickly cover why he did it and then I'm just going to ask him how he did it, what he learned what tips he can offer you. So that if it's something you've been interested in, you have a step by step guide on how to do it. So let's hop into this episode.   Before we hop into it, what's up, man? It's been it's been a while since we recorded up so…   Michael: I do I know it's been a minute I'm doing well, thanks. Trying to get some financing lined up on these three multifamily that I got the rug pulled out from under me on so still working through that but construction project, the rehab projects almost done, which I've been told is almost done for a while now. So I'm not really holding my breath but really I think this time for real is almost done. So let's get to you Emil, how about yourself?   Emil: I think you when we started this show like two years ago, you told me it was almost done. So I don't know if that's true.   Michael: That's true, I believe it…   Emil: I hope, I hope it finishes soon.   Michael: Thank you me too.   Emil: Good. My update with me, we are still selling the Jacksonville property. We just got it under contract but a week and a half ago, I want to say we did inspect the buyer scheduled inspection on Thursdays so I should probably be hearing back from my agent like today or tomorrow on I'm sure you know what, what they want to knock the price down based on seeing the inside, which I knew going into it like, once the inspection is on the inside, you know, we've had a tenant there for five years there. They're definitely gonna want some. They're gonna ask for something. So I'm expecting it. We'll see how that goes.   Michael: Okay, cool. Well, keep me posted, let me know how it all shakes out.   Emil: Yeah, man. Absolutely, so this episode, you know, a lot of people think in in a previous episode we covered what should you do an LLC? Should you put your properties just get umbrella coverage. In this episode, we're going to really just focus on like the steps that you personally took on setting up an LLC getting your properties in things, you learned mistakes, you made all that stuff but before we hop into like the how can you briefly give us the why, like, why did you decide to set up an LLC and put your properties in it?   Michael: Yeah, totally. So I grew up in the insurance world. Next question. So like, it's, it was something that I grew up around, like segregating assets, and like, understanding what risk is and how to mitigate risk and so that's really, from my perspective, what an LLC is used for, you put things into an LLC, that's bucketed and so that's kind of the limit of your exposure and so I used to work as a fire protection engineer and the commercial property insurance industry and that's also kind of on the physical side of things, what we would do, we would say, okay, how bad can a fire get and can we physically build a building and put systems in place that will contain that fire, so it doesn't spread to the rest of the stuff because if you have a small fire, it's usually not a big deal. If it's contained, it's not necessarily the end of the world versus if you burn, burn the whole plant down, that can be very problematic. So same kind of thinking can be applied to asset protection from the real estate investing side of things.   So it just made sense to me to bucket things in their own bucket, and keep them totally separate from my own assets. So therefore, if I did have a fire, quote, unquote, metaphorically speaking, or physical one, as any listeners of the pod know, that I've had to, it doesn't affect the rest of my building, so to speak, the rest of my net worth or my nest egg. So just keeping things separate made sense to me and so there's financial burdens that go along with that in order to have own and maintain an LLC. There's a cost associated with that. That overhead was worth it to me to mitigate that risk exposure.   Emil: Yep, makes sense. So did you did you set up an LLC before you bought your first property? Did you buy a property and then like quitclaim it in? What was what was your timeline for LC?   Michael: Yeah, so my very first two properties were Southern California single family homes, and so they didn't cashflow very much. If you live in California, the LLC has to be registered in California from everything I've been told and heard, if someone has a way around that I've been asking for years, let me know, I would love to not have to give California State Government 800 bucks a year per LLC. So those first two investments, I just had my personal name, I had high liability limits on the insurance policies themselves, like on the dwelling itself and then I also got an umbrella that sat on top of that, because that just made me comfortable on an umbrella for anyone who doesn't know what it is. It's basically a liability only policy that will sit on top of your existing policies and give you have limits across the entire portfolio and so the dwelling policy itself has a liability limit attached to it and so for me, I think I had like $2 million of coverage, or maybe 1 million on the dwelling and then I had an additional, I think, one or 2 million as an umbrella and so that can be applied across multiple properties but that dollar limit is like all that the insurance company would pay out in in any given occurrence and they also have an annual limit that they'll pay out in any given year.   Emil: Right, that's my current setup, I never LLC seed, I wanted to at some point, but…   Michael: Oh, good verb.   Emil: What LLC seed?   Michael: Yeah, you heard it here first folks, see new, new real estate investing verb…   Emil: Yeah, don't trust the words that make up. So I wanted to, but decided to just, I had an umbrella policy from the beginning on top of, you know, regular rental property insurance. So that's still my setup.   Michael: I think it makes sense for a lot of people and so you have to like understand what is entailed and what are the risks and benefits of having an LLC versus not having an LLC and just weigh the pros and cons? I definitely don't think it's you, like, thou shalt have an l like, no, you don't, I don't think you need one, necessarily. You just have to make sure that you understand again, what are the pros and cons for your situation and so it wasn't until I bought my third property and that was out of state that the cash flow cumulatively between all three was enough to support the 100 bucks a year payment. So that's when I did the whole LLC thing.   Emil: Yeah. Yep, that makes sense. I probably say, this is just my opinion, not legal advice, or anything. I probably say, once you're, when I did it, my net worth wasn't very big. I didn't feel like I had a lot to lose. I feel like when you start having more to lose, right, you're like, someone could personally come after more, probably a very, very good idea to make sure you have an LLC. So at the bare minimum, that's, you know, my opinion.     Michael: Yeah, totally and I mean, talk to like, talk to a legal expert, and get an understanding because they can really give you the breakdown, hey, this is this is what's exposed, or this is what's protected with an LLC, because the one thing I really hate to see as someone open an LLC, especially themselves think that they're totally protected, and then get totally shafted, you know, in a lawsuit or that sort of thing. So you really want to understand because you're setting up this system to protect yourself and your family and the assets, like spend the extra couple 100 bucks, whatever it is to do it right, and make sure that truly you have an understanding and a grasp of what is this doing and what are its limitations?   Emil: For sure, so that's a good segue. So at what point did you decide to LLC you, about the SoCal properties, didn't have an LLC.   Michael: So it was after that third, the third property that I purchased at a state, the cashflow was then enough on that, and then the other two, cumulatively to support that 800 bucks a year LLC payment to California. So at that point, I said, okay, let's move everything, put it into the LLC and now that'll kind of be its own standalone thing and so that that just made sense at the time and so I kept a very similar insurance policies structure, where I had the same liability limits on the property itself and then I also had the umbrella for the LLC that sat over those three properties.   Emil: Got it, okay…   Michael: Because I'm neurotic.   Emil: So, I think you're just being smart. So walk us through that you because now that you have properties, you have to do what's called a quitclaim of the deed, right from your name into the LLC. So we'll get to that but what did you do? Did you hire a lawyer? Did you just go on, like Rocket Lawyer or one of those online? How did you do it?   Michael: Yep. So I did it myself. I went on, like I think was like LegalZoom, or one of those type situations where you can set up your own LLC. In hindsight, I probably wish I had used an attorney, just because it was totally brand new and I was worried about making the wrong choice or selecting the right things. So in hindsight, I wish I would have spent the extra money just to have it done, right but for the quit claiming process, I use an attorney and we've had her on the podcast before Kelly Chrisman. She's amazing, she's awesome, really well versed and all this sort of stuff. So for the two properties I owned, I quit claimed those into the LLC and for this third property, I knew I wanted to basically start an LLC to take property ownership and so I actually did that concurrently, while I was in escrow and got the LLC opened before the property closed. So that actually took title directly from the seller into the name of the LLC. Because the more you can keep your name off the chain of title, apparently that's more beneficial. So I was like, okay, like, I'll just do that because I wanted to do it anyhow. So instead of closing in my personal name, and quit claiming, I just went straight to the LLC and it was a private lending note. So that was no problem to close from the lending perspective in the name of the LLC   Emil: God, okay, so that's, that was gonna be my next question is like, what are the differences in, like the process, when you buy in your personal name, I think you've highlighted on the first one, you can get a loan based on you, you as the individual, when you get in an LLC, it's a little bit different, right?   Michael: Right, so my understanding and definitely chat with your lending partners professionals out there, but my understanding is that like the government subsidized conventional loans, the Fannie Freddie type products cannot be titled in the name of the LLC, they're not going to lend to the LLC, they're going to lend to Emile Shour, or Michael Albaum, or Pierre Carrillo as individuals, not as entities can, commercial mortgages, totally different space, different ballgame, we actually just recorded a podcast with a commercial lender and a conventional lender, their husband and wife team and so that was really interesting to kind of get both sides of that coin but if you're going to get a non-conventional mortgage, you can likely get one in the name of your LLC, or some sort of business entity and so I would just simply ask your lender, hey, this is what I'm trying to do. This is the goal I'm trying to accomplish. What's the best way to do this and if they say, well, you need to close in the name, or your personal name and you eventually want to get it to the LLC, ask them oh, hey, can I transfer to the LLC after the fact? Some lenders will say, no, you may not. Others might tell you, yeah, the loans closed, do whatever you want, we don't care. So that might affect your lending decision of who you ultimately get financing through because if someone tells you no, don't do that, do you really want to go get that loan from that lender might kind of make you take pause and think twice about it.   So again, be super forthcoming with all the information, give them the goals, the strategies, the hopes, the wants to dreams, so that they can really help structure what loan product makes sense for you because if we just give them the transaction piece of it, and we're going to do something different down the road, it just, they're not giving you the best advice, because they don't have the whole picture.   Emil: Got it, okay and so, if I have a brand new LLC, and I decide to get a loan, in the name of the LLC, if it's a brand new LLC, like how do lenders usually look at that brand new LLC, like, how do they deem it worthy of, of lending?   Michael: Yeah, so they'll in that instance, likely look to you as the borrower, and just be like, do you have enough money to do this and we're gonna make you sign a personal guarantee. So you're still I mean, even if a meal shore LLC 123, doesn't can't pay the debt, like a middle shore, can we're coming after you directly and so new businesses new LLC, is are started all the time to take over property ownership or to receive property ownership, essentially and so I think that's something that they're used to, if they balk, and say, oh, you need two years of like business tax returns, like, obviously, new businesses won't have that and so ask them: Hey, how do we work around this? Can I give you a personal guarantee? What do you need from me to make this happen?   Emil: Got it, okay. Good to know. Let's see what else we want to ask you. What other parts of the transaction are different? So financing can be some that you need to ask your lender might, you know could be different. What else was different about buying a property through an LLC versus in your personal name.   Michael: The one of the main differences from a process standpoint, really nothing that the two are equivalent, you still get an inspection, you still negotiate with the seller. One thing I would definitely recommend people do is if they are considering purchasing in an LLC that might not be in existence yet. As you put your name on the purchase and sale agreement, put your name or assignee, and that basically allows you to assign the contract to someone else and so it's something that wholesalers might do and if someone asks about it, just say like, no, I'm just not sure it's either gonna be B, or my LLC. I'm just not sure yet. I haven't created it yet and that way, you can assuage any fears that oh, someone's trying to wholesale this deal on me but that makes it super easy for once you open your LLC, you can now say, okay, it's not Michael Albaum, it's Michael Albaum, LLC, 123, whatever, whatever that entity is.   And then the other thing to keep in mind is like the money flow, for how you physically need to purchase the property. So if you do purchase and close in the LLC, the money needs to come to escrow to the title company, from the LLC and so in your example in the like, you were asking, what if it's a brand new LLC, so if you're buying $100,000 property, and the bank's giving you a loan for 80, you're bringing 20, you Emil would transfer that 20 grand into the LLC bank accounts, which then that's where you're going to wire the money from to close the deal over to the escrow company as opposed to wiring it from Emil Shour checking account over to the escrow company. So you want to be able to show very clearly that this is the LLC is asset. This isn't a meal shores asset.   Emil: Got it, I'm glad you gave us that note about either your name or assignee because you're right, a lot of wholesalers use that and it's funny, you bring that up, because on the Jacksonville property, we got a couple offers, and they had that language and we didn't choose some because we're like, you know, wholesaler like those deals can fall out, they have to go find a buyer and you know, not as strong as someone who's just coming to buy it. So like, if you mention, you know, if you're you have your agent mentioned to the selling agent, or whatever, that I'm putting that in, because it's going to be my LLC, it's gonna get looked at differently. So good thing to clarify when you write that offer.   Okay, I think that was most of the questions I had for you. Any big lessons you had from the process? I think you mentioned a couple but if you could do it all over again, what you did differently?   Michael: Yeah, I think I would just have an attorney do it from the start draft up the LLC documents. It's also super important to keep in mind of if you don't live in the same state as where the property is owned in the LLC. Like, what is the registration process look like and so I've done it both ways. I formed a California entity, and then registered as a foreign entity in the state where the property is owned. So for me that was like Kentucky, or Alaska or Ohio. I've also done it the opposite, where I formed the LLC in Ohio, and then registered as a foreign entity here in California and so again, not legal advice, definitely chat with a legal professional. But from my experience, the LLC needs to be registered in both locations in California, because that's where I live and in the state in which the property is owned as well and there are certain things, taxes forms filings that I have to maintain for both states, which are separate and distinct and so making sure that you're in compliance with the local state, governing rules and regulations around LLCs. You also need to have a Registered Agent. If you're not living in the same state in which the LLC is owning the property. You might even need a registered agent if you do live in that same state but basically what a Registered Agent is, is someone or some company that can receive court papers on your behalf really is what typically is getting served.   Like, is there, like where do we send the mail to and so that's what a Registered Agent is. So there's businesses and services out there that can do that for you. I just use like a service provider that handles all that I've also used like my CPA or my property manager, that can also work but you just want to check and understand the local rules and regulations around who can and can't be a registered agent for you.   Emil: Yep, illegal zoom all those internet you know, LLC providers, they usually have that as like an add on option as well. So if you're like how do I do that? They make it super easy, like very, very common thing and make it super easy for you.   Michael: Yep…   Emil: You know, if you do want to talk to a lawyer, your accountant a good accountant can be very helpful here as well. They don't bill you for a 30 minute consult, so accountant can be helpful here as you're trying to figure this stuff out as well.   Michael: Absolutely, absolutely.   Emil: Cool, man. I don't have anything else. I think that's probably a good spot. This was this was actually enlightening for me because I haven't gone I mean, I have an LLC for my business but not for a rental property. So this was this is good for me as well.   Michael: Yeah, right, alright man. It got us all helpful.   Emil: Thank you everyone for tuning in. Please, please, please leave us a comment. Let us know what you liked what you want to hear in future episodes, wherever you're listening to this and we will catch you on the next episode. Happy investing.   Michael: Happy investing.

Our guest for this week's show is entrepreneur, real estate investment expert, and fellow podcaster, Michael Albaum.  Michael is a real estate investor and Program Manager/Head Coach of Roof-stock Academy, which is one of the world's leading real estate investment marketplaces and has exceeded more than $6 billion in transactions and continues to disrupt the industry with cutting-edge technology and innovations.  In the last decade, Michael has done a variety of deals ranging from single-family homes to longer-term NNN lease properties with national chain tenants. After years of investing, he found his niche in long-distance, value-add multifamily investing. Michael recently left the 9-5 world and prior to the pandemic was traveling around the world with his wife, who is also able to work remotely.     Quote:   “As I grew organically in the real estate space, my purview grew as well. And I found short-term rentals are an asset class that can make a lot of sense for a lot of people.”   Highlights:   05:45: Why getting laser-focused on particular markets led to Michael's success 07:45: The systems and processes Michael uses to manage investments remotely 09:50: How Michael manages his multi-family investments 13:05: Getting multi-family units ready to lease using property management companies 17:05: How the pandemic and today's financial market impacted Michael's investment strategy 22:00: Getting funding for rehab projects 28:10: How short-term rentals have been impacted by increases in post-covid travel 31:35: Finding financing for short-term rental investments 32:40: What advice Michael would give to himself 10 years ago   Guest Website: https://www.roofstockacademy.com/   Recommended Resources:  Check out our company and our investment opportunity by visiting www.SunriseCapitalInvestors.com  Self Directed IRA Investment Opportunity – Click Here To Learn More About How You Can Invest With Us Through Your SDIRA  Accredited Investors Click Here to learn more about partnering with me and my team on Mobile Home Park deals!  Grab a free copy of my latest book “The 21 Biggest Mistakes Investors Make When Purchasing their First Mobile Home Park…and how to avoid them MobileHomeParkAcademy.com  Schedule your free 30 minute "no obligation" call directly with Kevin by clicking this link https://www.timetrade.com/book/KV2D2   

Many, if not most of us, have had to adjust to working remotely over the past two years. How many of us have been able to invest remotely as well? My guest today, Michael Albaum, recently left his 9 to 5 job and has found his niche in long distance, value-add multifamily and triple-net lease investing. For months at a time he'll either travel the world or travel the country in his van while investing remotely. Michael is here today to talk about nomadic investing and the steps you need to take to be able to do this yourself. Michael will break down what you need to be a remote investor and some of the challenges he's faced in managing his managers. I know you're going to enjoy this conversation with Michael. He has a lot of wisdom to share that will apply to all types of investors. You can find out more about him and get in contact through the following methods: LinkedIn - https://www.linkedin.com/in/michael-albaum-297a8534/ Twitter - https://twitter.com/MichaelAlbaum The Remote Real Estate Investor Podcast - https://apple.co/3MAgH1J Roofstock LinkedIn - https://www.linkedin.com/company/roofstock/ (12.1k followers) Roofstock Instagram - https://www.instagram.com/roofstock/ (6.3k followers) Roofstock Youtube - https://www.youtube.com/channel/UC3C867XTb4PISoUzmtxkMcg (2.69k followers) Today's episode is brought to you by Green Property Management, managing everything from single family homes to apartment complexes in the West Michigan area. https://www.livegreenlocal.com And RCB & Associates, helping Michigan-based real estate investors and small business owners navigate the complex world of health insurance and Medicare benefits. https://www.rcbassociatesllc.com

Michael Albaum is living his dream: traveling full-time in a renovated van with his wife. Their nomadic lifestyle is made possible through his commercial real estate investments, allowing him to invest remotely from anywhere. He's also able to run his company, Roofstock, while on the road, which provides single-family rental opportunities for buyers, sellers, and financial management software for real estate investors. In this episode, Michael shares how he's scaled his business, and how he manages his investments from anywhere in the world. Michael Albaum | Real Estate Background Program manager and head coach at Roofstock, a marketplace for buying and selling investment properties. Portfolio: Owner of 47 commercial units He invests in real estate remotely while embodying the nomadic lifestyle of living in a van and traveling with his wife full time. Based in: Petaluma, CA Say hi to him at: roofstock.com LinkedIn Twitter The Remote Real Estate Investor Podcast Roofstock Instagram Roofstock LinkedIn Roofstock YouTube Best Ever Book: First to a Million by Dan Sheeks Greatest lesson: Your gut knows more than you think. Start listening to it. Stay in touch with us! www.bestevercre.com YouTube Facebook LinkedIn Instagram Click here to know more about our sponsors:  Cash Flow Portal | Cornell Capital Holdings | PassiveInvesting.com

You're looking to get out of the rat race, and it's obvious that real estate will be a part of it, but your local market may not be the right fit for you.That's why you need to get comfortable with the nuances of remote investing.That's why we're bringing Michael Albaum on the show!Michael is the Head Coach of Roofstock Academy, a company that is democratizing the remote investing space by creating a national market for it.He will join the show to talk about - what stops most people from investing remotely (and how to overcome it)- how to choose the right market (for your particular situation)- how to choose the right property manager (even more important when you're remote)- and much more!Michael doesn't just have great advice.  He's also got great stories of traveling the US in a van with his family thanks to his passive income... and he's not even 40!Don't miss your chance to level up your lifestyle by understanding how to invest remotely.  Join us live!-------------------------------------------------------------------------------------------------------------------

Want to avoid mistakes in Long Distance Investing?  Download your FREE document at http://keeponcashflow.clickfunnels.com/7mistakes  Going Long Podcast Episode 221: How to Successfully Navigate The Long Distance Investing Landscape In the conversation with today's guest, Michael Albaum, you'll learn the following:   [00:37 - 04:09] Show introduction with comments from Billy. [04:09 - 07:08] Guest introduction and first questions. [07:08 - 14:20] The backstory and decisions made that led Michael to this point in his journey. 14:20 - 20:31] Why Michael made the contrarian decision to invest beyond his own backyard and out of State in Real Estate rather than sticking with his local market locations, and how you can know if it's the right thing for you to do too.. [20:31 - 23:29] How Michael's real asset investing is aligned with the way he likes to live his life. [23:29 - 28:59] What Michael means when he says “If it's not easy to do now, it's not worth doing”. [28:59 - 36:02] Some of the tactical elements of investing that Michael helps his students with. [36:02 - 49:05] How people are using technology to facilitate their long distance investments, and what some of the risks can be in not being local to where you investment properties are. Here's what Michael shared with us during today's conversation:    Where in the world Michael is based currently: San Francisco Bay, California. The most positive thing to happen in the past 24 hours: Michael found out that he may be able to buy his neighbor's property which has just come up on the market. Favourite European city: Sagres, Portugal. A mistake that Michael would like you to learn from so that you don't have to pay full price: Get out there and make some mistakes, learn from those mistakes and alo learn from the mistakes and success of other people. Book Recommendation: Rich Dad Poor Dad, by Robert Kiyosaki. Be sure to reach out and connect with Michael Albaum by using the info below:   LinkedIn: https://www.linkedin.com/in/michael-albaum-297a8534  Websites: https://www.roofstockacademy.com/ and https://www.roofstock.com/  Twitter: https://twitter.com/MichaelAlbaum?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor    To see the Video Version of today's conversation just CLICK HERE.   How to leave a review for The Going Long Podcast: https://youxccbxtu.be/qfRqLVcf8UI    Start taking action TODAY so that you can gain more Education and Control over your financial life.   Do you want to have more control and avoid the mistakes that I made getting started in long distance investing?  Then you can DOWNLOAD the 7 Mistakes to Avoid in Long Distance Investing Guide by clicking HERE.   Be sure to connect with Billy!  He's made it easy for you to do…Just go to any of these sites:   Website: www.billykeels.com Youtube: billykeels Facebook: Billy Keels Fan Page Instagram: @billykeels Twitter: @billykeels LinkedIn: Billy Keels

Your home can be a powerful source of ready cash to fuel financial growth, add value to your property, or even provide a cushion should an emergency occur. Refinancing your mortgage and taking a home equity line of credit out on your home are two ways to make that capital available to you. HELOCs and refis are quite different from each other, though, so knowing which one fits your strategy best is important. In this episode, Pierre and Michael talk about the attributes of each and what situations might be best fit for either of them. Links mentioned: www.roofstockacademy.com  --- Transcript   Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Pierre: Hey, everyone, welcome to the Remote Real Estate Investor. My name is Pierre Carrillo and today I am joined with…   Michael: Michael Albaum…   Pierre: ….and today we're going to talk about refinancing and HELOC and which ones make more sense. So let's jump in.   How's it going, Michael?   Michael: Good here, I was telling you yesterday, my van broke down in the middle of California. So I had to get that taken care of and get a lift home from a buddy of mine…   Pierre: In my hometown?   Michael: In your hometown. That's right, that's right. We were smoking off the highway. So he said, oh, we got to pull over and get this thing fixed and it was going to be a week to diagnose it and get parts. So we just said let's leave it down there and then a buddy of ours was able to give us a lift home and we were like on our way home from being on the road for a month and a half. So we were super excited, super close and then wahh wahh wahh…   Pierre: Not usually the best place to get stuck, I left…   Michael: Yeah, if I had to point if I had to pick and choose it would not have been in this particular town. But that's okay, it's how it goes.   Pierre: All tight. Okay, so let's talk about refinance, what just roughly, what is a refinance? And why would someone want to use it.   Michael: So a refinancing that's not familiar is basically just getting a new mortgage on top of an existing one and it basically this new mortgage is going to replace the old one and so there are kind of there are two different types of refinances. One is called a rate and term refinance, where you're simply just changing the rates and the term of the loan and so if you have a 30 year fixed mortgage at 4%, and you go get a new 30 year fixed mortgage at 3%, because interest rates are better, but the loan balance remains the same. That would be a rate and term refinance, the other kinds of refinances called the cash out refinance and that's basically where you're actually you're getting money out of the transaction and so if you have that same 30 year fixed mortgage at 4% interest, and you have a balance of $200,000, but your home is appreciated significantly, or the property has appreciated significantly, you might be able to go get a new mortgage, a 30 year fixed mortgage at maybe the same 4% but for $300,000 and so that new mortgage is going to replace your old one, it's going to pay off the 200,000. But there's $100,000 left, that goes to you as cash in the form of tax free cash and so that can be a really, really powerful mechanism or lever to pull if you need access to cash and so those are kind of the two different types of refinances and how they work.   Pierre: So those both sound like awesome options. Why wouldn't everyone always just refinance?   Michael: Yeah, it's a really good question and a lot of people do they refinance, and refinance and refinance throughout the life of their property or maybe their own lives because it is such a powerful tool.   Pierre: Refi till you die.   Michael: Yeah, refi till you die, so it was it was not shocked to swap your job for the 1031 refi till you die. I love it. So yeah, I mean, it's a very powerful tool and of course, everyone's probably thinking, wow, if it's so powerful, like, is there no downside? I think that there are some downsides that we do have to talk about and understand. So first and foremost is it costs money to refinance, and some lenders will tell you oh, we can wrap the closing costs into the loan and so what that basically means is, if we go back to our initial example of like, $200,000, if it cost five grand to refinance, your new loan might be $200,000, to pay off that initial $200,000 loan, but it might, your new loan might actually be $205,000 and so they're wrapping your closing costs into the loan. So you don't have to pay anything out of pocket upfront day one. Now, you're still paying interest on that extra $5,000 over the course of that 30 year loan and so it ends up costing a lot. But for from a day one cash out your pocket perspective, it might not and so that's an option for folks to be asking their lenders about is that an option for them, depending on their situation. The other thing I think it's really important to keep in mind is that it resets the time clock, and for how your payment is broken down and so on a 30 year fixed mortgage or any kind of fixed mortgage, your monthly payment every single month is fixed, we know it's not going to change, it's gonna remain the same for the duration of the fixed period of the loan. But what does change over time is the amount that goes to principal and the amount that goes to interest and at the beginning of a loan, the majority of your payment is going to pay down interest. So if someone is towards the end of the life of their loan, they're paying down their principal very, very quickly and so if you go do a refinance again, that time clock is going to reset and now you're going to have a duration that you determined for the loan, but most of your payments going towards the interest. So that's important to understand that distinction as well.   Pierre: What is a HELOC and how is it different?   Michael: So a HELOC is an acronym and it stands for a home equity line of credit and basically, that is a line of credit against the equity that you have in the property and so a lot of refinances, they will give you 80% or 75% of the property's appraised value or they'll simply just replace the mortgage if you're going to take a lesser amount. So if you've got a $200,000 property, and it's worth 400k, but you do and rate and term refinance, you're gonna go get another $200,000 mortgage, that would be a 50%, LTV loan, versus going maximum 80%, LTV or 75%, if you're going to take out $300,000 loan, then you're going to be at 75%, you're gonna get cashed out. So a HELOC is basically on the equity and so if you have a let's say you have $100,000 of equity in the property, and a lender says, hey, we'll give you 80% equity line of credit, that means that they're going to give you like a line of credit of say $80,000 and the cool thing about line of credit is that they just sit there until you use them or until you need them and so if you set one up, you set up a line of credit, they're often free to set up with lenders, and never touch the thing, you're not going to pay a penny in terms of interest or principal payments, because you're not drawing on that line and you can think of it like a credit card. So with a credit card, if you're not spending any money on a credit card, you don't have any payments to make, there's no interest accruing. Same thing with a line of credit, so a lot of these lines of credit have a checkbook associated with them or an account associated with them. And so if I needed a $10,000, tomorrow, or in two days from now for repair, I could write myself a check, write Michael Albaum, a check from Michael Albaum line of credit, I'll deposit the check with my mobile deposit depositing app, it'll have $10,000 in my account, by the time the check clears now is when the time clock starts running on the interest payments and he locks are going to be traditionally interest only payments and the interest rate is going to be fluctuating it's going to be variable and it usually changes monthly. And there's oftentimes a ceiling and a floor. But so if I have a $10,000 balance, let's say my payments 100 bucks next month, if I make that $100 a month interest only payment, my balance hasn't decreased at all. So I'm not getting this benefit of the loan pay down like I am in a fully amortizing loan, which is basically what a cash out refinance or writing term refinances. So I want to just be very cognizant of what my balance is, what my interest rate is, and how much I'm paying off every month. Because you could pay off the entire thing tomorrow, or the day after, if you got a big $10,000 check in the mail, you decided, hey, I'm gonna go pay this thing off. There's usually no prepayment penalties, you can pay it off as aggressively or as slow as you'd like. It has a set period of set life that you have to pay it off in X amount of time. But that's going to be HELOC specific, but it's a very flexible tool and so your cash out refi is gonna be full interest, full interest and principal payments, fully amortized loan, your line of credit tends to be an interest only variable flexible line of credit you have access to.   Pierre: Okay, cool. I have a few questions on so the So you're essentially on a HELOC, you're borrowing that money from the equity in your property?   Michael: Yes.   Pierre: So when, who are the interest payments going to?   Michael: They are going to the bank, they're going to the lender that has that line if you have that line of credit with.   Pierre: Okay, all right. Next question is you said it's a variable rate.   Michael: Yes.   Pierre: What okay, so say you're, you have a certain amount of equity in your property based off of its current valuation, and there is some like major market correction where the value of your property drops down significantly. Does that new calculated equity in your property, then replace the amount that you had available to you and that HELOC?   Michael: It's a super good question and so it's something that a lot of people were very concerned with, sort of COVID is, hey, I've got these lines of credit out, are our lenders gonna start calling them do which they can, they're legally allowed to do that and it's all in the mortgage language and so it's important to read and understand that language very closely. But it can happen, lenders can say, hey, major downturn, like we're closing your line, you need to pay it all back and understanding what that mechanism is and how that works is going to be specific to your lender and your HELOC. Traditionally, I haven't seen that happen a whole lot, because values tend to fluctuate with time and lenders when they're looking at how much line of credit will extend to you. They're building in buffer and that's why lenders are only giving out 80% loan to value or 75% loan to value. They're like hey, Pierre, you've got to have 20% 25% skin in the game and so the property has to drop 25% before their investment is even at risk. So same thing with the locks they tend to go a little bit higher on the LTV I've seen up to 90% and so there's still that tempers sent buffer, which lenders that's how they're underwriting things, but to your question, short question long answer, they can close these lines of credit, yes.   Pierre: Okay and then how do the HELOC affect your credit rating? I mean, it's pretty big chunk of credit that you're then pulling out on $80,000. That's a huge credit card.   Michael: Yeah, potentially. So it's a lot of it'll show up as a second mortgage. That's really what it is. It's a second loan against the property and I, I'm not 1,000% sure. So I would ask the lender that you're getting the line of credit from, but my understanding is that most lenders when they do a credit poll, they'll see the full balance, the full amount of the line of credit as a debt on your credit score and so they'll just assume that you're making the minimum monthly payments on that loan, affecting your debt to income negatively. So I hope that answers your question. But again, I'm not 1,000% sure. But that's how I've seen it done in the past.   Pierre: Going back to the variable rate on a HELOC are can that rate just change from one day to the next or is there a schedule that it changes? Well, you can you plan ahead, you know, and say, you know, did you can use it within this certain time period before the rate rises or is it just like, rates are variable, we changed it.   Michael: Most lenders do monthly rate adjustments, and there tends to be a ceiling and a floor and so you know, going into it, okay, this is my maximum interest rate this, this will ever be throughout the life of this HELOC, which tends to be five to 10 years. So you can have an understanding, but no, it's really tough to forecast. Okay, rates are gonna go up on this date, and this is what they're going to go to. Okay and if you figure out how to do that.   Pierre: Alright, so that brings us to, when do we use which one? When does a HELOC make sense and when does a refi make sense? Which one's better?   Michael: It's a super good question and one that I get in the Roofstock Academy all the time, I'm constantly chatting about it with folks, especially given today's market environment where there a lot of people have made a bunch of equity in their home over the last couple of years. So it really depends which one is better, it really depends on it's a case by case basis. What I often share with folks is if you have a plan for the cash, within six to 12 months, I would go cash out refinance, if you're not sure, but you just know you want to have access to cash. I go with the HELOC because again, in that in that cash out refi scenario, you're paying on those borrowed dollars, day one, independent of what you do with the money independent what you do with the proceeds. So if I've got $100,000 proceed from a cash out refinance, but I don't quite know what I'm gonna do with it, I'm just kind of having it sit in my bank account that's costing me principal and interest every single day it's sitting there.   Versus if I go the HELOC route, I set up a line of credit for $100,000. I can access it tomorrow if I needed it, but doesn't cost me anything to have the ability to access it on a moment's notice. So it really depends, I would say on what you're planning on doing with the proceeds. It also depends on your current loan terms, and what your new loan terms would be in terms of a rate and term or cash out refi if you're at a two and a half percent loan, 30 year fixed, and you would have to go through a five and a half percent. If you want to do a cash out refinance, I would think long and hard about that depending on the loan size on the smaller the loan less impactful a delta and interest rates gonna be, but on a really big loan, that can be really really, really impactful to your monthly payment. Now you could make the argument that oh, I can always refinance again down the road. Yeah, but today, I know exactly what your payment isn't at two and a half percent and I know it's pretty darn attractive. So in that instance, too, it might make sense for someone to go the HELOC route if they have to give up a really attractive or really a really solid loan.   Pierre: Okay and can you use, is this a product like a HELOC? Can you just use this on your primary residence or can you use this on every one of your investment properties?   Michael: Yeah, also really good question. They are most predominantly used and given on owner occupant primary residences, there are lenders that will give them out on investment properties, but there are fewer and far between it comes in, it's much easier to get on an investment property. If the lender already has the first mortgage. I'm investigating this right now with a investment property that I own. I'm going back to the same lender that has the primary mortgage and say hey, can I get a line of credit on this thing, there's a ton of equity that they're being open, too or r if you own it free and clear, that tends to be very easy. But what lenders don't like to do is specifically on investment properties because it is a second loan. They're in essentially in a junior position. So they don't want to be second in line to foreclose on the property. If you're not making your HELOC payments to them.   Pierre: Okay, and so you take a HELOC out on your primary residence and then move out and now it's kind of you're renting it out as an investment property. Do you have to close out that HELOC or can you just keep that open?   Michael: Yeah, it's a great question. It's that's going to be lender specific as to what they have in their language, I would imagine you can continue keeping it in effect in force if it's if you're making payments to them. That's kind of like when you get a primary mortgage and then move out and rent it out. You don't have to close the mortgage, but it's going to be lender specific and product specific as to what you have to do what you have to disclose if it can becomes a rental and it was a primary at one point.   Pierre: Okay, cool. I think that's those are all of my questions on this topic. Do you have any, like final tips that you should that that you want to leave everyone with about both of them?   Michael- Yeah, I think they're both really powerful products, really powerful tools to have in your tool belt, there are applications for both. But if you're not sure, definitely do your research. But also, it doesn't have to be one or the other and there's this kind of hybrid approach where depending on what your new product you're going into, from a rate and term or a cash out refi is, you don't have to take your maximum loan to value. So let's say you've got $100,000 of equity to play with that you can get a loan against. Maybe you take 40,000 in cash out refi and then 40,000 in HELOC. That way, you give yourself a little bit of cash today, but you also give yourself a little bit of flexibility down the road. And again, you really want to think long and hard. What is the plan for the proceeds? What am I going to do with this money once I have it in my account and again, for me, my kind of number is six to 12 months. That's what makes me comfortable. But if you're sitting out there like no, I'm okay having this money sitting my account for two years because of the uncertainty or because of whatever justification you have. Great. But again, it's not an all or nothing type situation for either product. So definitely start chatting with lenders and it's easiest to start with the lender that currently has the mortgage if you're interested in HELOC, but there are plenty of lenders out there that have just HELOC only products that can that can complement a mortgage.   Pierre: All right, Michael, that definitely covers it. Thanks so much for sharing, anything else?   Michael: Now this was great, man. Thanks so much for that for the awesome questions here.   Pierre: All right, let's get out of here.   Michael: Let's get out of here.   Pierre: Thanks everyone for joining. Please subscribe to the podcast wherever you listen to it. If you're watching it on YouTube, hit the subscribe button that really helps us get out to more people. Thank you all for joining us and we'll catch you on the next one. Happy investing.   Michael: Happy investing.

Tamar Hermes is a full-time real estate investor and educator. After building successful businesses in the retail and entertainment industries, she turned her attention to real estate with a mission to get more women to become investors and continue to build her portfolio. Tamar has been investing for over 20 years with a focus on appreciation with buy and hold single-family homes and duplexes in Los Angeles. In the past few years, she has expanded her portfolio to include passive multi-family investments across multiple states, private lending, and Airbnb properties. She bought her first duplex when she was 28. She always had a knack for saving money, but it took her years to discover there were other ways to earn income besides working a 9-5 job. Today, Tamar will talk about how financial freedom is possible through real estate and the importance of knowing how to allocate and invest your money and protect assets is a critical piece of sustaining financial independence and creating a legacy. Episode Links: https://www.themillionairessmentality.com/ https://wealthbuildingconcierge.com/ https://quiz.tryinteract.com/#/60bd0792decf1d00177af595 --- 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 the Remote Real Estate Investor. My name is Michael Albaum, and today I am joined by Tamar Hermes, who is an author, investor, coach, an all-around awesome person and she's gonna be talking to us today about what it's like to get started, as well as some of the different avenues that investors can take as they're going down their investment journey. So let's get into it.   Hey, everyone, just a quick note, before we get into the episode, today, I wanted to give a shout out to the Roofstock Academy, which can be found at roofstockacademy.com. It is a one stop shop for your real estate investing education, independent of where you're starting from whether you're just starting out trying to get that first deal done, or a seasoned investor with a sizable portfolio, looking to get involved some other asset classes, or maybe streamline your investing. We've got stuff for you. It's comprised of on demand lectures, so you go at your own pace. Some of our programs have one on one coaching access to private Slack channels, forums and group coaching sessions. So come check us out at roofstockacademy.com. Look forward to seeing you in there.   Tamar, thank you so much for taking the time and joining me on the podcast. Really appreciate you coming on.   Tamar: Thank you so much for having me.   Michael: Oh, my pleasure, so I know a little bit about your backstory. But I mean, you're an author, you're a coach, you're an investor, give us the little background of who you are, where you're come from, what it is you do in real estate.   Tamar: How long does this podcast? Okay, in a nutshell. So my background is similar story, as a lot of investors that start out in real estate, I was looking for a way to lower my expenses and so I bought a duplex over 20 years ago and the rest is history, I realized that I could get other people to pay my mortgage and it was very exciting and I went on and did more of it cut to I did grow up without anything. So I wanted other women to realize the opportunity in real estate and that's when I started wealth building concierge. I recently wrote a book, the millionaires mentality to teach women how and men too actually should say, how to invest in real estate and the many ways in which you can do it and the many ways to build wealth through real estate.     Michael: Oh my god, I love it. Well, there is a ton here to unpack, we'll see how much we get through in today's episode. But so the duplex that you bought, you obviously bought it locally because you were living in it, and your future investments and kind of proceeding investments after that were those local or those remote?   Tamar: So when I first started investing, many years ago, in Los Angeles, I was living in the duplex and so I bought there, and I continued to buy there because we didn't I didn't have the resources that we have now and I didn't realize the opportunities of investing out of state. Over the years, I have investments across the country now and I also invest in both passive and active meaning that passive that I give money to partners and they do all the work and I get a piece of the pie active where I do the work and I take advantage of the real estate professional status and get to enjoy all the perks of controlling my own asset.   Michael: Love it, so on the remote real estate investor podcast, we've often done showdowns between single family versus multifamily passive versus active investing and we try to take a stance and defend both positions having done both, which do you like better and why?   Tamar: I will say that I enjoy both for different reasons. I enjoy both passive and active. I ultimately like passive better because passive is where you're on the beach in Hawaii, drinking a Mai Tai while you are collecting checks, so that kind of trumps everything. Although active gives you tax advantages, it gives you more control over your investment and it is a way in which you can also learn a lot more about real estate investing because if you're passive, you need to learn a certain skill set in terms of looking at analyze a deal and how to vet a sponsor. However, you don't need to know all the ins and outs of how the property management works and the ins and outs of negotiating, finding the deal. Dealing with the tenants all of that those aspects. So there's a different, it depends on what you want to accomplish as part of my whole platform, where I feel like right now we're in a time where real estate investing is very popular, which I'm so grateful because there's enough for all of us, and we can all make a lot of money have owning real estate. What I do get concerned about is that there's not a lot of thought or strategy around what we're buying. So a lot of investors now they might say, okay, I want to buy Airbnbs and the goal is to cashflow 10,000 a month. Well, that's a great goal and that's wonderful. However, what is the big play in terms of the Airbnb and where are you really going with that and what then is the property appreciating or is it just in a market where it doesn't appreciate? What happens if the market changes and will that place still rent as well or do you have to turn it into a long term rent and can you can it? Can it take the that strategy? So there's a lot of pieces that I like to think about in terms of mitigating risk, and in terms of wealth building in terms of how do we build a portfolio where we have passive income, where we have certain assets, performing in certain ways and other assets performing in certain ways. And I'm also in private equity deals, I'm in crypto, I like a diversified portfolio.     Michael: Love it, love it, love it. So if someone is just getting started, they are trying to get their legs under them invest in their first deal and they're getting kind of overwhelmed with the amount of stuff that you have to learn and do to get involved into an active ownership deal. Do you think passive is a good place for someone to get started or do you like people to see, go the active route, get their teeth cut, get an education to understand what goes into the back end stuff around the passive deal?   Tamar: That's a great question. I think it really depends on one big factor, which is how much time do you have, if you are a busy professional, and you are working or running companies, and you're not really that interested in real estate, but you want to benefit from the profits that are available to you, then passive is certainly the way to go and then I would I would do is focus on that dive deep into meeting the right sponsors, finding out about how to look at the deals and learn about certain deal structure and the benefits and that is a great way to go. If you are someone who is young, you've got time you're interested in real estate you want to be in the game, get your hands dirty, then you want to be asking yourself, what is the most appealing aspect of real estate in terms of do you like and Airbnb, a lot of a lot of people don't like designing, they don't want to deal with all of the nuances and the expense sending up an Airbnb, Airbnb is expensive, there's not a lot of way around that if you're going to furnish a place, you're going to have to put money into it. So those are if you don't have that resource, then that might not be an option for you right now. Granted, if you're able to maybe do a get a property where you can get a low enough deal and get enough appreciation into it and do sort of the burr then you have the opportunity to do the option of Airbnb and because maybe you have enough money in the deal there or maybe you take a partner. So those are just examples. A very simple way to get started is even with Roofstock, you do a great job of providing turnkey properties where people can go on and figure out where they want to buy and then do a purchase and start learning that way. That's another great way, keep it simple.   Michael: Tamar, I think that's such great insight and I know that you've done all kinds of investing, you've implemented a ton of different strategies, kind of throughout the country. So I would love if you could give people just a taste of some of the things that you have done and then I'm curious to get your thoughts on what your favorite has been.   Tamar: My favorite investing strategy is passive investing and I'd say that as a general because any project that you can get in on where you are making mailbox money is a good project and especially when those projects exit, you get another bump and you're looking at interest returns of close to 20% generally annualized when it when it all shakes down when once a project exits. So granted, you have to remember it's it an investment, so it could vary and even if I'm making 14% annualized, I'm pretty happy. I think that's a pretty great return for doing no work and putting my money in. Now my favorite investment strategy for if you are just starting out is a little different. I would say right now my favorite investing strategy for starting out is probably the Airbnb model and I think I'm not alone and that's why it's become so popular because you can cash flow properties and buy in appreciating areas, which is sort of unheard of in the past, when you would buy in Los Angeles. Well, Los Angeles is a bad example because they have terrible laws for, for tenants. So that's not a good example.   But let's say Austin, where I live now, Austin is a great city. So it is possible in Austin or San Antonio to buy a place if you if you are savvy and you can buy it right and get a great opportunity, then you can move into an Airbnb structure. Now, I should say, though, in Austin, there are regulations, so you need to go outside of Austin, but certainly San Antonio, there's a lot of places where you can do it and you can actually buy in an appreciating area in Florida and Georgia, there's a lot of places and I just think that's a great strategy for a beginner, you do need some money, like I said, because you got to furnish the place and it is harder to buy in an appreciating area, because prices are higher. So if you don't have as much money, it makes it cost prohibitive. But there are a lot of labor areas that you can go in Texas, in Florida, in Georgia, in Idaho, where you can make money and do well.   Michael: Love it, so I think what's hard for so many beginning investors and curious to get your thoughts if you see the same is that there are so many different things, so many different rabbit holes, an investor can go down, oh, I want to learn about wholesaling and go through that I want to go learn about burr investing go to that I want to go into fixing, flipping, go do that and so it's can be really overwhelming. And so if someone is interested in buy and hold, or in Airbnb, I mean, how do someone stay focused when they're just learning and they're just getting started?   Tamar: So that's a great question, it can be very daunting and you can also get into analysis paralysis, where you want to buy the best deal and make sure that it's the best one and you make the most money and a lot of times getting a base hit is better than getting a home run on the first go around and sometimes you're a seasoned investor and you end up with a base hit. It's happened to me, and it happens to the best of us because we can't control all the variables. So there are a couple things you want to look at if you're just starting out one is where do you live and do you live in an area where you can actually invest and it makes sense and if you do, I always think don't go to another state. If you live in a perfectly good state. If you live in South Carolina, don't go to Texas to invest in South Carolina, it's a great market, you don't need to make your life harder. So the first thing is deciding on the area.   The other thing is, then you need to decide what strategy now strategy a lot of times comes down to how much money do you have and how much time do you have and how many partners can you get if you need money to Terez for a deal. So if you're just starting out, you don't have a lot of money. Wholesaling is a great option because you can get a deal and you can make a really quick profit, and you can start building some profit in there. Now you're not owning the property, so you haven't quite built your asset column. Although you're doing a great job in terms of bringing income in and building that that nest egg, well, not a nest egg, but an investor egg that you can turn into buying properties working capital, working capital, exactly, you have working capital and so you just look at where you are and I think you really the numbers are pretty basic. If you're not going for a huge deal multifamily aware, you have a lot more metrics that you need to be looking at. So if you're just a single family, it really isn't that complicated. You just need to look at how much it's how much the expenses are going to be. What can you rent it for? Are you in an area where people are moving? Or are you in an area where people are moving away? That's a consideration. What kind of markets are in the area or is there just one industry like it was in Detroit, that was a huge problem. When the industry fell apart, and then a lot of people were leaving their homes and there was no one to buy those homes. So those are the kinds of things that you want to ask yourself and don't get caught into wanting to retire from real estate investing next week, because unless you have millions of dollars that you're playing with, you've got to build that and chances are you're not going to build it on the first deal. Although if you keep moving you will ultimately get there you have to stay in it and you have to do the work and be diligent and just believe in yourself a little bit. You can look at other people who have done it and you know you can do it especially when I speak to women, which is who I coach and who I serve.   We are looking at what we can, what we're looking at what we can do, how we can get an action, how we can focus and diversify and create portfolios and with, with clarity and confidence so that you can actually get past that part of the of the gate where you're just looking and wanting to dive in and actually diving in and being on the other side of actually, oh, my gosh, I own property.   Michael: Yeah, no, I think that makes a ton of sense and kind of continuing in that thought vein, have you ever had a deal a bad deal or a deal go sideways that you could share? Because I think so often, especially on real estate podcast, we're talking about the wins the highs, the best of the best and people are like, I could never do that. I could never be where Tamar is I could never do what she's done. So give us a humbling experience that you had in real estate.   Tamar: Yeah, sure. So I can talk about a deal recently, that wasn't really a horrible deal. But definitely the numbers were not what I expected and I did, I never think that you actually I don't like to say you ever lose money in real estate, unless you sell at a loss, right? It's just like the stock market. It's the same principle. If you hang on to the property, and then the prices go up, and then you sell then you made money. But if you sell at a loss, then you that's the only time you lose money. So recently bought a property in Arkansas, and I had boots on the ground. That was the other thing I was going to talk about that if you want, let's say you don't live in a great area, like you live in Los Angeles, you might need somewhere where you have some people in place that can help you find the property and facilitate the, the rehab and manage the property for you. So those are things you think about. So in Arkansas, I had boots on the ground in this area and I purchased a little lake house that I wanted to Airbnb, and the margins were terrific and my boots on the ground were very seasoned and I had done other deals with her before and I kept asking, hey, is the Airbnb regulation an issue and she said she really didn't think it was and that other people were air being in the area and that we just had to go through a process with the with the city and with the with the gated community that I bought in, and that it would be fine and so I went through with the deal and we started buying furniture and I did it very hesitantly because it's, it's expensive to furnish an Airbnb and I kept thinking, well, I want that to go through the regulations to make sure we're not stuck and at the end of the day, we did get caught in some red tape, we were denied by the city, there was a big political issue. We're actually in this area, we're actually going to court now not just me, the whole community of Airbnb, Airbnb homeowners that are upset about the regulations and feel like it's not good for the community and that it's not, it isn't diplomatic at all and so what I ended up doing was I ended up renting it for six months to a guy that was actually building a lake house, and I am covering my mortgage, and I'm making a few $100. So it is cash flowing a bit. But it definitely wasn't the few 1000 that I thought I was going to make in the area. So that's a story where it wasn't like the worst thing in the world. But it certainly wasn't the best I use my resources, I expected a certain return and I didn't get it. But I just pivoted, and hopefully in six months in a year, if the regulations change, then I believe that my property will not only double in value, but I will also be able to start Airbnb being it. So sometimes it takes a little longer when you're doing an investment.   Michael: Yeah, okay. Oh, that's interesting. So maybe you didn't get to make lemonade today, but you made like lemony water, and next year, you'll be able to hopefully make the full fledge lemonade.   Tamar: This is part of the reason why I like a diversified portfolio because you can't control all the variables in real estate and that's part of the reason why people don't ever get into it, because they are uncomfortable with the fact that you can't control the variables. They think that when they invest with a financial advisor, and the financial advisor puts them in stock, somehow that financial advisor is protecting them and protecting their assets for the one and a half percent commission that they're making. The truth is they don't control the stock market. So it can go down just as easily. You're just as vulnerable. In fact, I think a lot more in the stock market than you are in real estate.   Michael: That is such a good point and I just want to kind of touch on that again, because I think it just I had an aha moment for myself. I think when people get involved with other people that can talk the talk or that have experienced doing whatever it is, they get this illusion of say see, and to your point, exactly, the person who's selling you the product or placing you in a product has zero control over the market or the company into the stock that placing you and so I think that's a really great point to hit home.   Tamar: I mean, they certainly have knowledge and they are certainly doing the best they can, although we know historically that it's volatile, and then ultimately, they don't control it.   Michael: Okay, Tamar. So getting back to kind of having a bad experience I showed on a prior podcast, I just got my lunch eaten on my very first deal, but I was too green, too naive to know to stop. So I just kept falling forward and I was like, well, this is progress. When people hear those types of stories, like whoa, like, I don't want that to happen to me, I'm gonna do my research, I'm gonna get educated, I'm going to do all the things I need to do in order to do this responsibly. How should someone think about being ready, because you could very easily say, and I'm guilty of it, too. Oh, one more podcast, one more conference, one more book, one more coaching session, whatever it is you're doing to prepare yourself if you're just getting started. So how do you take that leap and know that yeah, I'm doing it responsibly and I have enough information to proceed without getting without, you know, being overloaded with information?   Tamar: I think you need to be honest with yourself. And I think you need to look at what's really happening for you. So there is a point where you are educating yourself and you do feel like, okay, I want to have my ducks in a row, I want to be pre-qualified for a loan, I want to have a certain amount saved. So I can buy this property at this amount. Or I want to educate myself in a certain strategy and then there's also a certain point where you are just in analysis, paralysis, and one of the things you can do that really helps is one to set a deadline, just decide to say, okay, I have two months to do this and after two months, I'm going to do this and when you do that, one, you're making a commitment to yourself and also in your mind, you're making a commitment to that action, the other thing you can do is get an accountability partner and say in two months, hold me accountable. I said I was going to do this. Now, you mentioned coaching, I'm a huge fan of coaching, I have coaches, I pay a lot of money, for support for guidance for collaboration and I think that it's very important to look at yourself and see if you're the kind of person where you know what, I need somebody to take my hand and look at this with me and say this is okay. Now granted, you could have a mentor, and sometimes you could go to meetups, and you can meet mentors for free and a lot of people are super generous, and they will be able to support you. So you couldn't even get that support for note paying no money and I would also say there is a huge benefit in being in a group being in a private coaching, really looking at what you're doing, and having someone support you in that deliberate way. Because we do pay attention to what we pay for and it's just the truth. So sometimes when we get it for free, maybe somebody gives you some great advice, but you don't pay for it. But then as soon as you pay for it, you think, okay, I just gave that person money to tell me for the value of their knowledge and they told me to do this, this and this, I'm going to do it because I just pay money for that and I want to get the I want to get the benefit of that. So it does work pretty well and the trick is to really know yourself, and to make sure that you are moving forward and don't be afraid.   The other thing that happens is we have this attachment to money, we have this false attachment that if we hold on to our money, that we're safe, and that we are building wealth, and that we're secure and the truth is, is that we don't build wealth by keeping it in a bank account, where in fact right now with inflation, we are most certainly losing money. If you want to use the rule of 72 and seven years your savings is gone at this point with the inflation rate we're at. So the truth is that that money needs to be working. I can't tell you how many clients I've had where they have hundreds of 1000s in the bank, and they're just paralyzed. They just don't know exactly. I'm not sure what to do. I don't want to make the wrong decision. I don't want to lose money and I don't know exactly what direction to go in and they are so happy once the money starts moving. I had a client she ended up buying a house that really suited the next move for her. It's an Airbnb, but also her family can use it. So it kind of tied in really nicely with her desires, which is also important and then right after she did it, she made a big sale and some money came in. I mean, it was crazy. Once you start moving the money, money starts moving with you and it's amazing how that works and that's why I really think that the false attachment to money can really also hold us back from the real estate investing and we need to be careful about that because if you fall into that trap, you will just be hoarding your money and it just won't be working for you and you also won't be reaching your goals because you can't buy anything unless you're willing to give somebody some money to buy the property.   Michael: All right, that makes a ton of sense. For those that might not be familiar to mark, you just touched on what is the rule of 72.   Tamar: So the rule of 72 is you multiply how much percentage you're making, by the years that it will take to double your money. So in 10 years' time seven, that would be 72. So that would take you at 7% 10 years to make that money at 10% inflation, it would take you seven years to make that much money.   Michael: Perfect, perfect. Thank you for the clarification. Let's shift gears here and talk about your book. I know you said who it was for it and why you wrote it. But I'm just curious, how did you get the inspiration with so many real estate books out there? How did you want to set yourself apart?   Tamar: Yeah, that's a great question and I think this is really at the crux of everything that we do, because we can look also at all the people that are involved in real estate, wait, where's my space? How do I fit in? Is it is the market? Is it too late for me? Those kinds of questions. So for me, right, what I think is a great place to come from is to think about your why and think about why you're doing things. So for me, the book was about me sharing with the world. So I wasn't thinking about everybody else and how saturated the market was, and that there wasn't a space for my book, I was just thinking, You know what, I have this knowledge, I have an idea I want to share who I am and how I got to where I am, I feel like I have a message that I really want to share. I feel that I have knowledge that I want to share and so I just shared…   Michael: …and people were clearly receptive to it.   Tamar: Yeah, yeah, absolutely, a lot, a lot of women are and men are reading it too, and getting a lot of benefit out of it. So it was really about what it's really all about and everything that that the listeners are do is about what is it that you want and what do you want to put into the world and how do you want to live and if you want real estate, by golly, just figure out a way to get it, you know, other people are doing it, why not you? They're not you're gonna, we're all just humans, we're all just people. The only difference between me and you is that I've done it a lot. So I have amassed a certain amount of wealth and you might be at the beginning or at a middle stage, it doesn't matter. It just you're on your journey. I'm on my journey. But you can still find properties.   Michael: Yeah, yeah, not so good. Someone once told me and I forget if it's a famous person or a quote, but you know, you look at someone that's really accomplished. The only difference between them and you as they've made a ton more mistakes than you. It's like, oh, yeah, like they've gone, they've gone through the stuff, right? It's true.   Tamar: That's true and most of the people just so that, you know, that I ever speak to, and that in the circles that I'm around where we're a lot of us have accomplished a lot. We have come from nothing. We have worked really hard, we have made a lot of mistakes, we continue to make mistakes, we continue to put ourselves out there. It's just working that muscle and just be willing to be in the world and create the life that you want.   Michael: So good, Tamar, it's no secret that the world of real estate investing is like oversaturated with dudes, it's like it's ridiculous and we've really tried to make an effort here at rootstock to highlight the women voices that are out there that are doing it. So what can you share with women that are out there who are wanting to get invested, but are feeling overwhelmed or nervous? Because it is such a male dominated space?   Tamar: Yeah. So it's, I think we're still 30% women are investors and we're, we're making strides and I would say, embrace the men embrace the good men and don't feel like it's us in them, just because they've been in the game a lot longer. Historically, we couldn't even buy property, it sounds insane to even say that, because none of it makes sense. Although it's true and we haven't had as much time in this arena. I would say I think the women that struggle more or any woman that starts thinking, oh, those guys, they did this they did that they're hard to work with. I have tons of partners that are men, I adore them as much as I adore the woman and that I work with that I partner with and I believe that if we all embrace what we want, and as a woman understanding that we have skill sets that men do not have and that there's place for us in the real estate investing arena, then we will continue to flourish and to make strides.   Michael: Love it, love it, love it. Tamar, this has been so much fun. Where can people get a copy of the book and how can they get a hold of you if they want to learn more?   Tamar: Yeah, awesome. The book is called The Millionaire mentality of professional women's guide to building wealth through real estate and you can get it just by going to tamarbook.com. It's T A M A R book.com and then also, I'd love to share my real estate investing personality quiz, which is also at the beginning of my book to support beginners and learning. How do you decide what area of investing you want to go into and that you can tamarquiz.com.   Michael: Amazing. Thank you so much and if people want to reach out or learn more about you, is there a good place for them to do that?   Tamar: Yeah, absolutely. You can visit my website at wealthbuildingconcierge.com or you can also send an email to me and my team at hello@wealthbuildingconcierge.com.   Michael: Amazing and we will link to those in the show notes. Well, thank you so much for taking the time Tamar. I really appreciate you coming on and I'm sure we'll be chatting soon.   Tamar: Awesome, thanks for having me.   Michael: You're welcome. Take care.   Alright, everyone, that was our episode, a big thank you to Tamar for coming on. Really, really great insights. Love the piece about the financial advisor that she talked about. So if you missed that, definitely go back and give it another listen. As always, we love hearing from you all with episode ideas, comments and feedback. So feel free to leave us a rating or review wherever it is get your podcasts and we look forward to seeing on the next one. Happy investing…

Michael Albaum started with a simple mission. He wanted to buy 1 property a year for 10 years, and achieve a level of financial independence. That plan was drastically surpassed as he continued to invest and grow his portfolio. Adam Schroeder and Michael discuss his journey, how people can follow a similar path, what metrics they like to use when looking at a deal -------------------------------------------------------- Website - www.RentToRetirement.com YouTube - www.YouTube.com/RentToRetirement Current Hotlist Properties - www.RentToRetirement.com/Hotlist

Michael Albaum started with a simple mission. He wanted to buy 1 property a year for 10 years, and achieve a level of financial independence. That plan was drastically surpassed as he continued to invest and grow his portfolio. Adam Schroeder and Michael discuss his journey, how people can follow a similar path, what metrics they like to use when looking at a deal -------------------------------------------------------- Website - www.RentToRetirement.com YouTube - www.YouTube.com/RentToRetirement Current Hotlist Properties - www.RentToRetirement.com/Hotlist

These days, living on the road doesn't mean you have to live in a suitcase and move from hotel to hotel, or invest all your  savings in a luxury motor home that can serve as a bus. Something as simple as a camper van can become a home away from home - or even your full-time residence. Thinking of living a van life? You'll want to listen to Michael Albaum in this episode, as he talks about how he and his wife decided to live the van life and how that can help you get started investing in multifamily real estate. Come join us and listen in!Michael Albaum is a real estate investor and Program Manager/Head Coach of Roof-stock Academy. In the last decade, he has done a variety of deals ranging from single-family homes to longer term NNN lease properties with national chain tenants. After years of investing, he found his niche in long distance, value-add multifamily investing. Michael is also the host of The Remote Real Estate Investor Podcast, which interviews RE industry professionals about remote real estate investing. We welcome a show trade if you invest remotely and you're at all interested in being on his show.   [00:01 - 01:15]• We welcome Michael Albaum to the show  [01:21 - 06:03]• Michael Albaum's background on how he started investing in real estate.[06:10 - 07:57]• What were some of the sporadic markets that weren't the ones he focused on and the two main ones that he did?[08:00 - 13:56]• Why they decided to live in a "Camper Van"? How they focused on their chosen market? Awesome fact about Suzy Sevier[14:00 - 16:03]• What is it about teaching people about real estate? What are the main topics that you're teaching? [18:52- 20:19]• What excites him most right now? Why do they want to self-manage after finishing the development project?[20:22 - 27:54]• Short -term rentals and should you put restrictions on them? Golden Visa in Portugal.[28:04 - 32:29]•Closing Segment•  Asking Michael Albaum the Adventurous FourTweetable Quotes: "Real estate could be for every one, but doesn't have to be."  - Michael Albaum Connect with Michael Albaumhttps://www.linkedin.com/in/michael-albaum-297a8534/https://twitter.com/MichaelAlbaumhttps://apple.co/3MAgH1Jhttps://www.linkedin.com/company/roofstock/ https://www.instagram.com/roofstock/ https://www.youtube.com/channel/UC3C867XTb4PISoUzmtxkMcg  Until next time…Explore more. Adventure awaits.  Please subscribe and leave an honest review  - how do you want to create an impact in your world?Check out Adventurous REI and our social media channels: Facebook, Instagram, and LinkedIn.Michael on LinkedInSuzy on LinkedIn   Invest with us! Start here. GRAB A FREE copy of The Complete Guide to Generating Passive Income for Avid Travelers & Adventure Seekers

They say that you date your real estate agent and marry your property manager! So choosing a property manager requires quite a bit of scrutiny. A solid relationship with a good property manager is critical to the performance of your investment. But many property managers know what owners want to hear and getting past those surface questions is important to gauge their experience and capacity. In this episode, Michael, Emil, and Tom will share the interview questions they use to evaluate a property manager. --- Transcripts Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Emil: Hey, everyone, welcome back for another episode of the Remote Real Estate Investor. My name is Emil Shour and today I'm joined by…   Tom: Tom Schneider   Michael: and Michael Albaum.   Emil: And on this episode, we're going to be doing a round table finding out what our favorite questions to ask as we're interviewing new PMS. So let's hop into this episode…   Jents, how you doing? What's going on? What's new? Tom, where are you first?   Tom: Great question. Physically I am in my garage, I… in previous episodes talked about building a little office shed prebuilt. Just really going through the wringer on it, I started the process tried to do it quickly, like maybe not permitted and…   Michael: Maybe not permitted used to say…   Emil: I hope the inspector is not watching…   Tom: It doesn't matter, man I'm in… So long story short, get to a Tom, I if I'd made it 120 square feet, you can do whatever you want, basically but I made it 180 square feet and I had a NIMBY neighbor calling me as they were pouring concrete. So just basically had to like start from square one, get approvals on design from the city then get sanitation review and now I'm in plan check and they're asking like very detailed structural questions. So now I need to like pay for an engineer to answer these questions and yeah, I'm in the garage right now. So I would I wish I was in my new little office but I got a newborn, who's in what was previously my office. So long story long, here. I am at the garage.     Emil: You relegated to the garage. That's your new office?   Tom: Yes, yeah. But it's good, it's got gym in here and do some TRX and squats. Try not to hurt myself in between meetings. But…   Michael: Nice…   Emil: Awesome, now Michael what's going on?   Michael: I got a little have a couple different refinances. So I closed one last week, which is awesome cash out refinance and then I've got three more hopefully closing this week and we're looking at purchasing making a purchase here kind of shortly. So getting very excited and geared up for that…   Tom: Purchase more short, short term, or what do you what are you getting into?   Michael: I think I'm gonna do short term and do some more short term, add that to the portfolio and juice that cash flow. What about you Emil, what's going on?   Emil: So it's actually lends itself well for the topic today. So I got a an email last Friday, from my property manager in Jacksonville, basically saying they've they're discontinuing service in these three zip codes, because they've found them to be management intensive, whatever they probably want to focus on, you know, maybe some zip codes where they get higher rent, higher fees, whatever it is, they don't like managing them. So I'm on the lookout for a new property manager. So I figured, you know, what better way than to use that as a topic for an episode? Like what, what questions you ask, you know, I haven't, haven't gone through in a while, but figure be good to just think of our favorite questions as PMS.   Michael: Getting back into the dating world again, after being in a relationship for a long time.   Emil: I don't know about you guys, but I don't love it. Do you do love like interviewing property managers?   Michael: No, I don't like interviewing in general.     Tom: I think it's, I think I respect the value in that, you know, how important it is for downstream stuff like so for myself, like, super passive, like I will like, not be super engaged. So like, knowing that, that, you know, what is it, you know, cutting your wood? I'm not using my analogies, right…   Michael: Sharpen the ax…   Tom: Yeah, sharpening the ax. But I mean, I don't know, I'm excited in that, I know that I can give myself some downstream space, if I you know, do a good job and get a good pm in place.   Michael: Yeah, and I don't think it can be overstressed enough the importance of like finding a good PM, because I think we all agree that the investment is make made or broken by the PM and so putting in a time energy and effort on the front end to get a good one is gonna pay dividends down the road.   Emil: Yeah.   Tom: It could be like, easy to just, you know, pick the first one that's right…   Michael: Yeah, it's so easy to skimp on that kind of stuff a stick before…Yeah.   Emil: You know, I'll revise what I said. I don't like interviewing new property managers when I have a decent property manager in place. So Jacksonville has been good, I thought they've done a great job. You know, we're not in a C neighborhood and they've actually done a pretty good job, I haven't had like a ton of stuff they've, they've been easy to get ahold of really easy to work with. So I'm not looking forward to like, going and replacing them versus, you know, when I talked about the St. Louis property managers, I went through a couple, those I was looking forward to, because I'm like, I can't stand working with this property manager, like, I'm excited at the prospect of somebody who can like, make my life a lot easier.   Tom: So what would, why are they going out of business just like, they're just tired and don't do anymore?   Emil: They're not going out of business. They're just, there's like three zip codes, they said that they're no longer servicing. So they still have, I don't know how many properties under management, they'll retain, they're just choosing to stop managing properties in these zip codes, because I think they've been higher maintenance, higher touch for them, probably, I don't know, less margin or whatever, if I had a guess…   Tom: Smart good business discipline, did they give you any references on?   Emil: They did, they gave me three people actually. So one was like a small portfolio manager literally, like, has a Gmail contact. So not even like a, you know, big PM, which I don't know if I would feel comfortable with that having tested both small PMS with like, one 200 properties versus like 1500 plus, I just think the bigger ones have like their operations a little bit more solid. I'm sure there's people out there who have experienced the opposite. But anyway, and then like a couple bigger ones.   Michael: Did you, did you ask your PM if you could pay them more to stay on?   Emil: No. If they're not interested in managing it, and I'm not going to like force their hand in like, no, no, I have no interest in like doing that.   Tom: I like that Michael, option out of the box…   Michael: Bravo man above, out of the grovelling…   Tom: Out of the box solution…   Emil: I mean, I have one property in Jacksonville like I am 0% worth it for them to like make an exception for.   Michael: I mean, with that attitude. It's no doubt.   Tom: Yeah.   Emil: The pessimists and the optimist, go ahead. It's not the pessimist, I consider myself the realist and you're just like, why not one? Which is a good attitude. I should, I respect that, I should probably ask. But anyway, moving on, what are we talking about?     Michael: Let's try to give you some questions that you will go ask the property manager, a new property manager as you're screening, right?   Emil: That's right, right. So why don't we just kind of go around and just sort of like, listen off favorite questions that you'd like to ask property managers? Either you guys want to take the first one, first at bat?   Tom: I'll take the, I'll take the first one…   Emil: Do it!   Tom: I will. So an important question, right, there's a couple of vectors in evaluating a property manager, its quality and costs, like money, how much you're paying them? So I would get explicit, my question would be around, like, what are all the different ways that you know, maybe worded a little bit better, but like, what are all the different ways that you can make money off of me, you know, so in this, it's surprisingly, like, not standardized, you know, from the in the different ways. So for example, like some property managers charge a monthly flat rate, some take a percentage of rent, the way that they charge you on maintenance, there's a lot of different ways to do that. So you need to have a really clear understanding on all of the very specific ways in which they charge you, some of the examples on maintenance could be a percentage, upcharge, they could charge you a flat, like dollar amount for doing that. There could be breakup charges, where if you fire you know, if you get rid of them, or you sell your property, I've experienced that, that was awful, I wish I had asked that question before.   So I would be, you know, get clear understanding of what are all the different ways that they can make money off of you? That would be my my question, and then kind of verifying against that with the PM agreement, getting a copy of that PM agreement. I kind of asked two questions there. But yeah, I'll go with what are all different ways you can make money.   Michael: Yeah, it's a really good one. It is so interesting. Tom, like you mentioned, it's so not standard, so not uniform, like everyone knows you're gonna go pay an agent to buy this property, you're gonna pay him 3% pretty much across the industry, property management, it could be you know, anything under the sun. In terms of fees and cost structure.   Tom: I pay $1 technology fee to avoid a property manager. It annoys me so much when I see it, it's like oh, is this like rustproofing?     Michael: But look at that…     Tom: Yeah, I let it slide like they're good but it's like it's funny you know, the dollar is not impactful into my yield at all but me feeling like they're trying to like you know, sell me something…   Emil: Nickel and dime…   Tom: Yeah, yeah. Yeah. It's like, I don't know, I've been like meaning to tell them like this charge is stupid. Like just charge like, an extra something somewhere else. Don't don't charge me.   Michael: Don't show it to me.   Tom: …You made up you know? Yeah, yes…   Michael: That's really a good one Tom   Emil: Along those lines, I had this property manager, my first property manager in St. Louis. They were they were flat rate and I think with flat rates really important you dive into those numbers because I've found just personal experience that flat rate like, can sometimes seem like the lowest cost, but then they'll make it up in other areas like this property manager would literally charge me, for somebody driving to the property, like they would calculate the time and charge me $6.41 for the drive out to the property or someone being on the phone with a tenant, they would charge that time. So if they were on the phone for 15 minutes, I got charged, you know, 25% of the hourly rate. So like, yeah, ask about, like, literally ask them that question. What do you guys charge me if tenant calls, do you to charge me to drive out to the property, like, drill in and ask like, really specific questions.   Tom: So lens, the question of like, perverse incentives, you know, lightly, obviously, the property is trying to make as much money as they can, and they have like, all these little like, mechanisms, you know, like, let's get aligned on what we want is for another discussion, who is up for the next question?   Michael; I'll take a stab at it. So a question that I really like asking property managers is, what types of properties they specialize in managing and if they say all of them, they're either, they're either a liar, or they're not good at whatever it is you're trying to accomplish. So making sure that they are equipped and have experience managing the type of property that you have and so like for this for you, you're in what you said, a C minus neighborhood, like, make sure that they have experience managing those types of properties, because that's what they're going to be good at and so I don't want to be the guinea pig, I don't want to be the first, the first owner that gets in a property manager managing a unique style of property or one that they're just not familiar with. So that can be student rentals, that can be section eight that can be you know, assisted living any kind of specificity around whatever makes your property unique, make sure that they have experience doing that thing.   Emil: Such a such a good one. I've had I think every single property manager I've gotten on the phone with I've asked that question and they do always say all types, all areas. So like, again, it's just one of those things where you just have to I think they're just so used to that question like, most investors are probably asking the same questions and it's on you to like really drill down like, what zip codes, what kind of properties single family multifamily what kind of multifamily like you just have to…   Michael: Tell me the breakdown, percentage breakdown? What's you know, and where?   Emil: Totally.   Michael: Yeah, don't just accept their answer at face value because I think you're right. I think a lot of these, essentially, because like I said, the Roofstock Academy, we're so focused on educating investors and equipping investors with like actionable usable tools. So a lot of folks who are in the academy are probably asking these questions. So they probably heard those questions before, so they might have a rehearse or a canned response. But so push, you know, they'll be ready to push people a little bit.   Emil: Yeah. Yep. Alright, so mine, it's not really a question. It's more like before I go ask questions, but you reminded me when you mentioned the academy, go ask people, you know, who invest in that area to give you some recommendations. So I feel like even you know, before, you're going to ask, like, building your list, the most important part, right? So ask people, you know, as people who invest there, ask them how long they've been with that property manager, if they've been with them for a month? Probably you don't have a good idea yet of like how good they are, right? Like, I've had people who say, oh, I recommend so and so how long have you been with them? Two months, it's like, you haven't really had enough time to like judge this property manager, maybe yet you've been able to judge their onboarding, but like, not quite enough time. So ask people you know, get recommendations before you even go talk to PMS.   Michael: So Emil, if for all of our listeners who are just starting out, or if I'm going to go invest in a new market, and I don't maybe know anyone that invests in that particular market, what are some things that I could do to go either meet people or go get my hands on some? That sounds terrible, go get my hands, the people. We're gonna go, go, go get access to people that are investing in that area to ask them for recommendations and references.   Emil: So obvious plug Roofstock academy, awesome. I have found such good recommendations in there personally, and that's, you know, me just being honest, as an observer.   Michael: I just refiled with a lender that came from one of our Academy members to so I'm right here with you.   Emil: I mean, as you know, it's like any community as it grows, like you just get better and more feedback, more points of feedback, right? When your groups like 20 people you don't have as many now that there's hundreds and hundreds it's just like a better feedback loop. Biggerpockets can be a good one, I've found that to be hit or miss you kind of get like, I don't know people, some people saying go with them. Some people saying they're horrible, but again, you're just building your list. So Like BiggerPockets you know, if you're investing in Jacksonville like I am, there's gonna be tons of threads on people asking that already, you can go in and ask yourself. Local meetups, so you can probably Google Jacksonville Real Estate Group or whatever and find a local investment group and go ask them and I'm running out of steam and that's it all the places I can think of…   Michael Albaum: All good answers.   Tom Yeah, I'd say you know, your, your, your broker to your, your whatever your team, you know, like, perhaps your lender, especially they do amount of no harm and asking they could say, I don't know. A successful investors are okay, asking questions, like not afraid of like looking silly, sometimes asking questions. I want to dig in a little further…   Emil: Can I add another point zero before you even like start asking questions, just like, let's say you, you talk to one property manager, and you're like, oh, man, I really get a good feeling from this one. I would recommend continuing down the list and like, talk to some backups, because you know, we've mentioned on the podcast, you don't really know until you try him out and it's good to just have a couple backups in hand for if things don't work out, so…   Michael: Well, I agree a 1,000% Emil but not only I think if things don't work out, I think it gives you a really a lot of perspective around, hey, I had this really great conversation with PM-A and that's what I want to go with. But now that I have spoken to PM-B the first one maybe doesn't sound too exciting, because I heard there's really great things from the second one. So, I think it kind of helps level set expectations around hey, what's available in the marketplace?   Emil: For sure. Alright, Tom, you got a you another one for us?   Tom: I think there are a bunch of questions that you can templatized and in that initial correspondence, like send them like a list before on the phone. So this is kind of like a sneaky, I'm out in a couple of questions here. But questions that I would ask to that property manager or perhaps even as like a prescreening, you know, list of questions is, how many, how many units do they have under management? How long and how long they have been operating?   So you know, really simple, discreet kind of answers, and that there's like a, you know, simple one. You know, it's not like ambiguous, but for units under management, I think that's helpful to know if I think this came up a little bit earlier in the conversation, like how big of a fish this this person is, I would say it's market to market on how important the response to that question is, or how, like telling. So like, if I'm buying in a small market, it would be surprising to find a property manager with a ton of units under management. But I would be a little bit concerned if, say, I'm in a smaller market that person has, what do you guys say the benchmark would be like, maybe like, less than 200 properties under management? I, I know, in some of the larger markets, I'm in, you know, my property management has close to three or 4000, you know, units under management. So I like having a property manager with a little bit more units under management, and that they just, they're probably processes are a little bit more hardened.   So that's the first question, right, how many units under management expect there to be less in smaller markets, I tend to like property managers with more units under management and the other one on the year, until I just took two of them is, you know, I don't want like a property manager who's like just starting just getting things going. You know, I also don't want like a dinosaur that's doing stuff really old. So it's, it's putting it all into context of all the different responses you get, I think, kind of based on what you are looking for in a partner in that market, finding that right fit. I can throw in more questions related to asking them about their technology and stuff, but I'm going to not steal too many of them. But my tip here is it's okay to include a list of questions in an email before, like having that initial call with them and there's like a slew of these simple kind of questions that it should be easy for them to respond to units under management, how long they've been, you know, in business, those type of questions.   Michael: Yeah, I think that's such a good point, Tom and especially the types of questions that have just like factual answers, like this is the answer, as opposed because there's no like, interpretation there. There's no getting a gut feeling for it's like, hey, they either are or they're not or this is what it is. So I love that. I love that suggestion.   Tom: Am I using discrete correctly? I think like, words like…   Michael: That sounds right. Tom: Sure, yeah.   Michael: Go with it!   Tom: Use your confidence, you know, not…   Emil: Inflexion…   Tom: What do they call when your tone goes up when the end and like what you're saying? Yeah…   Michael: Monotone   Tom: A solid tone all the way through.   Emil: I'm curious if you guys… Tom, I'm with you now in your unit count. Like I've tried someone who had on the lower end in the market. Again, this is just me trying one time, I found the exact issue you said like, they didn't have a very built out team, this owner was like, really the point person, which I thought going in was great because I had someone I could, you know, like, lean on more. But I just found that he was frazzled and working on too many things at once, and things would just get dropped all the time. So I'm with you now that I like someone who has more of a built out team people who like, you know, someone who does leasing someone who does maintenance someone who does XYZ. So Michael, have you felt anything different? Are you kind of in that same boat now to… from like, personal?   Michael: It's totally a mixed bag. So I have one property manager, she's a husband and wife with her son team, and she's great. But if she hadn't been hit by a bus tomorrow, like that's gonna be a big problem. So I think this kind of bleeds into my next question is, is recommending talking to the property manager about their team and if it's a one person operation or a smaller operation, that can be sometimes beneficial. I've had really good experiences with small team property management, because a very personable, they know that community, they have a really high quality tenant experience.   But the insurance side of me is like from a risk mitigation standpoint, what if something happens to that location or that person, then you could be in real trouble and so you don't want to be, you know, you don't want to have a single point of failure, that could be catastrophic and that's what I found to be potentially the case with these property managers and I'm always I'm constantly pulled back and forth, because I don't want to not use someone that's good for fear of that if something catastrophic happens, I'm going to be in trouble. I'm like, no, I should just, you know, hope for the best kind of thing and if that catastrophic, things happen that reevaluate, but I'm gonna throw a good thing away. Because I'm living in fear kind of thing.   Emil: Got it, I was hoping you had that experience, because I feel like, there are plenty of small shops that do a good job, I just wanted to, you know, talk from my experience, and then it's cool to hear your experience has been the opposite on some cases.   Michael: Totally and I think oftentimes, too, like with a smaller Property Management outfit, you could almost be that bigger fish in a smaller pond, even with a couple properties. So depending on how many units they have, under management, depending on you know how they operate, you could be getting a lot of attention, versus going with a larger property manager, because they have the infrastructure because of the systems in place, you might just be a number to them and it might be a lot less personal. So pros and cons to both and this is why I think the exercise you're going through right now and actually talking to these property management companies and getting a feel for okay, well, how do I fit into their overall end game is really beneficial.   Emil: Okay, so what else do I have? I have my list here in Evernote of questions I asked last time, so I'm cheating a little bit, but I like to ask if they own any rental properties themselves. I like knowing that the property manager is not just in property management, because they heard about or whatever. Like, I like to know that they were an investor themselves, they can think like an investor, empathize with an investor know, know what they're looking for. I've always liked working with property managers who actually currently own, not like they used to, and then they got rid of them. I've talked to those PMS and experience wasn't as great. I'm talking like, they have their own investment properties along with the property management business. I like that they're their investors themselves. Do you…   Michael: I do. But before I share any experience, I'm curious, do you think that could create a conflict of interest if the property manager has a unit vacant of their own at the same time that you have a vacant unit?   Emil: I don't think so, I think if two vacant if they can't fill two vacant units at the same time, they're probably not a good property manager, anyway. Dozens of vacant units at the same time, right. So alright, so I think that's probably a good spot to end it. I know there's endless questions you can ask but I think you know, you just rattled off like six to nine between the additions that we kind of threw in there, so I think…   Michael: Depending on how you count if you're Tom.     Emil: Just gonna throw seven into one.   Michael: So yeah, I'll give you one…   Emil: If you're looking for a property manager, I hope this helps you out, I hope you have a nice list to start with and as always, we will catch you in the next episode. Happy investing.   Michael: Happy investing!   Tom: Happy investing!

Michael Albaum is a professional Program Manager, real estate investor and the Head Real Estate Coach at Roofstock, where he works with real estate investors in their paths to making acquisitions and getting started in the industry. He has worked in the real estate world for almost a decade and has worked across many different markets and investment types from SFR to NNN commercial properties. He is a true expert when it comes to overcoming your mistakes, and really making the most out of every one of your units. Avery and Michael speak about his diverse range of real estate assets from the Smokey Mountains to Alaska. He also speaks frankly about some of the hurdles he faced early on, and how he was able to lick his wounds and take the necessary steps to become the successful person that he is today. They also discuss the importance of finding your niche rather than having units that span across too many territories, and the benefits of doing a 1031 exchange of more stressful units. Michael additionally stresses the importance of diversifying your income streams and how doing so will open you up to a world of possibility. Key Topics Perks of narrowing down your market focus How to mitigate risk Benefits of breaking down monthly financial responsibility Perks of renting in Alaska How to take some licks and move on Tips for getting rid of stressful units Michael’s role with Roofstock Importance of having multiple income streams Why STR are a savings account Value of networking Roofstock Rich Dad, Poor Dad The Short Term Shop University The Short Term Shop Facebook Group IGMS Your Porter Smart BnB OwnerRez Beyond Pricing Pricelabs HostGPO

Michael Albaum is a professional Program Manager, real estate investor and the Head Real Estate Coach at Roofstock, where he works with real estate investors in their paths to making acquisitions and getting started in the industry. He has worked in the real estate world for almost a decade and has worked across many different markets and investment types from SFR to NNN commercial properties. He is a true expert when it comes to overcoming your mistakes, and really making the most out of every one of your units. Avery and Michael speak about his diverse range of real estate assets from the Smokey Mountains to Alaska. He also speaks frankly about some of the hurdles he faced early on, and how he was able to lick his wounds and take the necessary steps to become the successful person that he is today. They also discuss the importance of finding your niche rather than having units that span across too many territories, and the benefits of doing a 1031 exchange of more stressful units. Michael additionally stresses the importance of diversifying your income streams and how doing so will open you up to a world of possibility. Key Topics Perks of narrowing down your market focus How to mitigate risk Benefits of breaking down monthly financial responsibility Perks of renting in Alaska How to take some licks and move on Tips for getting rid of stressful units Michael’s role with Roofstock Importance of having multiple income streams Why STR are a savings account Value of networking Roofstock Rich Dad, Poor Dad The Short Term Shop University The Short Term Shop Facebook Group IGMS Your Porter Smart BnB OwnerRez Beyond Pricing Pricelabs HostGPO

Investing $50,000 in real estate can go a long way toward creating a diversified rental property portfolio that generates strong cash flow, provided that you do it right. Today we are asking each other the question how we would invest this amount of cash. In this episode, Tom, Emil and Michael share how they would invest $50,000 in real estate if they were just starting out, and if they know what they know now. --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Emil: Hey, everyone, welcome back for another episode of the Remote Real Estate Investor. My name is Emil Shour and today I'm joined by…   Tom: Tom Schneider   Michael: and Michael Albaum.   Emil: And on today's episode, we're going to be talking about how each of us would invest $50,000 in real estate, and we're gonna frame it as what we would do with that 50k when we were first starting out, versus how we would approach it now, so let's hop into this episode.   Well, I can't ask what's on your guys's mind? Because we just went through that so, huh… Hmm. You know, I used to have this boss that every every meeting every week, he would come in and just ask some random question to avoid the like, so how's everyone doing? That was like, it's a good way to kind of start a meeting, get like really random answers from people.   Tom: You got an example of one?   Emil: He would honestly as a really weird, he's like a weird dude. But like funny, weird. Yeah, probably not suitable for this show. The ones I remember.   Michael: There was a my, my wife loves David Sedaris. And he does a masterclass and he talks about comedy. And one of the questions he loves asking people was, so when was the last time you touched a monkey? He asked him on this and they were like, oh my gosh, like, can you smell it on me, I was working with him earlier at the zoo today? And he was like, no way and it led to him like being able to go play with the monkeys at the zoo. Like and that's why you should always ask random questions.   Emil: He had asked like 400 people, and they all I never spoke to him again, but that one person…   Michael: The one was a big one.   Emil: Then he finally got to meet a monkey at the zoo.   Michael: Yeah…   Tom: Bad news man, getting a baby monkey and then growing up a lot of sad stories about …like ripping arms off. Anyways, sorry…   Michael: That's a… go hard left fast…   Tom: Yeah.   Emil: All right with that we're gonna hop in and talk about real estate. So the topic today is how do you invest 50k? I think this will be interesting. If Michael ever gets it together here.   Michael: Oh man…   Emil: How would you invest 50k If you know what you know, now, but you're just starting out. So take yourself back to you have your current mind, you're going back to when you first started. So how would you invest 50k? And then we'll talk about you're at where you're at currently, you're 50 grand, you want to invest in real estate? What do you guys? What are we all doing? So who wants to kick off? Going back to the past with 50k?   Tom: So, Tom's gonna go first. I would… So me with real estate investing, I really enjoy real estate investing, but I also really enjoy the kind of passive nature of it, more probably more than Michael and Emil, I think they're like, way more active. So I think this is going to be a good diverse range of responses to this question. So what I would probably do so I'd say there's there's two options, right For me, as I also really like single family off of multifamily, just a little bit less to do plus less turns plus XYZ. What I, I would see this as two options, I can either go to, to pick buy two properties in more kind of class C markets, not not as in like, negative, but like smaller markets, right? Talking about like, maybe Birmingham or buy or like Memphis?     Emil: We'll call it Tier 3, it's classy…   Tom: Sure, sure. Sure. Sure. So the my options would be to that or to buy one property in like a Class B area, you know, maybe a, you know, Atlanta, Raleigh, you know, Dallas, one of those guys and where I am right now, if I had 50k, I'm still trying to deploy as much capital out there. I would get debt for sure. I would, I would max out my debt on it. You know, I … we know well, being conscious of not getting over my tips, making sure that my income could support my debt coverage. But I would probably, I'd probably got two properties in one of those smaller markets. But you know, I might have a old fishing pole in the water on some of those larger markets. If something were to come up, I'd cast a wider net, you know, it's a busier acquisition time. So that's why we deployed by SFR, I would look at those smaller markets max, loan to value most of it… That is what I would do, went a little bit long didn't it… Ehmm, yeah. Done…   Michael: Love it. Would you buy… Would you buy both in the same market? Do you think it would use spread them out? Peanut butter spread, as they say…   Tom: I would probably buy them in the same market. Again, like so important to that to develop a thesis when investing in me is a little bit less overhead. So just using a single property manager, you know, doing that work and finding the right property manager, maybe having them help me out on the acquisition side, as far as evaluating neighborhoods and whatnot. So yes, it's a market. Good question, Michael.   Michael: Love it, love it, love it.   Emil: So, Michael, what would you do?   Michael: I think I'm taking that 50,000 and like Tom gonna go get some debt. But I am probably going to go buy a multifamily building, something a little bit bigger that I could, you know, really, really scale with. And it's probably going to be a little more turnkey, because having done the whole multifamily value, add thing, it can often be a lot more expensive than first anticipated. So something that's, you know, relatively easy, stable. That's why you may go to but in close second, what I'm also going to be considering is going and using a 15%, down DSCR loan and going to go purchase a short term rental, which would probably be a single family out in one of those vacation markets that are out there. But I think it can be a really, really, really great use of cash to generate quick income to then go to buy additional properties.     Emil: Michael, for anyone who doesn't know, what is a stable multifamily property, what does that look like?   Michael: Yeah, it's something that has, it's really good question. First off, it's something that has probably already been rehabbed, either extensively or lightly, doesn't have a whole lot of deferred maintenance, rent is probably going to be pretty close to at market rent. So I'm not going to feel the need to, to get new tenants in place when their leases are expiring, because they're already up at market rent. Just something that has been taken care of, or well maintained. Doesn't need a whole lot of CapEx.   Tom: Short term rentals are interesting. How do you find your overhead as an owner relative to your multifamily single family versus long term versus short term rental? Do you find it pretty similar? I would imagine that there's obviously range like there's variants with each of them, but just general ality generally speaking…   Michael: Yeah, it's a big range and it so depends on like my older vintage multifamily, it's gonna be a little bit even less than some of the expense ratio on that just because that has a lot more maintenance, regular, recurring maintenance type issues. On newer single families, comparing across the board to long term versus short term, short term is definitely more expensive from an expense ratio standpoint. But the income generated is still stronger. And so from a cash on cash return, it's it's still performing quite quite well.   Tom: I bought this as a metric, number of times you as an owner, you have to like make a decision or get involved.   Michael: Oh, see, short term versus long term?   Tom: Yeah, yeah, I would think I mean, I would assume short term rental, like there's a little bit more overhead as an owner. Is that wrong?   Michael: Yeah, I don't think that that's, I would say that there is more on the front end. So like we were involved in the decorations and decision making process around what amenities to include, but from a day to day…   Tom: … FF&E and OS&E those are some acronyms, Michael…     Michael: What's a OS&E?   Tom: Oh, OS&E is operating supplies in equipment, and FF&E is furniture, fixtures and equipment.   Michael: Ahhh!   Tom: No big deal, just drop an acronym…   Emil: A unit count into, what's going on here?   Michael: Yeh, sounds like an accounting term.   Tom: I know about luxury man.   Michael: You're just steeped in luxury. But no, I would say other than that. It's pretty much about as hands off as as long term if not more. So. I've really I've made very few decisions, I've been involved in very few of the conversations, we're looking at converting the garage into additional space so that of course, there's a lot more involvement in but that would be the same as if I was doing some kind of rehab work on a long term rental.   Tom: I heard a great story a description of short term rentals as comparing them to fire trucks and that they're constantly getting turned and washed like a fire truck has been around but oh, it gets it gets a fresh wash every time it goes out. So like while you might think it's a you know, getting beat up a lot it perhaps it is but it's it's getting a lot of Washington. It's like a fire truck. I don't know. I like that.   Michael: Yeah, I think I mean, I think so and it's getting eyes in it every turn. So the festering kind of long term deferred maintenance stuff tends to not be again, for my experience as big of an issue because there's people constantly putting eyes on stuff. And if there's an issue you'll hear about it immediately. Like these tenants are going to tell you because they're paying good money to be in these places. Hey, this is an issue you need to fix it.   Emil: Are you is your short term rental being professionally managed, do you have a property manager?   Michael: Yes, yeah, I'm a full service property manager, I definitely pay for it. But I'm not. I'm not at the point where I can set, you know, neither myself or my wife or I are at the point where we have enough time to be able to learn how to do that remotely for this particular property. And you know, if anyone listening is interested in learning more about short term rentals, we did a podcast episode with Avery Carl, which was a phenomenal episode, in my opinion, where she talks all about the short term rental market, and short term rentals in general and things you need to be aware of, if you're going to get involved in this space.   Tom: Did you pencil… Emil needs to give his answer, but just really last question I have on that… Did you pencil it as a longer term rental as well, just to like, see what…   Michael: I did. And it doesn't work. And so I had to always take in the opinion that it has to work as both because if something changes, I don't want to be stuck holding the bag. And after extra chatting with Avery about the short term rental market, this is out in the Smokies. She was like yeah, but the thing of it is, is the regulations aren't going to change out there. Like it is such a through and through short term vacation rental market, that she is not concerned with it being the next Santa Monica or Santa Monica, city regulators come in and say I can't do Airbnb, because it's always been short term rentals. So that's given me a lot more comfort to say, okay, I'm okay, kind of taking that leap of having it only makes sense as a vacation rental?   Emil: Well, I had one final question. I asked Michael about the third party property manager because I, what I really want to know is how does your time commitment with a third, like you have property management and on a long term and a short term? How does your monthly time commitment in terms of speaking with your property manager being involved? Like how, how much more time is it with the short term compared to long term, if any?   Michael: You know, I have probably spent less time with the short term manager than I have with long term management. I was so impressed by this company, they've been awesome and they're just like really good at what they do. And I think that universally speaking, that's kind of what I would expect in the long term world as well, I have my that one of the best property managers I have is up in Alaska, I hear from him, like once a quarter, unless we're just calling to check, you know, checkup and chew the fact sort of thing. So if a property manager is good at their job, you really shouldn't hear from them, in order for you to make decisions, they could update you and tell you what's going on and this and that. But from a decision making standpoint, if I have to hear from you and talk to you regularly, like it's probably not going very well. Right Emil how would you spend in those 50 G's?       Emil: For me, if I'm just starting out, and I want to invest in real estate, I'm, I like single family as a first starting point. And we can debate this later on a showdown. I think single family is a good way to get started, I think having one tenant, one unit to worry about just a lot less hectic. And so I'd start with a single family, I would want to do a tier two city, somewhere where the climate isn't so severe, right? Like I have properties in Indianapolis and every winter, I'm like, man, our pipes gonna freeze and explode. You know, you hear all those stories. Usually, if you have a tenant who's there, like they're running the water, and that doesn't happen. But you know, if you have a turn in the winner, always think that could happen. So I choose something with a little bit less harsh climate, just because it's going to keep everything solid for a little bit longer. And I'd probably just use it on one property to get something a little bit better, ewe just talked about on a different episode, six things we wouldn't do, again, six mistakes and for me it was buying a really cheap property on the… in the beginning, I get something a little bit nicer, less headache, you know, newer build, that's just going to be an easy learning process for me, because the first one isn't going to be the make or break. It's really you're just like learning how to deal with real estate how to deal with the property manager all this stuff. So having it be something that's going to be better long term is what I would prioritize.   Michael: Are you okay, accepting less cash flow?   Emil: I wasn't in the beginning and on the other end of it now, yes, you should like it's not going to be a huge difference. You think it will be and you know, excel math will tell you different but it's a different story. I think when you get into it.   Michael: How much cash flow, how small of a cash flow are you willing to accept and still consider it cashflow positive?   Emil: For me like even like if you're being conservative, right, like not going oh, best case scenario, right? You're ending up with like at least $50 of cash flow a month right? I think that's a good place to be at least obviously, I…   Tom: Got to beat inflation, got to beat inflation.   Michael: Beat it back with a stick…   Emil: We don't, you know, we're just talking about cash flow and again, these this isn't going to be a make or break for you. You're trying to learn and you're trying to grow. You also have equity building right in a better property that's going to be more dollar like appreciation. 10% appreciation on something that's $250,000 Verse $100,000, you're gonna make more than that equity anyway, right? It's appreciating, it's a higher appreciation.   Michael: So you're sticking to one, one property… One more expensive property?   Emil: Yes, yeah.   Michael: Alright.   Emil: Not even just expensive to be expensive just better quote like a turnkey, nicely done property that I'm not going to have a ton of headache right out the gate.   Michael: Well, there you have it, ladies and gentlemen.   Tom: It's been a few seconds on zero scape, just installed some fake turf on my backyard. It's killer man.   Michael: Is it good?   Tom: Yeah, yeah. And then like if leaves come on it you get the power washer. And just like my my own little zen…   Michael: What about dog puppies?   Tom: That's a thing. But you know, that's where the power washer. And also that's where gates like preventing the dog to go out there. Come in…   Emil: Anyway, anyways, you could also have a dog like mine who we have we have turf in the backyard too. It's like turf in concrete. And he is afraid of it doesn't like walking on turf. So he makes us take him out in the front yard where there's real grass to go. So that's fun.   Tom: He is natural… Michael: Some… double apply.   Emil: He's a purist. He's got a good taste.   Tom: Good for him.   Michael: So Tom, are you saving some of that 50,000, so you can install zero scaping in this investment property?   Tom: Yeah, probably. I mean, the right warranties are in place with the Zero Escape. You're like basically making money when you install it, so…   Michael: Are you, are you working on zero escape installation side hustle?   Tom: I am yeah, I got a, I got a, I got some, I got some hints.   Michael: You need a guy, I got a guy…   Emil: Probably not that awesome on a rental property. Like the ROI on that is, is not great.   Tom: Nooo, problem.   Michael: Depends on who is paying this utilities though…   Emil: Yeah…   Michael: If you include these utilities in your bill…   Emil: It's your tenant.   Tom: Oh…There could be markets Emil, before you jump the gun. There could be markets with it makes a ton of sense, Las Vegas, Arizona…   Emil: I prefer talking generalities, we're not getting into nuance on this on this podcast, sorry…   Michael: I thought you only spoken absolutes.   Emil: That's it, that's it…   Michael: Now you're speaking in generalities. Man pick one Emil.   Tom: Yeah.   Emil: Ehmm, absolute is what I met. It's not... Moving on. Alright, what do we do with $50,000 now? If $50,000 is now, in your investing career, what are you guys doing? You're not a beginner, you're at your stage now, so what's next?   Tom: I am making the transition to getting some multifamily, you know, I don't know, I don't actually know short term, Michael's got me hyped up on some learn a lot more about short term, I don't know. I'm all over the place right now. This is what I'm gonna do, this is what I am gonna do actually, I'm going to set up a coaching session with Michael and we're going to go through some options and get to the root of it. I swear to God, that's like the real answer, right.   Emil: That is actually a very solid strategy. Alright, Michael 50,000, I feel like I know where you're, where you're putting money, but if 50,000, where's it going?   Michael: Yeah. Now in today's world, I'm probably splitting that. Truth be told I'm probably do you like for sure a short term rental 50% down DSCR loan, and then I'll probably wait half or two thirds and then I'm taking the other half and I'll probably park it in a syndication to be perfectly honest and just kind of enjoy the passivity that syndications provide. It's, we've been doing a lot of podcasts recently and had a lot of passive investment experts on talking about benefits, pros cons of passive investing, and I'm like, huh at this stage of my career, it's definitely sounds interesting. My back's already, you know, a little tired from from caring so much. So I'm ready to slow down a little bit and just kind of enjoy the fruits of the labor.   Emil: Nice, yeah. I'm sagging into what I'd do, I'm right there with you. So I like that I have nowhere near the amount of units like you, right that I own directly, I have six units. I think that's perfect for me and where I'm at right now, I would put $50,000 honestly, either in a REIT or yeah, in a in a private deal or something like that. Something where I'm going to be completely passive. Just given we've got two little kids, we got the six units again, that we own directly and that takes off takes up enough time and you know, business I started a year ago that's taking up a lot of time as well and attention. So I'd be looking for something passive to pocket.   Michael: I love the fact that Emil, you mentioned that you have like little kids and so you're kind of at this stage in your life where the active hands on direct investment isn't a great fit for you. But that could easily change and so you go park your money and one of these indications. Hopefully it doubles or better in a couple years' time and then you get it back and you get to decide okay, well what I want to do next I want to continue the passive route now maybe the kids a little bit older, you have more time on your hands to do something else. So I love it. I think it's, it's such a good point that there's like seasonality to this whole investing thing.   Emil: Yeah, it's not like, I'm done direct investing. It's, I'm done direct investing right now. Like, we have what we have, we're good, we're not getting rid of those and it's time for a different strategy. But you know, life changes, maybe you have a windfall, whatever, and you're like, now I'm bored. And I want to go do something more challenging and I'm gonna go do some, some value add stuff myself, maybe even like, in a market closer to me, or what did you know there are just so many different ways you can take this and it's not like those strategies you start with is going to be the strategy you end with.   Michael: Mike drop Emil out.   Emil: Don't listen to me, I don't know what I'm talking about.   Michael: That's great, man. I love it, I love it… Should we get out of here?   Emil: Yeah, let's do it.   So thanks, everybody, appreciate you tuning in for another episode, hope you got some value out of this one. And as always, please leave us a review or subscribe if you're watching on YouTube. We love seeing that number go up, it boosts your ego and it keeps us coming back every week. So we'll catch you all in the next one. Happy investing.   Michael: Happy investing.  

Dan Sheeks is one of the newest BiggerPockets Publishing authors, with his book, First to a Million: A Teenager's Guide to Achieving Early Financial Freedom. The book introduces teenagers to the strategies, concepts, and mindset needed to achieve early financial freedom. He is a high school Business/Marketing teacher, real estate investor, and personal finance advocate in Denver, Colorado. He and his wife have a variety of real estate investments including multifamily, single-family, Airbnb, and out-of-state BRRRRs (buy, rehab, rent, refinance, repeat). Dan's passions include working with teenagers, advocating for personal finance education, investing in real estate, and promoting the FIRE movement. In his 19-plus years of teaching high school, he has taught various business subjects, including financial literacy, entrepreneurship, and marketing. In this episode, Dan will share with us his passionate work how he is helping teenagers in personal finance, passive income, real estate investing, and early financial freedom strategies so they can live their best lives. Episode Links: https://www.sheeksfreaks.com  https://www.instagram.com/dsheeks/?hl=en https://store.biggerpockets.com/products/first-to-a-million https://www.amazon.com/First-Million-Teenagers-Achieving-Independence/dp/1947200461 --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone? Welcome to another episode of the Real Estate Investor. My name is Michael Albaum. And if you're watching this on camera, I've clearly got a shiny head tonight. I think it's my lighting.   On this episode, I will interview Dan Sheeks, author, investor, teacher, and just someone who's full of wisdom and golden nuggets. So let's get right into it.   Dan Sheeks, what's going on, man? Thanks so much for coming on the show with me. I appreciate you.   Dan: You bet, Michael, great to be here. Thanks for having me.   Michael: Oh, my gosh, my pleasure. So we were chatting a little bit before we recorded, we you know, hit the record button. And so I know a little bit about your story. But I would love if you could share with all of our listeners, who you are, where you came from and what it is has to do now with real estate.   Dan: Sure. Um, it's not it's not a crazy exceptional story. It's… so I'll keep it short. It's… I've been in Colorado for a little over 20 years. My main gig currently is that I am a high school business teacher in a public high school, just south of Denver and a suburb. This is my 19th year doing that. And I teach classes like entrepreneurship, personal finance, marketing, stuff like that. I love my job. I absolutely love my job. I have great kids and great program. All my classes are electives. And so most of the kids that are in their want to be in there. And so it's it's fun to teach them.   I bought my first property…. say 10 years ago, but I really started investing I would say about six or seven years ago, when my wife and I, at the time we weren't married, we had just started dating actually. But we both were just kind of starting to scratch the surface around real estate investing. And when, when we met, we also both found the BiggerPockets community and the Choose FIRE community and really dove like full on into those communities and their blogs and their podcasts and all that good stuff. And so luckily for us, I guess that's probably why we're married. We were really in sync with our future financial goals. And the idea of real estate investing to build wealth. So we've been hammering it ever since. Today, we own 17 units, mostly in Colorado. We have three houses out in Detroit, Michigan, or suburb of Detroit. And a little bit of variety in there. We have single family, small multifamily, we've done some burrs, we have a couple of short term rentals. We house hack, so we rent out our basement as well.   Michael: Love it, love it…   Dan: Most… mostly long term buy and hold properties. So that's, that's it in a nutshell.   Michael: Okay, man, that's awesome. I mean, I think there's a ton there that I want to unpack. But you said at the beginning of that sentence, that's not a very exceptional story. And I'm going to push back a little bit on that, because you said that you're a high school business teacher in a public school. I mean, those words don't exist, didn't exist in a sentence when I was in school. So what is a high school business teacher? I mean, that's, that sounds incredible.   Dan: Yeah, there's a lot of people say that, like, Oh, I didn't know they had those classes in high school.   Michael: Yeah.   Dan: And when I was in school, too, we did… we did have one business teacher, he taught typing and accounting. And that might have been it. I took accounting from him, and I really liked it. But business classes have been around, but nowadays, they're really started. There's a lot of them, especially in the larger urban schools where there's enough, enough of a you know, class size and students to to fill those rooms with with kids. So we have all kinds of classes at our school, we have, I think, seven business teachers… 1, 2, 3, 4, 5, 6, sorry, six full time business teachers that teach a variety of classes. So most of your bigger urban schools are going to have business classes, and even some of your rural schools will have the things I mentioned, like, you know, accounting, and maybe an intro, intro to business class, computer application, stuff like that. So, yeah, they're out there, but they are usually always elective.   Michael: Okay. All right. Well, I know I would have for sure jumped on that when I was in school. So I'm so glad to hear now that it's being offered. But it's so cool to hear that. I mean, you're living, like you're living and breathing what it is that you're teaching these kids, right.   Dan: I teach personal finance and I teach marketing that's… Marketing is my main, the main thing I teach marketing classes, Social Media for Business and I guess entrepreneurship, too. And so in those classes, because it's a passion of mine, I will drop in, you know, a day here a day there. I call them FIRE-days, Financial Independence Days, and we'll just talk about some random strategy. Maybe it's house hacking, maybe it's frugality. Maybe it's side hustles, maybe it's passive income. And we'll just have some good conversations around it. In the personal finance class, of course, I can get more into that because it's more relevant to the actual curriculum. But even in that class, I still have to cover a lot of the basics. So there's that foundation, because when I get into things like, let's say, real estate investing, or these higher level FIRE-strategies, you know, they have to have that foundation first.   Michael: Okay. And when you say the basics, what is that? Because I think so many investors, or people that are just getting into investing in general, hear that real estate's a great investment and think, okay, I gotta go, you know, I gotta go get some real estate, but maybe don't have some of those basics and those fundamentals down. So when you say that, you know, what are you referring to?   Dan: Yeah, just the basic personal finance stuff would be things like checking accounts, savings accounts, brokerage accounts, the basic stock market investing, knowledge, credit cards, building a good credit score, using credit, having assets and not liabilities, things of that nature. Insurance…   Michael: Okay.   Dan: Pay stubs, good doing your taxes.   Michael: Love it. And you recently wrote a book, right?   Dan: Yeah, I wrote a book, came out about two months ago.   Michael: Awesome. And what is it called? And what can people expect to find in it?   Dan: Yes. So the book is called: “First to a Million” and the subtitle is “A Teenager's Guide to Achieving Early Financial Independence”. And so it covers, it covers a lot. It's actually pretty, it's kind of a longer book for a teenager, but it's a pretty easy read, I think. But it's not something that someone who read in it in an evening, it's, it's got, it's got some, some girth to it, I would say some a lot of good content. But when I wrote it, I wrote it for teenagers, obviously, that's in the subtitle, but really, it's a book, anybody who's just getting started in the early financial independence world, or, you know, that idea that, hey, I don't have to work till I am 65. The book has a lot of value for anybody. I don't care what, what age you are, it's really an introduction to that, that community, that strategy. And so you know, I wrote the book, assuming the reader knew nothing, right? They were, they're starting with a clean slate, they knew very little about personal finance. The good news is though, and I always laugh about this, because there's a lot of people out there who are very passionate about teaching adults, personal finance, and early financial independence strategies, and bless them for doing that. But I think it's actually easier what I'm doing because a teenager is a blank slate, right? They, they haven't really started bad habits, they haven't tanked their credit score, they haven't incurred a bunch of debt, they don't have any debt. And they haven't engaged in lifestyle inflation. So they're, you know, you can train them from the get go to make good decisions from, from a very early age. And so I think it's kind of easier to deal with teens and to teach them right out of the gate.   So that book is really just about introducing the young person to savvy personal finance, the foundation, some of that's covered in the book, and then going into those bigger topics. Like I mentioned before it, frugality, entrepreneurship, side hustles, passive income, real estate investing, index fund investing, and there's a couple chapters in there about should you go to college? Is that a good decision or not? Obviously, teenagers, that's a big decision they have to make.   Michael: That's a very big, I'm sure you've got some angry parents of folks reading that book? Because that's a question for so many people, right? It's like you have to go.   Dan: Yeah. I mean, I don't have any angry parents because I don't tell anybody what to do. I just lay out the pros and cons. Like if, if you, the reader are interested in early financial independence, then here's the pros and cons of college and I ultimately say it's your choice only, you know what you should do? But a college degree isn't necessary for financial independence. And that sometimes can actually be a hindrance, because, you know, especially if you incur debt, you know, in the book I talked about if you're going to go to college, great. More power to you, but you need to find a way to do it without incurring any student loan debt.   Michael: Yeah, yeah. I mean, you think about and just look at the math like an average college costs about 20 grand a year 25 grand a year. If you go put that on a down payment on a house, you could have four properties by the time you would have graduated college.   Dan: Yeah, especially if you how sacked one a year you will…You'd have four properties without a doubt. And I know guys who are financially independent with four properties and the house hack to meet, so you can parallel universe there, you have someone who's graduating at 22, let's say with 100,000 / 50,000 in credit card debt, just starting their career in parallel universe, there's their, their twin who's basically at financial independence are very close. Now. They're, they're living pretty meagerly and frugally, but they can, you know, slowly continue to buy more passive income assets and grow that over time. Yeah, so it's, there's a choice. And I don't tell anyone what choice to make. It's everyone's got their personal path to walk. But I do believe everyone should be educated on the options.   Michael: Totally, totally. And I mean, you're teaching this stuff day in and day out, Dan. So what inspired you to actually write a book about it?   Dan: Um, it was, it started six or seven years ago, when when my wife and I found bigger pockets and Choose FIRE. Because before that, I really, I knew about investing. And I knew about savvy personal finance, but I didn't know about early financial independence. And so as my wife and I learned more and more and more, and I was reading books, and blogs, and listen to podcasts, and all that stuff.   I was like, Wow, this, you know, these options that are included under the financial early financial independence umbrella, nobody knows about this stuff. It's just, it's a pretty new movement, at least the last 10 or 15 years. So I, you know, teenagers being my thing, I love working with young people. I just knew that I had to write a book, specifically for that young person, about these early five strategies, because there's nothing else out there. You know, there's nothing, there's no other book out there for young people to introduce them to these other options.   Michael: Yeah. And I mean, I love that, I love that. So many people, I think, especially if talking to a financial advisor, or financial planner, get overwhelmed with all of the different options, all the different choices, all the different possibilities out there. So how do you break it down for younger folks to really understand and digest? And, and do you think that they really do?   Dan: Um, I know they do. Because I've worked with so many young people who are, who are using these these strategies and these tools and these tactics to be well on their way to early financial independence at a young age. Does every kid soak it up? Don't know yet, right? Because a lot of the students in my class or in my classroom, or in my… sorry, my online community, they're probably listening to stuff and they may not, they may not employ it right away. But it's always going to be in the back of their head. So maybe 15 years down the road, they hate their job. And then that's the impetus that makes them say, you know what, I cannot do this for another 30 years. But I remember that one guy, or that one book, or that one guy…   Michael: The Dan guy…   Dan: Yeah. Yeah. And so let me Google that and see what that's about again, I want to look into that some more, because now they're more motivated, perhaps. Yeah…   Michael: I love that. I love that. So and let's talk about your online community. What's it called? And kind of who's it for? Dan: It's called SheeksFreaks, which is kind of a funny name…   Michael: I love the name.   Dan: Well, it's my last name plus the word freaks in the whole, you know, the first 2 million book, the whole kind of premise, or the theme of the book is around being freakish. And same with my community. And that that is, you know, it's it's the idea that very few young people are motivated enough to spend time learning and executing personal finance strategies. It's not the norm most young people don't want anything to do with that. That was me when I was younger. So the young person, like if someone reads my book, and they're a teenager, that's, that's exceptional, right? That's, that's a book about personal finance and money that a teenager just read through. Kudos to them, but that's not normal. It's freakish in a good way, right? It's exceptional. So the SheeksFreaks community is an online community been around for about two years, it's for young people, I like to say 15 to 25, who are either beginning or, you know, maybe intermediate level around early financial independence stuff, we have several different subgroups within the community, like different topics that they can join, that they're more specifically interested in. We have like 40 of those. And so that it's just a place for young people to come together to interact and connect with likeminded young people because again, these are their freaks, they are different. And so even in their home group, there's not a lot of people like them, their best friends probably aren't engaging in the conversations that they want to have around money, but in my community, that's all that we're doing.   Michael: I love it. I love it. And how do you find the conversation is best started. You know, for a lot of our listeners out there maybe their parents and have young, young kids or teenage age kids in their life, and this topic has never come up at the dinner table or never come up in life. So how do you start to facilitate? How do you start to have that conversation? You give them a book and say here, go, go get learned?   Dan: Yeah, well, I think you have the, you have the conversation at the dinner table, even you just do it, right. And I mean, it should go well, before that, I think money conversation should be held in the household from a pretty early age, you know, I mean, from the get go, and it just, it becomes part of your family culture that we are open with money, we talk about our, our incomes, and our expenses and our, our financial status in our house, and you can try to make it you know, don't tell them too much, until they're old enough to understand that some of that shouldn't be shared with everybody. But you have the conversations at dinner, you have the conversations in the car on the way the grocery store, you, you have your child teenager, tween whatever, you have them sit down with you while you pay the bills, click the mouse and pay, you know, pay the bill here pay the bill there you show them where your money's coming in, you show them where the money is going out for the house. So every household is like a small little business, show them the profit and loss, show them the balance sheet. So then the checking account, the savings account, the brokerage account, explain to them what's going on there. If they don't have any interest, um, you know, just keep at it every few months, sit them down again. But if you're having these conversations around the table, I think it's going to happen pretty organically. I don't have kids that age yet, so I can't speak to it. But I can say as a teacher, you know, and use terms like financial freedom, not retirement, retirement, it's kind of boring and like light years in their future, but financial freedom, financial independence, those are more catchy click beatty kind of terms that they, they might gravitate to. And, you know, just pose a question like, son or daughter, if you won $100,000 in a lottery, what would you do with that money? Here's what I would do. You know, let them explain and here's what I would do. And what do you think would be the best use of that money? Would you split it into different buckets? And why would you do that? There's a lot of things you can do to just facilitate money conversations. That's really what you got to do.   Michael: Yeah, that's a great question, that's a great question… So Dan, I would love to shift gears here and talk a little bit about your kind of personal portfolio and journey having done, you know, a handful of different things, what's been your favorite investment asset class today?   Dan: Short term rentals, we have ,too you know, we're not experts by any stretch, but they do crush it, man, the, the, the increased cash flow is significant. But they are a little more high maintenance, or sometimes a lot more high maintenance. My wife just… one of our short term rentals is about an hour drive south of here in Colorado Springs, and my wife just went down today for about an hour drive down, she spent about two hours down there, she came back for an hour, you know, she goes down there and checks up on the property every, every month or so. And just to make sure things are good touch base with our, with our cleaner, who's really kind of our property manager down there in a way.   Michael: Okay…   Dan: Umm, so I think those are my favorite, but you know, we're not, we're not real estate investors that want to own 100 properties, we will probably buy a few more, and then we'll be good. We'll probably start paying off some mortgages and, and increasing our cash flow. And we don't want to own multiple, multiple short term rentals. That's just not in our strategy for long term wealth and happiness. And that's what it's all about, right? It's about being happy. And we live pretty frugally. So we don't need a bunch. And we don't want to be having to think about a bunch of properties.   Michael: It makes total sense. And you mentioned that you and your wife are also house hacking, which I love because my wife and I are doing the same thing. And I think so many people hear what house hacking is and think oh, it's only for, you know, a single person fresh out of school, you know, can eat Top Ramen for dinner, but I mean, you're, you're a married couple doing it. So curious to know what that's been like for you both?   Dan: It's been awesome. It's like getting a $10,000 a year raise every year, or just a bonus, I guess. And by the way, my wife was a public school teacher elementary for 18 years before she retired a couple years ago, was able to retire because of our our real estate investments. Now she manages our portfolio, she grows our portfolio. She's a property manager. And she has a couple of side hustles so she's home pretty much all day except when she's doing you know, managing properties and whatnot. So we have, we have a three story house and it's a three bedroom house and there's a bedroom on each floor, each each level. So in our basement, there's one bedroom, one bathroom, a living area, plenty of storage fireplace and we've kind of made a makeshift kitchen down there with the a hot plate and a microwave and a toaster oven and a medium sized fridge. And so yeah, we ran out the basement to… well, we've we just our third tenants that we've had in like four or five years, just left. So it's right now actually listed and we'll have someone moving in soon.   And yeah, they just live downstairs, there's that we share the laundry with them, we share the main entrance. For the most part, they don't use our kitchen, but they can you know, if it's, if they need to use it, that's fine. But they pay us $950 a month to live in our basement. It's a nice house, right? The downstairs is a great living area.   Michael: Amazing.   Dan: So it's not for everyone, my wife and I are in our 40s we have a small child. I'm at work at school, you know, every day, so we only rent to females, my wife feels and I feel much more comfortable doing just females. And it's worked out great, you know, we've had three great tenants looking for a fourth, and who doesn't want an extra 10 grand a year?   Michael: Totally. And so it sounds like it's a long term rental than long term basis.   Dan: Yeah, we usually start out with three to six months and then month a month after that. I think all three of our tenants have stayed for at least one year, the longest, I think was two years.   Michael: Okay. Man, I love that, I love that. Any plans to stop that in the future at a certain… when your kids get to a certain age after you feel like, you know, just kind of over this? Do you see that in your horizon anytime?   Dan: We've talked about it, but we'll just play it by ear, honestly. I mean it. If at some point were like, you know, this isn't working anymore. We'll just say, all right, you got you got another month, here's your months' notice, and then we'll move on. Yeah…   Michael: Love it. And I think, I think house hacking is like one of the best way to turbocharge just like rocket fuel for real estate investing and wealth building. I mean, it's just unbelievable what you can do with it. So any tips, tricks, recommendations to folks listening out there that are considering purchasing a house hack for themselves?   Dan: Oh, I have tons and I agree with you.   Michael: Awesome. I thought you might…   Michael: Yeah. Yeah, Michael, I 100% agree with you that house hacking is I think by far the best real estate investing strategy for young people to get started. And I write about it quite a bit in my book. There's also a workbook that goes, there's the book First 2 Million, and there's a workbook that goes with it and in that workbook it takes, it takes a teenager over like a five year, five year period of time and gives them tasks to do every four months. And if they follow the workbook, they will own their first house sack within about four years, and when they start employing all of my strategies that I lay out. And so you know, some tips and tricks, one, if you're, if you're a teenager, you got to start saving some money. You can have a low down payment with the house set because it is a primary residence, but you got to have some cash and you want to have some emergency cash. And you want to have some initial maintenance and repairs cash, which I lay all this out in the workbook in detail, you got to have a good credit score.   I tell my, the young people I work with and this is counterintuitive to I think what a lot of people say but when you the day you turn 18 I say roll out of bed, go to your laptop and apply for your first credit card. And when you turn 19, get your second one, you turn 19 and a half, get your third one and use them all, use all three, at least a little bit every month and pay him off every month. If you do that you will have an amazing credit score in no time. And I know young people who have done exactly that caveat, right. That's only if you know how to use a credit card responsibly, if you haven't been educated on that, then stay the heck away. But the young people in my community they they're very responsible with money in there. And there they are educated on how to do that. So get the good credit score, save up some money, educate yourself. That's a huge piece, read the books. I'll throw a plug in for my friend Craig Curelop, he wrote a book called: “The House Hacking Strategy”, published by BiggerPockets.   Same publisher of my book, and it is a phenomenal book for someone who wants to start house hacking, and just wants that introductory book that takes them from step one to step 100. And now you're in your third house, that kind of thing. Yeah, so the, the piece of that puzzle for house hacking that will trip most young people up is the is the income history. Um, you know, a lender isn't going to want to lend a 20 year old or 21 year old or a 22 year old $100,000 for a property unless they know that they're going to be able to pay it back. And most young people don't have you know…   Michael: I can't, I can't show my lunch money that I got from my parents' income. When I was in high school, that allowance doesn't count…   Dan: The allowance doesn't count, you know, gifts from grandma don't count all that stuff. So…   Michael: Alright, yeah. So what do most folks do?   Dan: Well, young people in the workbook I kind of lay out a plan of how you can look for the young person that doesn't go to college it becomes much easier you work full time for a couple years, hopefully in a good job. And depending on the value of the property you're looking to buy, that could be all you need to do. For some people, it could be as easy as graduating from college, and just getting that first job that is aligned with your major and you don't even have to work for very long after obtaining that job. They just want to see that you have a pay stub from the job that you were in school for, and then you're good to go. But the best loophole, which doesn't work for every young person is to have a parent cosign on the mortgage. So the bank looks at their income history and credit score if needed and the young person can get in to their that first property.   Michael: I love it. So it's interesting you mentioned the getting a job associate with your major my younger brother, actually shout out to you, Jeff went and did this, he graduated got a good paying job at the company I used to work for and then they told him yeah, you qualify for a mortgage because we will constitute your four year degree as a as basically earned, earned time, time and you're earning income. Yep. So he's like, sweet, awesome. So it's it's a pretty good life hack.   Dan: It is, it is for sure.   Michael: No, I love it. I love it. Dan, this has been so much fun man, I want to very respectful of your time. Where can people get your book? Where can they subscribe to your online community? And if you have additional questions want to reach out to you what's the best way for them to do so?   Dan: Sure and thanks, thanks for having me, Michael, this has been a blast. I can talk about this stuff for hours. Yeah, if you're interested in the book: First to a Million you can get it at, at BiggerPockets.com, which is the publisher. And if, if your listeners are familiar with real estate, they've probably been to that website a few times already, if not every day. They can also find it, they can also find it on Amazon and other places. The workbook right now is exclusively at BiggerPockets.com however until I think spring of 2020. To the community for young people. There's a free version and a paid version, I'll just transparency there but the free version has a ton of value. Just go to https://www.sheeksfreaks.com/ and there's a button that says: Join the community and it'll tell you all about it. And if people want to reach out to me, I prefer email: Dan@sheeksfreaks.com but you can also reach out to me, DM me on Instagram, that works too.   Michael: Awesome, Dan, this was great. So much valuable in you know, what you've been talking about in the book and the online community. I can't wait to see where you go from here. We'll definitely be in touch soon, man. Thanks again.   Dan: Thanks for having me, Michael. Thanks again.   Michael: Hey, my pleasure. Take care.   Alright, well, that was our episode, a big thank you to Dan for coming on. And just a big shout out to Dan for educating our young people and teachers in general for all the work that you all have done. If you liked the episode, please feel free to leave us a rating or review wherever it is you listen to episodes. And as always, we look forward to seeing the next one. Happy investing…

In real estate, small mistakes can make or break your deal. One slight oversight and your yearly cash flow can be wiped clean. For new and seasoned investors alike it is important to hear where others have messed up so that we can learn their lessons without suffering their pain.    In this episode, Tom Schneider is back with Emil and Michael to share their biggest real estate mistakes, ones that hurt so bad they'll never make them again. Episode Links: https://www.roofstockacademy.com --- Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Tom: Greetings and welcome to the Remote Real Estate Investor. My name is Tom Schneider and I am joined by…   Emil: Emil Shour.   Michael: and Michael Albaum.   Tom: And today we got a fun topic. We're going to be talking about the six mistakes you'll never make again. Let's get into it.   I heard of a great question to ask people. You know, when you're trying to not try to understand how they're doing, you know, without leading the witness, what's on your mind?   Michael: Uhh, uhh…   Emil: Uh, uh, I have…   Tom: What's on your mind, Michael?   Michael: Ehmm…What's on my mind is got a lot of balls in the air, which I feel like is a standard thing that I've been saying over the last two years, so just got a couple refires in the works, got my rental unit upstairs for a new primary that were house hacking, going to be getting tented here shortly. So just making sure all the cookie crumbles are getting baked into cookie properly. If that's the same…   We're putting it back together and putting Humpty Dumpty back together, man.   Tom: Why not, why not? How about Emil, what's on your mind?     Emil: Oh, man. I was chatting with Michael this morning, actually. We have a weekly calls just talking about what's going on. And I was chatting with him about this person that I've been wanting to hire, the position I've wanted to hire but I keep putting it off. And I'm not sure if right now is the right time in the business to hire this person. And I just keep… I talked to other people who run businesses and they kind of keep nudging me to do it even before I'm ready. So that's been the biggest thing on my mind. So this week, I'm going to start putting together, documenting some processes and putting a job ad out there to at least have some conversations and hopefully find this, this unicorn of a person I'm looking for.   Michael: In the words of The Waterboy: You can do it!   Emil: If you're, if you're a content marketer, and you like creating briefs for writers and editing content, please, please reach out to me. I would love to chat with you. Free plug, thank you!   Michael: At eshour@gmail?   Emil: Emilshour@gmail. Yeah!   Michael: Sweet. Tom, what's on your mind my friend?   Tom: I love that question. It's just kind of you know, cuts a little deeper. So got a baby, I got like a three week old baby so not sleeping in longer since then, like two or three hours. But to be fair, the first baby was… I was it was much worse, worse than that, I don't know what the right word is it… Anyways, so got a very good three week old baby but still a three week old baby. Besides that just yeah. Yeah, doing it. I wish I'd taken a longer paternity leave. I think I kind of blew it on that front in the retrospect but who knows if there's a third one, I'm going to take a good two months off because that is special time, so that's what's on my mind, cruising along. Let's…anything else, guys? Anything else in your mind before we get into the topic today?   Michael: No, it's super exciting to hear, everyone's happy and healthy.   Tom: Everyone's happy and healthy, that's right. All right. So this is the six mistakes you'll never make again. I love this topic. And I think some of the oddly the best way to learn about real estate is just not learning about other people's mistakes and not making them. So a really juicy helpful topic and to start today's discussion on the way we're going to divide this is we're each going to take two and Emil, you're going to go first what is a mistake? We'll do a snaking order here so Emil what is a mistake that you'll never make again?   Emil: In my life or are we talking about real estate investing?   Tom: This is the Remote Real Estate Investor. But you know what? Let's not put boundaries. Let's live in the open space, right, so you can take this in any direction you want Emil.   Emil: Oh geez. Alright, let's go back to when I was five years old the first mistake I ever made   Tom: It's a long time without making a mistake.   Emil: I know for… it well the first one I remember who knows all the other ones. Okay, first one I have is buying the cheapest properties. So this was something when I think, I bought my first property I looked at, you know, I was going for the cheapest to maximize Excel cash flow and something you realize after a while or not even to maximize cashflow, Excel cashflow, maximize Excel returns, right, cash… cash on cash. And we don't realize after a while, until after a while you've been investing is that you know, 50 or $100 difference in those slim cash flow margins completely throw off your returns. So right, let's say you're looking at trying to hit a 10% cash on cash return, and you end up buying, you know, I'll throw out a property I bought years ago for $60,000 in Memphis, right… If if there was a variance one month of 50, or $100, that destroys your, your cash on cash, it completely changed the numbers like anyone who's listening to this and runs their numbers, change your projections by like, throwing extra expensive 25 or $50 a month, just small things right, on cheap properties. They, they make such a big difference in the percentages, both ways, right? So something I didn't appreciate, for a long time was actually like nominal cash flow, not just percentages,   Michael: Totally!   Tom: Get the rosy glasses off, take them off.   Michael: How long into owning that property. Did you realize like: Oh,oh…?   Emil: It was at the turn, honestly, it was like, oh, okay, like, I mean, the turns always ruin everything. But you really see how much of a variance like, again, even $100, or like, I guess that's on a monthly like $1,000 expense, one time a year just crushes these, these cheaper properties on like a percentage basis. They can be good investments, but it's like, you got, you got to like play around with the numbers to see even a small variance from your numbers like, changes the percentages a lot.   Michael: Yeah. I love that quote. And yeah, Emil Shour, February 14 2022, the turns always ruin everything.   Emil: Turns are the worst man…   Michael: Yeah…   Emil: …just keep people in here.   Tom: Have a lot of first time investors. It's like, just getting so excited of that, you know, $50,000 investments, are you kidding me? You know, such great returns. But yeah, hammered on that. Michael, what is the mistake you'll never make again?   Michael: A mistake that I'll never make again, is rushing and kind of pressuring my property manager into accepting a tenant that they don't feel really great about. That was on my very first property ever, I talked a lot about it, ended up doing tons of damage on the property and it's just a total headache. And I was so concerned because now here I have this mortgage payment and this property that has expenses associated with it and no tenant in place. And I was like, we gotta get some money, we gotta get some, we gotta get someone in. And so against her better judgment, she capitulated and said, okay, and it was the worst tenant that I've ever had. And that she may have ever had, too. I think she told me that once like, yeah, I remember that tenant, that was the worst tenant I had ever, too.   So just like, take your time and be calculated and try to be level headed with stuff because that was a very emotional decision. I had a job at the time, like a really strong paying W-two, I could afford a couple of months of vacancy, I could afford like several months of vacancy, thankfully, but I was just so kind of like a meal looking at that return, oh my God, my returns gonna get shattered. And so didn't listen to my gut, or my property manager and really ended up paying out the nose for it, for a long time, for a very very long time…   Tom: …capitulated, that's the word…   Michael: …that's the word of the day?   Tom: That's word of the day. I love it… I think there's, you know, there's like long term decisions and like selecting who is living in your property. Hopefully, it's a long term decision. And one of those things where, you know, you could feel the pressure boiling every month that passes if it's not occupied, but man so much more expensive to refill that that with a bad tenant.   Michael: Yes. Yeah, totally. Totally. Alright…   Emil: Sounds along the theme of turn suck as well.   Michael: Yeah, exactly. To turn through and everything.   Tom: I'm gonna go along a similar theme as my goal. So a mistake that I'll never make, again, is not getting into the details of my property management agreement. So usually, with like terms and conditions like, oh, cool, new phone. Oh, except this. Oh, there's 270 pages of…   Michael: Except of…   Emil: Yeah, apples made us very good at that.   Tom: Yeah. And with a property manager, there are reasons that you might want to not just accept all! So the mistake that I made: I had a property in Florida, bought it, it, it was it was good. It was occupied. I had a turn that come up, turns up, the turn the price to do the turn was kind of expensive, and it had appreciated just Mamet's that's not a good use of language. I got to think like Michael, what would Michael say, not capitulated? What would be what's a lot, a lot of appreciation…   Michael: That's a technical term…   Tom: …a crap ton of appreciation. So I decided to sell the property, you know, this is one of the awesome things about real estate You can you can make moves like this fed right into a 1031. And it was like a, like a stock split, I ended up getting two properties from that one. And at the point I sold it, my property manager, they, you know, had some escrow funds that I had left in there from just in between tenants and you know, as maintenance or whatever, come up, and I emailed them, like, hey, send me give me my money, you know, on this property more, and they're like, oh, no, this is the breakup fee. And I'm like, what? The breakup fee? Are you kidding me? So this memo, jam is bad mamma jamma date, they had a little line in their fee structure where if I sold the property, they had to retain management, or charge me like a month or two of rent and that is a mistake, that I'll never make, again, not reading the property management, like, basically, what's all the other…What's all the ways that you can make money? What's all the different ways that you can take money from me and one of them was selling? So that's a mistake that I will not make again.   Alright, guys…   Michael: Have you come across that language in any other pm agreements? Since now, you're on your radar?   Tom: Ah no, I haven't. And that's like, something I will explicitly ask for is like is, you know, more or less like, what's all the different ways you can make money? And usually there's a section within the pm agreement of like breakup fees, you know, how do they charge for maintenance? How do they charge on rent? And, you know, it'd be a fun episode. I've seen more property managers charge a flat rate versus a percentage rent. Future episode idea, future episode idea, yeah, is a ruminating?   Emil: Are you ready for the TLDR? Don't do it!   Tom: Don't do it. Okay. Alright, that's mine. This is not going to be a traditional steak draft, we're going to go right back to the top of the order with a meal. I mean, what's the number four thing what's a mistake that you'll never make again?   Emil: So this was a mistake I made on my most recent property. And it is what I call or actually, it's not what I call, it's what I heard Michael Zuber call a B-property. So he, he classifies three types of properties, he has the A, B and C. A is turnkey, good to go, you don't have to do anything, lift a finger, it's nicely renovated, or it's in good condition, you're good to go. I see properties on the other end of the spectrum, you know, probably needs a partial got rehab, or a full gut rehab, you know, you have to do a lot of work, but you're getting a good deal. You just have to put in that the time and energy and the extra money, though, to make it look nice. The B property is the in between, it's a property where it's a maybe the rent is a little under market, but you know, at the turn, you're gonna have to maybe replace the cabinets or some tile in the shower, you know, like a bunch of little things, little not little things like several cosmetic things, they add up so much more quickly than you think. And they aren't usually sold at that much of a discount these B-properties from what I found. So I bought this triplex. It wasn't like up, when I bought it, it wasn't like a premium price tag. But it wasn't, it wasn't a great, amazing steal of a deal either, right. But in my head, I kind of just looked at things and I was like, oh, this will probably take like $5,000 total, maybe, maybe 10,000 to fix up… Long story short, it was more like 25-30,000 to get it all fixed up. And I don't know, I think these B properties are just like, they're not the way I think it's either you buy the thing that's, that's good to go the A or the C where you're putting in the energy and you're getting an awesome deal. So I do not like the B properties anymore.   Tom: It's funny when we do these episodes, I try to guess like, in my head what you guys are gonna do and that's a good one. I did that did not come into my mind is like a potential one. And yeah, you could think with the little the little nicks and dents, you're able to catch a catch a deal, but it's like, yeah, go go in the deep end or go in the baby pool, I like that.   Emil: Yeah, that's my experience, I don't know. Other people may say, no, those properties are great for me, but just my personal experience. I won't, I won't go for those anymore.   Tom: Yeah, I've probably done like, the majority of my deals have been more like, the ish-range and it hasn't like, you know, caught me caught me too bad. I mean, I had some terms that were like pretty ugly, where I bought occupied and then…   Michael: And then surprise…   Emil: I guess the question is, did you go in knowing, like your estimate for what it would require to fix? Was it on par with what it actually cost?   Tom: No, it was it was more expensive. I think it wasn't as dramatic as your use case going from, was it like 500% over like, you know, from 5000 to 25,000. Yeah…   Emil: Yeah, yeah, like four or five tax of that…   Tom: But I don't know. I think that's an interesting way to think about it have like, you know, either go go in and go home.       Emil: It's because there's, there's a lot of like these little things that you're like, oh, we might as well just replace it now or make it nice for next time right, like carpet that could go another round with a tenant or just whatever get, get vinyl in there now or something, you know, it just like, I think with these, it's like, you're gonna end up replacing a lot of things anyway, when you do a turn on, like these properties that are like so, so and they have a lot of things that are like halfway or towards the end of their life. I don't know, that was my experience…   Michael: Okay, yeah. And I think kind of to your point Emil, if this ended in a property and all that work had been done already, you may have paid additional 30-35,000 for the property, I'm not sure. But you also would have been able to finance that as opposed to coming out of pocket. So when you look at your return metric, it still would have been better, even though you're in it for the same amount of money.   Emil: Exactly.   Tom: Great point, Michael. All right. Number five, on the mistakes you'll never make again.   Michael: And the mistakes I'll never make again, I will never ever, ever, ever get caught in a loan with a hefty prepayment penalty without negotiating it down. So I was working on this massive redevelopment project that I've talked a lot about on the podcast. I was leaving my job at the same time as I was looking to acquire that construction loan for it and I found a bank that would give it to me. And I was just like, so focused on getting the deal done and they're like, yeah, this is a prepayment penalty. I'm like, yeah, whatever, like, I don't care and now I'm on the back end of that. I'm just like, God, this is killing me. I want to refinance so badly. But I'm stuck in this loan, because the prepayment basically makes it cost prohibitive to refinance out of it. And so I am just kicking myself because it's expensive, and I can't stand the lender. So like, there are just so many reasons for me to want to leave. But I am stuck…   Tom: Terms baby T's and C's…   Michael: T's and C's, T's and C's…   Emil: It's funny that the people who have these additional fees and things later on, right, like your prepayment, Tom mentioned, like a property manager who, who has like fees when you sell. They always end up being people you don't like love as much and you're like, it's almost like they've added these things because they churn through so many people or something I don't know…   Michael: They know they suck and they're like, oh, we got to keep our hooks in these people versus the good ones. They're like, yeah, we don't need it, like you will stay…   Emil: They trust their services…   Michael: Yeah, yeah.   Tom: Culture, bad culture. Got to… got to seek out good culture vendors.   Michael: Yep. Yeah. So look at what the pain is, and anyone listening out there that finds a prepayment in their loan, it's negotiable. Like that's a term you can negotiate. I think everything's negotiable. So definitely add that one to your list of things to look out for, and things to push back hard on.   Tom: Alright, all round us out here with the final mistake you'll never make again. And this one is a close friend of mine who got involved in real estate. He bought, bought a… bought a property, bought a rental property, and it was doing pretty good. And he got to a point where he needed the money back. So it was like kind of a speed thing to get the money back. And so he listed his property to sell. He got a buyer, the buyer made some, like outrageous claims about, you know, oh, the roof, that's like, you know, $15,000 in like the house was the house was fine. Like, it was like a reasonably hot market too. But I, I guess this mistake is like not talking to my friend or I don't know, if this is more like, it kills me. But he ended up like accepting this lowball, you know, funds off the sale price. And he sold this house and it's like, man, especially at the point where you're at the exit like everyone, you know, those that big chunk of money, like, that's just gone, that's just like money just disappearing. So I guess a couple of mistakes and lessons like on the acquisition side, you know, why not, me, you know, make those kind of requests unless you're, you know, at risk to lose the deal. And on the sale side, you know, don't ever get yourself in a position where you have to sell quickly, like have the right reserves or whatever else is going on in your life. Because that's just, you know, hard money coming, coming out, you know.   I'd say the other thing is, you know, people should just list their listings a little bit longer than they think they should, you know, leave it for sale. I think it was in blink or one of those Malcolm Gladwell, there was like a survey on real estate brokers that they list their properties longer because they like know, they get it like more eyeballs, the you know, the incremental increases in potential income by more eyeballs on it. So a wide variety of a spectrum of… I don't know from that experience that I'll share is the final mistake. But I think the big thing is if you can like don't put yourself in a position where you gotta, you gotta sell and if somebody makes a ridiculous offer back at you, be okay with walking away from the deal. So a cornucopia of things with that.   Michael: That's a really good one, man. That's a really good one.   Tom: Yeah. Brutal. All right, so I think that's it. Anything else you guys want to, want to cover today?   Michael: No, I think that was all, that was on my mind.   Tom: Yeah, it's on your mind. That's… the way to open questions. What's on your mind? It's like…   Michael: I like that.   Tom: It's sincere right? And it's… you can't, you can't give a cheap little answer to that. You know say,   Michael: Oh, yeah, good. Good. Oh, fine.   Tom: Yeah, nothing. Oh, that's what's on your mind?   Michael: You damn liar…   Emil: You couldn't get a really weird answer, like the turkey sandwich, I ate for lunch.   Michael: Yeah, but think about how interesting that is like, oh, you got cranberry sauce in that bad boy. Are we talking avocado sprouts. What kind of turkey sandwich we're talking?   Emil: Yeah, it does at least get some small talk going.   Michael: Yeah…     Tom: In my experience, it's a little more sincere. You know, it's kind of coming…   Michael: It was less rehearsed. I like it.   Tom: Alright, that's the six mistakes you'll never make again. Thank you for listening. If you enjoyed our episode, please share it, please like it, please subscribe. We got a YouTube channel as well and as always: Happy investing.   Michael: Happy investing.   Emil: Happy investing.

Chris Meunier is a program manager working at Google, but one of his biggest passions is real estate investing and personal finances. Over the past 10+ years, he has worked to build a real estate portfolio with his wife, Jessica, which includes a primary residence in the SF Bay Area and rental properties in California, Indiana and Georgia. Chris believes there are many strategies to achieve your real estate goals and they can be used to accelerate and generate wealth. When not working his day job or keeping an eye on the real estate market, you can find Chris spending time with his family, hiking outside with his dog or planning his next ski trip.  In this episode, Chris will share how he started in the real estate business as an investor, some tips & insights and how he found a platform that provided a holistic approach to him. Chris always enjoys talking real estate and personal finances, and you can reach him directly at cmeunier@ymail.com. --- Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone? Welcome to another episode of the Remote Real Estate Investor. My name is Michael Albaum and today with me, I have Chris Meunier, who's talking to us about, what it's like to convert your primary into a rental and how he's scaling out estate and what that looks like. So let's get into it.   Hey, Chris, what's going on? Man, thanks so much for coming on and hanging out with me. I appreciate you.   Chris: Yeah, thanks for having me, Michael.   Michael: No, my pleasure. So in… you know, I obviously know you and we have a relationship. And so I would love if you could just give everyone listening a background of who you are, and how you got started in real estate.   Chris: Sure! So my name is Chris. My wife and I have, we've been married about almost 10 years now. And I work my day job at Google. My wife's a, she's an entrepreneur, a personal finance coach, which is really exciting. So we're both very passionate about helping people with their finances and real estate as well.   And going back a bit, I grew up in a family that was very focused on real estate and had a lot of family members who work in real estate. My dad was an agent, my brother's an agent, uncles and aunts who've done you know, home inspections and things like that. So I was surrounded by all of that growing up, I bought my first property back in 2009, a condo in the San Jose area of California, and, and did whatever it took to get in there, I put 3% down. Because I knew that the earlier I could get in and get my foot in the door that it would be well worth it. And sure enough, it was and I still have that property as a rental. And then I think from there, we've… we've really just kind of kept building from there and look for ways to not just focus on our primary residence, but look for ways out of state as well to build our real estate portfolio. So that's kind of a little bit of background on where we've come from and where we got into today.   Michael: Awesome. And, and just with the goal of being fully transparent, you are a Roofstock Academy member, right?   Chris: Yeah, we've been for I think, a year or two now we've been with the Academy. And I've really enjoyed it and got a lot of value out of the courses. I'm a program manager in my day job so I've taken I built a lot of Evernote sheets and took copious notes and action items and things like that. So we've really gotten a lot of value out of the academy. And I used it to really, like, analyze properties differently and build out like our ten year plan and things like that. We've told other people about it to say that we're big fans.   Michael: Awesome. And how much should I pay you to say that?   Chris: Ohh, we'll figure that out later…   Michael: You'll send me an invoice.   Chris: Yeah.   Michael: All right, awesome! So I'm curious, Chris, I mean, for… for you and your wife, what was it? And maybe it was just your family kind of being bugs in your ear, but what was it about real estate that attracted you to investing in the beginning? Because I think people listening to this could say, oh, well, you know, he got started deals at nine, prices were… were at the bottom, so he just got lucky. I mean…   Chris: Yeah…   Michael: I don't think that's the case. But you know, you've done a lot since then. But what was it about real estate that initially attracted you?   Chris: For me for a while, it's, I think a few things. One is about just the fundamentals of real estate that I've learned over time. And then going back to 2009, it was really about like finding a primary residence first and foremost, but knowing the power of buying and holding in the Bay Area, and knowing what that could do. So at the time, I did a lot of research on the tax benefits and things like that, but not so much as an investor more as a primary owner. So I think that was one was just understanding the power of from an investment standpoint of what could be what you could achieve through that.   And the second thing is diversification. So we, my wife, and I even now look at okay, what how much do we have in our real estate portfolio? How much do we have in the stock market? How much do we have in other types of investment vehicles? Diversifying, especially when inflation is going crazy, and the stock market's going up and down I think is really important. So that's also been in the back of our minds as we've thought about what can real estate do for us?   I've always seen it as a way to build long term wealth and especially now that we have two small children leaving a legacy to see and having something that can carry on, beyond our time, beyond just like inheriting some amount of money, I think is something that's really important to us too. Like, we have just an example of my wife site, her family, they some of them live in the Bay Area and own an apartment, a small apartment complex, and her aunt bought many decades ago. And now it allows them to, and her cousins, you know, to live differently, because she made that investment long ago and is able to support the family in different ways. So things like that really speak to me, I think and show the power of what real estate can do for family and extended family.   Michael: Love it, love it… And for you and your wife, Chris, when you first started out, you had some goals in mind. And so now you've been on this journey for over a decade, what is done look like for the two of you and for your family?   Chris: We go back and forth on that honestly, like, there was a time where we said okay, like, let's… let's build out our 10 year plan and figure out like, how do we get active, you know, like 50, 70k of passive income a year from real estate, we want to get 100k, is that even feasible? Do we need that?   I think we both work day jobs. And we… we want our goal has always been we want to supplement what we will get from retirement, and always look for ways maybe to retire earlier. And, and, and also, like I said a minute ago, just provide kind of that that long term nest egg for us and for our children eventually. But having, having done that math, I think we've landed on like somewhere between five to 10 properties out of state, either single family rentals or duplexes or maybe triplex something like that.   But the reason being is that we can get to some amount of stable annual income through those properties. Combine that with like 401k, Ira income and get to this net amount that will allow us to live comfortably in retirement. Those numbers are, you know, they're… they're kind of made up at this point, we don't really know what amount will need to live on. And we don't really know how all of our rental properties will perform down the road. So we're trying to bake in some margin of error there and say, okay, yeah, five to 10 instead of just 10 or, you know, maybe by the time I turned 50, or something like that, I won't want to manage 10 properties, I don't want to have that mental burden of figuring out which ones are doing well or not doing well. At this point, I think I would enjoy that. But yeah, it's hard to know, right? Like, it's there's the time aspect that I think is playing a bigger role in my mind now.   About how much time do I want to put in now versus when I'm retired, it sounds really enticing to put time in later and kind of look for deals and look for ways to optimize the portfolio and things like that. So yeah, like, more tactically speaking, like our original goal was to go from like, one property to two to three, roughly every year. So right now we have, we have three, and we intend to buy another one this year, maybe next year. And then we go to, you know, five at some point after that maybe the next year. The pace kind of depends, of course, on our financial situation. But that's kind of how we're playing it right now is at least maybe get to five and then reassess how things work and what our financial situation is, and our job situation, too.   Michael: I love that, Chris. I think we've had so many people on the podcast, and I talked to so many investors that are out to get to 100 tomorrow, I'll do it as fast as I can as quickly as possible. And you know, that might work for some people. But I think for others, you really need to take a more strategic and slow and steady approach, which is what it sounds like, you are doing exactly.   Chris: Yeah. And I think we've when… when thinking about how can folks starting off benefit from hearing like tips or feedback from others. I think what's really resonated with us is… is just being extremely thoughtful about what your goals are and what you want to do. Because like I said, my wife, she talks to a lot of people who are working in her working to get their finances in order. They bring up real estate a lot. They say, Oh, I hear real estate, I need to I need to own sound like my family slam me down real estate and Jessica says why? And then they say well, I don't know, like, I just heard I should be owning real estate somehow and it kind of just gets to the basics like alright, what are you trying to achieve?   Some people want to do buy and hold and they can skip the cash flow every month, some people can… Some people need to live off that cash flow, some people haven't maybe done the math to know they can put a chunk of money and lock it up in real estate for a while. So just being very thoughtful about that and having concrete goals I think is, it sounds so obvious, but I think it's, it's so critical. And then once you have that goal or those goals, like stepping back and making a plan, and because my wife and I think very like project management oriented, like building out milestones throughout a year, like if you want to buy your first property, or even make your first offer, like this year, let's say, put down some, some steps you can take, like, whether it's time for Roofstock Academy, or educate yourself in other ways, or learn about certain neighborhoods, and then get pre-qualified and then get, you know, talk to…, property managers, things like that. That's what helped us a lot, is really putting down those stepping stones along the way to the point where we could feel like alright, like, maybe we can do this, maybe we can buy our first out of state investment.   Michael: Yeah…   Chris: It takes a while to get to that point, sometimes and that's okay.   Michael: And Chris, what would you share with folks now having been on the other side of how do you go from zero to one? How do you know when you're either mentally or physically prepared because you could always listen to one more podcast or read one more book or take one more course?   Chris: Yeah.   Michael: What does that look like?   Chris: I think it's, you know, there's always… there's always hesitation, I think I would dare compare it to like having a kid maybe in a way…   Michael: Okay… they're just as expensive.   Chris: You can do, all right, you can do all this studying and preparation you want, you'll never be fully, fully ready. And there's always going to be unexpected things that happen. So, you know, as an example, when we bought our first, our first property, we landed on Indiana, Indianapolis more specifically.   Now why why did we land there, we did a lot of research on, on areas that were seeing population growth and strong rent growth. And affordability was within our range of we were targeting somewhere around 100 to 120k, for our first property. And Indianapolis seemed great, but it took a while to really, like build up the confidence, like make an offer, because it… first I think is getting over the hurdle of like buying something that you don't see, at least for us, that was a big hurdle to get.   Michael: Yeah.   Chris: Because the other property we manage locally is only like 30 minutes from our house and we can drive there when we need to. But this was a whole different beast, right? Going, it's like going on eBay and buying something then you hope it shows up in a few weeks.   Michael: You hope it's real, yeah…   Chris: Yeah. So I think that was that was a mental hurdle to get over. But, you know, going, we spent a lot of time like, researching Roofstock and other competitors and learn in, in actually talking to folks who had used it, and getting feedback that way, too. So that helped build our confidence.   And then on the financials to like we, we took a lot of what Roofstock offered in terms of like estimates for fees and maintenance costs, things like that. And we just kind of put it to the max and very conservative and making sure that we were really planning for okay, like, if, if we don't get, you know, a tenant in place for a month or two months, what would happen? Would we still cash what would we be okay, if we didn't, and just mapping out all the what ifs. I think a really good tip that… that my wife reminded me of was have somebody who's willing to push back on your assumptions, and to question, question what you're doing, whether it's like, you know, like someone like you, Michael, a coach, or your spouse, like in my case, I tended to be more optimistic and my glass half full.   Michael: Yeah   Chris: And she was the opposite. She would say what about tornadoes, hurricanes, like, do we have enough insurance to cover that? What about, you know, if the tenant just doesn't show up one day, they grew success, somebody there, nobody's there, you know, things like that. And yeah, it's good to have somebody to check your check your assumptions. So those are some things that helped us feel confident and feeling alright, like we can do this. Let's give it a shot. Let's make our attempt. And we have made a couple of offers, it didn't work out, the first time before we got our Indiana property. And it was a good learning experience like we… we figured out how to make a stronger offer, how to… how to look for properties that maybe we're not going to be as competitive as like some that everybody wanted, for example.   Michael: Mm hmm.   Chris: Yeah.   Michael: That's great, Chris. So Chris, now that you and Jessica have owned that Indianapolis property for some time, how is it actually performing? Is it more towards where your assumptions were more towards where she was?   Chris: So yeah, that property has done it's done well, we've actually had the same tenant there for, I think we've had the property now, almost three years or so. It's been the same tenant in place and that was there when we purchased… So we recently raise the rent for the first time. The first time around, we did not raise the rent due to COVID. In this past, I think it was November actually, that we, we did a small rent increase, it was successful and so we're really happy about that. There's been a few maintenance issues, nothing significant. The kind of going back to like the point about not being able to see the house that the property manager has, when they've gone into maintenance, they've made comments back to me about like, oh, there's, there's cleanliness issues, or there's like, stuff everywhere, you know, and, and it makes me nervous, it makes me nervous that like, there's probably other stuff going on in the house that nobody knows about. They might, the property manager said they have possibly like an illegal dog in there. And they're supposed to have pets and like, things like that, but they're not making a big fuss about it. So part of me worries that when this when this tenant leaves, and we have to like update the property, like we're gonna find stuff in today that we didn't expect.   Michael: Yeah. But for now we're here.   Chris: Yeah, yeah… Because it's, it's so hard during COVID, especially like the tenants, they say, I don't want anybody coming in, like you can't do an inspection on the house. So very limited opportunities to like, really assess what's happening. The checks keep coming, though, and they're… they're paying and they're not complaining. So part of me is like, yeah, he said, like he were blinders on, just keep going forward. So that the property is doing well, and it's appreciated substantially. I get, like cold calls and texts, like every week from people. I don't know how they're getting my information, but they're finding it and they're saying, hey, like, we're looking to buy property in Indiana, like, what are you? Are you open to it? Like all cash? Like, come in? We'll give it to you right away?   Michael: Yeah… I just got one yesterday, too. It's so funny, you mentioned that…   Chris: Oh, my God, the strangest thing, even my brother, I have three younger brothers, one of my brothers gets texts about our property, he says…   Michael: About your properties?   Chris: I don't know his number got out there. But it's somehow out in the wild now and people, they're just grasping it whatever they can, I guess.   Michael: Yeah, that's wild…   Chris: So it's done. Well, the only downside and not downside, I guess is like when we got it, we had a pretty high interest rate on it, like almost 5%. And I've been wanting to refi or cash out refi or do something with it. But I was, I was a little too slow with it last year, we were really close to doing it. And like the cost were going to be too high. And now, now rates have gone up a bit, of course. So I think we're just going to leave it there. But all our other properties are much closer to like 3 to 3.5%, which we are happy about…     Michael: Okay…   Chris: This one, it's, it's a little bit higher. But that's more of like a nitpick not a major issue, I would say.   Michael: Totally! Chris, let's shift gears here, because you've done something that I think a lot of people end up doing, and you kind of became an accidental landlord. And in your instance, I don't know if it was accidental or premeditated. But talk to me a little bit about what that was like buying your first primary and then ultimately converting it to a rental. And did you know that you were going to convert it one day?   Chris: No, I don't think we did, honestly. I think so when, when we bought… I bought the condo initially before I was married. And my wife now she hated that I did actually because it was during like a down market. And it was, it was like 3% of my money, it was like all I could afford and like what did it go south. So that was it was a little bit scary and a bit of a risk. But I was like very sure that this was the right decision to make. And, and I didn't know… we didn't think we'd turn that house into a rental at some point. And that was after we moved out of course. Now and then our first primary we bought together in up in Redwood City was a great house, and we loved it and it ended up becoming a little too small. So we ended up moving out of that house, but while we were there we decided, you know, hey, let's experiment with something. Let's run out part of the house. Let's, let's just see if we could find people who are interested in doing that. And because we had, we had like a kind of an awkward layout.   We had an upstairs bedroom, our master bedroom that was added on at some point. And then the downstairs was like a two bedroom, one bath, a situation where the kitchen is and all that. The downstairs bedroom this was before we had kids was kind of unoccupied. So we ended up putting it up on an Airbnb and seeing if anybody would be interested in it. It was kind of slow for a while. We got a couple people interested here and there mostly for business travel. And then after a while we found somebody who was flying into Redwood City every week for work from Chicago. I don't know why he did this, but he did job at a startup and his family was in Chicago. He, he wanted to have a regular place not a hotel, like something cheaper, I think we charge like 100 bucks, and I maybe even like 90 bucks. And he came every week for like, several months. And we were really happy, he would only come on like four nights a week, we barely see him and then he fly out before the weekend and it was great… And we made good money from that through Airbnb and I think that just really showed us like, okay, like, this is the power of like renting, especially like, kind of hands off in a way for sure there's like cleaning and preparation involved. But we are not having to like manage a tenant or anything like that, like he was on his own pretty much. And then I think that really got us thinking like, okay, maybe we should do more of this. So when we moved out of that house, we, we kept it as a rental for I think it was two years we did. And it was that was a tough decision, because we ended up buying the primary house that we're in today, which was substantially more and we really wanted to use that equity from that previous house on the down payment. But we decided to leave it there and figure out other creative ways to get our down payment through family and such. And then we realize like after two years, we could not do that anymore. So the rent would read…   Michael: Was it an Airbnb or long term rent?   Chris: It was a long term rental.   Michael: Okay.   Chris: Yeah, so we found a 12 month, like a family that was in there for 2-12 month leases. And, and it was fine. I paid for the mortgage. But we were just too cash poor, and we didn't feel good about that. So we ended up selling it and, and recouping a lot of the money from there. And we sold it soon enough, so we could we could utilize the home the homeowners exclusion on the gains, thankfully.   Michael: And what is that for someone who doesn't know?   Chris: Sure it's so for… for married couples that you sell… Let me see if I get this right, if you do convert your primary to a rental, but if you lived in it for three out of five years, I think it is, you, you can claim an exemption up to 500k of gains, tax free exemption, on gains you would have otherwise had to pay capital gains tax on.   Did I get the number right, is it three years?   Michael: I feel like it's two out of five.   Chris: Two out of five…maybe…   Michael: Consult your tax professional before doing anything, but it's either two or three, you know, one of those…   Chris: Yeah, so that was part of our decision. We said, look, if we're going to get this, this because it was there was a significant gain there. We didn't want to pay tax on that and so that factored into our decision to but getting that exposure, I think this is you know, for folks thinking about like, is rent is being a landlord, right for me, like in my setup for this, like the stresses are the risks of it. And I know you guys on Roofstock, talk a lot about house hacking and like renting out part of your house, I think it is a good way to experiment and see if you're really interested in doing more of this without, without like committing a large chunk of money into some other property somewhere where you, you don't know if you're gonna feel okay about that and sleep at night.   Michael: That is such a good tip, Chris and I love that. I mean, you really got to do it very tangentially, you're very kind of toe dipping as hey, let's rent out a room, if it doesn't work, we stopped renting it out. But if it does great, that's awesome. And so you really got that firsthand experience, almost risk free, because it wasn't like you needed that renter to make your mortgage payment. You bought the house, kind of without that intention at the start, right.   Chris: Yeah, right, exactly. We didn't, we never even thought that would be possible when we started and then and then sure there's, there's even other I remember finding out about companies that allow you to run out your garage space.   Michael: Really?   Chris: We had a detached, we had a detached garage in our backyard. That's how a lot of the properties were in this neighborhood and we rarely use it and we never went through that. But we thought, ha like if we're ever going to ruin our house, maybe we rent out space in our garage for storage for people. And so there's you know, there's, there's ways to run out everything nowadays, I suppose…   Michael: You can rent out your car…   Chris: …you can rent your car, you can rent out your pool in your backyard for that summer days. So there's there's very innovative ways to make money. Yeah, so that's been, that's been fun to learn adding some of those things.   Michael: I love it, I love it. So now let's shift gears again, because we covered kind of zero to one. Now I would love to hear how you and Jessica have gone from one to three. And what the scaling mentality and mindset was and how did you get there. Was it was one to two to three easier than zero to one?   Chris: I think. Yeah, I think going from from zero to one was, was significant for us. It took a while to get to that point of feeling comfortable. It probably took us a year I would say of, of the education the research that we did. Talking, talking to people figuring out areas and neighborhoods and things like that. And I think just, just to like, go back to that for a second. Like, I think that's probably the position that most folks are in who are, you know, watching this and listening to this, is going to that, that zero to one step.   Like some of the things we thought about, with what is important is we wanted, we wanted to take a less, less risky first step, like by committing first so even going and buying an out of state property as a risk for it, we wanted to derisk it as much as possible by buying into a nicer neighborhood, buying into an area we knew would appreciate in a long term, buying and what that means tactically is like, you know, a three and a half or four star plus neighborhood. With, with, with good school ratings, we wanted to prioritize that too, because we have kids and we know families will look for neighborhoods and have decent school ratings.   Cash flowing on day one was a requirement for us. And still it is, like even going from one to three properties. Putting at least 20% down to have some, some equity stakes and stability in the property should things go south. These were some of our requirements that we made sure, especially for our first property that we still carried forward to our other two that we've purchased. And we, we really looked at these and looked at different ways, like, okay, what if it's a three star? Like, what does that, what does that mean? And there's a difference, you know, there's different cap raid, there's a different level of risk you're taking on it, we just didn't really want to deal with that and open ourselves up to potential downsides of like tenants changing frequently, maintenance issues. So we tried to focus on higher quality properties. And then going from the scaling part that you're asking about, I think was really about thorough planning. And using that 10 year plan, that the the template that Roofstock Academy offers, as an example, has worked really well for us to model out. Okay, well, like how do we get the money first of all, to put down payments on, on these houses? And how much cash flow do that we expect from them? How long will it take to recoup like to bank that cash flow and buy another property.   So so that's how we arrived at like the model of putting down like, 30 to 35k a year, every year, for example, to buy a property, some of that would come from our own savings accounts, but also some of it was from from collecting 200 to 250 a month of cash flow from the other properties we had. And building out that model helped us feel confident that okay, you know, there is a there is a path to doing this. But it also involves like, just very honestly speaking a lot of time. And, you know, a lot of stress at times as well. While raising a family, while working a day job and it took, it took a while I think to build the confidence to keep going and to go beyond the one. So that's, that's something to also keep in mind, I alluded to earlier, like the time involvement is, you know, it can be big, if you want it to be big, or it can be small, like there's ways to invest completely hands off and buy a REIT or buy, buy something where you don't have to do anything.   But the middle ground of owning an actual tangible property, and feeling confident enough to go forward with it, I think. It takes you know, everybody's different, but it takes some time to get up to that point. And more specifically, there too, I'm like looking for mortgage lenders, shopping around for those property managers, insurance brokers, those are, those are the types of things to consider when you start looking at other states and other areas. Thankfully, Roofstock provides a lot of, you know, recommended partners to work with in those areas. But you know, most you want to do your own due diligence and make sure you are checking all the boxes in your own buy box and spreadsheets section. By box, by the way, I know that's a… academy term, but I'll… I'll explain quickly is basically it helped us a lot. It's documenting what, what are your requirements for buying a property like, what cash flow do you need, cap rate, neighborhood rating, down payment amount, etc. And you put property through that analyze it and see if it comes out with yes or no or how many no's? How many are you comfortable with? Proceeding on so, I know that was a lot to carry, but I'm not there.   Michael: No, it's so good. No, so, so, so, good, Chris, I'm curious, it's kind of a follow up for those people that are interested in scaling. Because I think there are a lot of people that went from zero to one and maybe didn't have as positive as an experience as you did. Maybe they bought that less expensive property and a lesser start neighborhood because that was all they could get into. So for someone that didn't have a great experience, what do you say to them in terms of thinking about scaling?   Chris: Yeah, I think that's a great point. And I'm, by the way, I'm fully expecting that at some point, we will, like hit bumps in the road in our real estate journey, and we have had little bumps in certain areas, and there will be bigger ones down the road. Because that's just the reality of how real estate works. And I think, yeah, starting off and having a bad first experience can be, can be demoralizing, right, and it can make people want to get out, I understand that. But I also think it's, it's good to go back to what, what your own goals are, if your goals are focused around long term buy and hold, I think you have time on your side. Because there's plenty of data to show, you know, the long term up into the right charts of real estate and where it's going. But if, if you were hoping to do something in the short term, and that that hasn't worked out, maybe think about a different strategy, maybe think about investing in a different type of property, or with a different amount of money, different neighborhood. There, that's what's great about real estate, there's different there's so many different ways to get involved. Maybe the first approach you tried, didn't work. But there's could be nine other ways, whether it's with yourself or with partners, or with crowdfunding, or with owning, you know, pieces of property instead of the whole thing, things like that. There's, there's different ways that you can get back in the game, so to speak. And I would just say that, you know, don't let that fully ruin your view of what real estate can do for you and your family. The other thing too, like, honestly, is, you know, you could take a break from it, I think folks could, there may be folks who invested too early and didn't have enough capital, and maybe a deal turned sideways, and now you're underwater or something like that. Maybe it's assigned away in wait till, you know, you have enough capital to reenter or the market turns around, and you can do something with that money.   But yeah, I just keep going back to how there's so many different ways. It's a great for me, I don't see myself as a very creative person. But I think real estate has allowed me and my wife to think of like, what if we did this? What if we did that like to give you that control to do things in a different way…       Michael: Totally! I love what you said about you know, maybe it's not the right methodology, there are these nine other routes to go, cuz I think too many people have a bad first experience like, oh real estate's bad… bills ain't, sucks for me, so it's not for me. But I think…   Chris: Yeah…it makes me think, too, on that on that now, like my father in law, he, he lives in the Bay Area, too. And he bought a rental in Phoenix many years ago. And it was, it was great, it worked for a while. And then a few years ago, he realized that the supposedly the tenants were not paying rent, but in fact, the property manager was stealing the money or some portion of the money and pocketing it for themselves, which is crazy.   Michael: Wow…   Chris: I didn't even know that this can happen. So this happened for months that the money was gone. And so, he the property manager was fired, the tenants left. And he decided to sell a property, he was tired of that experience and didn't want to be a landlord property. He didn't want to own rental property anymore because of that one experience and the rest of the years before that had been great. And I can understand how that could be. It could be a pretty negative moment to be like all this hard work. And I lost all this right now. But, but also on the flip side, like if he kept that property, it'd be doing phenomenally now. So I think it just goes to show it for everybody's situation, it's unique. He, he was he was done with it, at that point, he didn't want to do real estate anymore because of that one bad experience. Whereas for me, maybe I would I would look for, okay, maybe, maybe there's something I could do differently next time. Maybe I should that the property managers more or just try a different company and see if it happens again, something…   Michael: Yeap, there was this poker player that wrote a book and I forget what the book is called, but she was on the Bigger Pockets Podcast and she was talking about how in life she tries to apply this, that you evaluate the process, not the outcome. Because the process is you can control the outcome oftentimes we can't and so if something goes sideways or goes poorly, I think it's so important to kind of do a post mortem and say okay, well what did I do and maybe what could I have done differently? Outcome is the outcome can't change that but the process leading up to it we might be able to influence a bit.   Chris: Exactly, very true.         Michael: Awesome, well Chris, this was so much fun man. I really appreciate you coming on. If people want to reach out to you have more questions about your story, want to learn from you, what's the best way for them to get a hold on you?   Chris: Yeah, I'm definitely open to sharing more in chatting about real estate or other personal finance topics. Happy to have folks email me directly and my email address is letter C and my last name Meunier: c.meunier@ymail.com.   So again, yeah, happy for folks who reached out and I was happy to talk real estate and other finance topics.   Michael: Awesome!   Chris: Yeah.   Michael: Can you spell Meunier for those who may not be familiar with the spelling?   Chris: Yeah, it's not obvious is it?   Michael: Depends who you ask.   Chris: M E U N I E R   Michael: Awesome, awesome. Well, Chris, thanks again, man. I'm looking forward to seeing how things go for you in the future.   Chris: Thanks so much for having me, Michael. It's been a pleasure.   Michael: You got it, talk soon.   Chris: All right, bye.   Michael: Alright, well, that was our episode. A big thank you to Chris for coming on and sharing his story. He's doing a lot of really cool things. And I think especially as any beginner out there listening to this should hopefully feel inspired that you can do it, too.   As always, if you liked the episode, we'd love hearing from you ratings and reviews on things we could do better or topics that you want to hear about, and we look forward to see you on the next one. Happy investing!

Getting your assumptions right on your proforma is crucial. Having one number off can be the difference between a home run deal and an alligator - costing you big. One of those crucial numbers is property taxes and getting that right isn't always straightforward. In this video, Michael explains how to get it right and properly underwrite your deals. --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions, and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone, Michael Albaum here from Roofstock, Roofstock Academy. And I want to talk to everybody today about how to actually calculate your property taxes.   So anyone who's purchased real estate might know that calculating property taxes, nailing them down with are actually going to be can be really difficult because they're not always gonna say the same from when you purchase the property, now you own it, they could absolutely change. So here are a couple things that I always recommend to do in order to really nail down into your pro forma what your property taxes are going to be.   So first and foremost, number one thing you should do is call the county assessor, make sure that you actually pick up the phone, I know it's kind of crazy in today's modern tech world, but pick up the phone and call the county assessor of whatever county the property you're interested is in. So if I'm interested in a property in Riverside County in California, I'll pick up the phone, call the county assessor and just ask to speak to someone who can tell you about how property taxes are calculated, because the interesting thing is that they vary from county to county, even within the same state. So we could be in California, California has a statewide law that says the property tax is no less than 1% of the property's purchase price. Now, Riverside County might do a little bit different than Yolo County or Alameda County, so you want to understand what those differences are. So figure out where it is you're interested in property, pick up the phone, call the county assessor, now.   They're probably gonna throw a bunch of different terms at you, they might say assessed value, appraised value, market value, purchase value, all of these numbers can be different. And they could also be used differently. And so not only do you want to talk to someone who can walk you through how to calculate how to calculate the property taxes and what values they're using, but actually have them walk you through how to do the math, because it can be really overwhelming very quickly, something to keep in mind is that there are three values that tend to be totally independent of one another one can be the assessed value, that's what the county is using to determine property taxes, your second is your purchase price. That's whatever the fair market determines your property is worth, or you determine its worth, because you bought it for that. And the third one is usually from the insurance company, that's the replacement value. And so these are three values that might never ever align, that's okay. So don't worry that the county is assessing your property way lower than you paid for it. That doesn't mean it's it's worth less than you paid for. And same thing with the insurance company, they tell you, Hey, this is the assessed value are the replacement value of your home and you're like, wait a minute, that's 100 grand less than I paid for it again, don't freak out, you want to understand what number the insurance company is using on a rebuild cost per square foot to get to that number and make sure you're not under insured. But it's not a big deal.   If the property value assessed value, which you paid for it are totally different. That's often very normal. So again, getting back to talking with the county assessor, talk to them and actually have them walk you through say, hey, if I bought this property on 123 Main Street for $150,000, how do I calculate my after sale property taxes as an investor, because something else that's really important to keep in mind is that there are often different tax rates for investors versus owner occupants or homesteaders. And so you want to be very, very, very clear with the person you're speaking to that this is a pure investment. Because if they understand or misunderstand you that this is a owner occupant rate, they could give you a lower rate, you calculate it, you're like, awesome, I'm in business, and then turns out your tax rates actually going to be double what you calculate going into it. So again, you want to be very, very clear that the person you're speaking to that this is an investment, hopefully, they're able to walk you through exactly how to calculate your property taxes.   But again, it's going to be different in every county you go through in the country, even within the same state. So don't make the mistake of thinking, Oh, I spoke to this county in Georgia, and now I'm good for the entire state. No, if you decide not to purchase in that particular county, you want to call a county that the property you're interested is located in to determine exactly how you calculate property taxes.   Some counties will just do a new assessment whenever there's a sale and say, Okay, this is our millage rate, that's usually a multiplier that they're using to calculate property taxes times some value, whether it's the purchase price or some assessed value that a county assessor determines the property's worth times the millage rate, that's your property tax for the year. It might be that simple. They might tell you something like Oh, we actually do a reassessment every five years or two years at some sort of regular frequency, independent of a sale. And if that's the case, you want to understand what that future property tax rate or value is, but know that until they do their reassessment you're going to be paying whatever the previous year's taxes were.   Now that's a very common case in a lot of places in the Midwest. So again, just really understand get a high level, but also very specific understanding of how to calculate property taxes. And I would say you should be able to explain it to someone else. Because that's how we in the education world find the best way to learn is actually to teach to someone else. So if you can explain it to a spouse, or a co worker, or a friend or partner, how the how the property taxes are calculated for that particular property, and what your projected tax rate and tax amount is going to be, then I'd say you're in good shape to move forward. But until you can do that, I would say keep having those conversations as awkward as it is, ask them to walk you through how to do it.   So those were a couple tips I have for everyone on calculating property taxes, and it's super, super important. It's one of it's often one of the biggest expenses associated with a property and so you really want to get it right, because getting it wrong could mean the difference between a home run of a property and a potential alligator that's dragging you down with it. So hope you enjoyed this video. Feel free to leave us a comment down below. We love hearing from you all and as always see on the next one, Happy investing.

For the last seven years, Ryan Lee has helped people build wealth by debunking bogus financial plans based on hope. Instead of hoping the stock market performed, that taxes would stay low, and hoping that his investments would perform as advertised, he developed something infinitely more valuable than hope: Control. Ryan has unlocked a personal path to achieving financial independence as well as a system of money management that he is passionate about sharing. In this episode, Ryan shares his investment strategy and the 4 pillars that you can use to evaluate a potential investment an determine if it is going to bring you the most reliable returns. Ryan's links: https://cashflowtactics.com/ https://podcasts.apple.com/us/podcast/rise-up-live-free/id1500021021  --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everybody? Michael Albaum here. Welcome to another episode of the remote real estate investor. Today with me, I've got Ryan Lee with Cash Flow tactics. And Ryan's gonna be talking to us about his background, how he became financially free, and what are some tips and tricks that you can maybe do the same? So let's get right into it.   Alright, Ryan, so you were saying before that you figured it out? Because you had to? And so I'm curious to know, what was it that you figured out? What were some of the tips and tricks and tactics that you figured out along the way?   Ryan: Yeah, man. So again, kind of going back to Rich Dad, Poor Dad, you know, first he like slapped me in the face and said, Hey, you, everything you think you know about money is wrong,   Michael: You're doing it wrong.   Ryan: Yeah, you're doing it wrong. And you're an idiot, right? And then the next thing that he said was, hey, the definition of financial success. And this radically revolutionized my thought process. It's not how much your net worth is, like, at the end of the day? No, it doesn't matter how much money we have, no matter how much income your assets generate. And so I started measuring my success off of how much income can my assets generate? And how long is it going to last? And how predictable is it going to be?   And this really exposed the lie of the 401k. Because even if I had quote unquote, enough money in the 401k, I couldn't get it right, it was stuck, it was gonna be taxable. And I couldn't take it out before 59 and a half. And so I realized, man, that's that's a trap. So I went down the world of real estate, and real estate is the most powerful wealth creator out there. But it's also a pretty dangerous tool, right? And I went into it super naive. I'm grateful that I did it because I made a lot of mistakes. But you know, I went into the game of real estate trying to do it all on my own. Right, I thought may I'm gonna go out and find the property. And then once I find it, I'm gonna rehab it, and I'm gonna renovate it, and I'm gonna put a renter in there, then I'm gonna collect the rent. And I did that three times, right?   And the first time I did it, walked around with my chest all puffed out, right? I'm a real estate investor, you know, and I wanted to tell everybody about it. The second time I did it, I was little bit nervous. And the third time I did it, I almost had a panic attack. Because here's what was happening, right? I mean, every property that I bought, I was actually getting further away from financial freedom. Because I had to find it, I had to renovate it, I had to put a tenant in it, I had to manage it. And man, man, if there's anything that you know about me, I am the worst, the absolute worst property manager in the entire world. And every time my tenant would call me up with whatever sob story they had, I would sob right along with them and say, Hey, don't worry about it, I'll pay your rent for you.    And, you know, this happened for a good six or seven months, where I was just bleeding money. And I was bleeding time. And I realized, man, the only way that I can do this is if I start plugging into other people's expertise, right? I can't try to do it on my own, because I'm losing time that way. But if I can find people that love real estate, they wake up in the morning, they're like, Man, I love real estate, because that's not my definition of financial freedom. I love real estate for what it does for me. But I don't want to do real estate. So if I can plug into teams and people that have expertise in real estate, and finding rehabbing, renovating, managing all of that stuff with real estate, then my life, my life gets a lot easier. And I become the CEO managing to outcomes.   So the difficult lessons that I learned along the way was don't try to do real estate on your own right? Plug into other people's networks and teams and have them do the real estate. And yes, they make money. But guess what, I get what I want, I get passive cash flow. And I have to manage outcomes.   Michael: Yeah, that's so good. That's so good. So now having done that three times, and coming to that conclusion of okay, I want to be the CEO, I don't want to be the person in the trenches, so to speak. Do you think that that's a good place to start? Or do you think that people actually have to go through those first three, or whatever amount of properties it takes for them to get that hands on experience to recognize, well, I don't like this, or maybe I do like this?   Ryan: Yeah, dude, that's such a great question. And man, I think everyone has their own individual ways that they learn. Some people are really good by learning from other people's people's experiences. Some people can learn from books and podcasts, some people just learn by getting their hands dirty. So understand who you are and how you learn. But for sure doing it gives you way more appreciation. Because if I hadn't done it, then I would come to turnkey providers and other people that are doing real estate. And I'll probably be a little bit more demanding because I didn't understand the process. I don't understand what's required in the work involved in it.   So me doing it. That gave me two perspectives. It gave me a very, very clear understanding of what I don't want. I don't want to be a real estate professional. But it also gave me a clear understanding of what I do want and real estate was the same tool. It was just a matter of how I decided to pick up that tool. So doing it helped me understand, number one, hey, I can do real estates and I can do it to get the outcomes that I want but I don't have to do the do all of the work along the way.   The next thing that it helped me understand was, you know, I lived in at the time I lived in a still do I live in an area where it's a lot harder to do single family homes, I mean, the median price where I'm living, man, it's several $100,000. And if I wanted to buy real estate and start in my geographic area, I'd have to have a lot of money set aside to be able to do that. So also, not doing it on my own allowed me to plug into networks like yours and say, look, what if I bought properties in the Midwest? What if I live where I want to live, but I buy where the numbers make sense. That opened up a whole new game for me. And that allowed me to start moving start from you know, rather than moving slow, and what's in my geographic area, it started to open up my expansion to say, what if I look in other areas and buy the right property in the right area with the right team?   Michael: That's so good. So something that I hear all the time inside of Roofstock Academy and from this other investors investors in general is how do you do in remote investing? I can't make that mental mindset. I'm too scared to give relinquish control. So I can't go touch and see it and check it on my property managers was it sounds like the drive for you. Because the numbers made sense overcame that fear and relinquishing control is that what happened for you?   Ryan: To a certain extent, you know, I still am kind of a control freak. And so every area that I bought real estate, I've gone to that area, right, I've literally gone to the area and that way, like it's kind of fun, because if I go out there, for example, Memphis, Tennessee, you know, Memphis, Tennessee, when I very first one out there, I had no idea I did my research beforehand and kind of understood, maybe some of the areas in that area that I wanted to invest in, took a plane out there, rented a car, got a map, and I just drove up and down the neighborhood's up and down, up and down. And I circled areas I liked, I exed the ones that I was nervous about. But here more than anything, is what I did, I developed a relationship with the team that I wanted to use out there. Because at the end of the day, real estate, isn't the objective real estate is the tool to exchange, that's all it is, I own real estate, someone is going to want to rent that real estate. But if I'm going to do it passively, I have to develop a really good relationship with my property manager, the people who are finding the properties for me my acquisition is and so that's what I spend, spent, and still do spend most of my time on, is developing really, really good relationships, one of the best things I've done, it's such a small thing, but man, it makes the biggest difference.   You know, in in the team that I use instead of Memphis, for example. I've been using them for almost a decade now. And I've been out there a couple of times, I did most of my research in the beginning. And now I can manage it from my, you know, quarterback here from Utah. But every single year, I send them a Christmas card, and a gift card. Right, Tom, thank you for all the work they've done for me for my life for my family, I send them a picture of hey, this is what you're helping me do and accomplishments out of my life, please go enjoy dinner on me, right. And it's such a small thing, dude, it's such a small thing. But as I invest in relationships, man, I can't tell you how many times that team has gone above and beyond for me. I mean, they out of all the people, they manage properties for guests whose name they know, they know my name, right? Because I invest in that relationship.   On the other side, if I didn't appreciate that team, you know, when I had a vacancy, like, I might just call them up and shoot them out and yell at them, and, you know, cuss at them. And you know, that in the long run is not going to help me be free, that's not going to help me get what I want. And so having done it myself, I understand the difficulty, the brain numbing work that that takes and the expertise that's required to do it the effectively and do it the right way. So I appreciate it more. And I honor the people that I work with.   Michael: It's such an important you makes I do the exact same thing, actually, for all of the professionals in my life, all the teams I work with, I do the exact same thing. And you're right, when when I pick up the phone and give them a call, they also pick up the phone and they know who I am, and they appreciate. So I think I think that's a great tip. If nothing else to pour into the relationships that you have in your life, whether it be your lenders, target managers, insurance reps, whoever, but just show them that you care. So when you're thinking about them show the value the relationship I think goes a long way.   Ryan: Man it so does, because at the end of the day, here's the crazy part, a house, a rental property has never written me personally a check. It's a person that's written me that says that, yeah, the house is just the lawyer. It's just alert to get people to do business with each other. And so at the end of the day, remember that you're investing in relationships more than anything.   Michael: That's great. That's great. Okay, so we figured out and you figured out that remote real estate investing was going to be the tool that you were going to leverage. So what then what was the next step was the next thing that you figured out?   Ryan: Yeah, man. And here's kind of a funny thing. And I think a lot of, you know, I'm assuming you're probably a lot like me in this way. You know, I'm very entrepreneurial, right? I like I'm creative. I like to see new opportunities and go chase down those opportunities. So in the beginning, I was like, well, if one type of Cash Flows great, what about all the types of cash flow? And so I bought a couple single family homes, and then I'm like, Well, what maybe I should buy an apartment complex. And maybe I should buy a long term care facility and maybe I should buy this and I was looking at everything through the lens of cash flow, which is a good lens to measure success by but at the end of the day, I still I wanted my time. Right. And I forgot that lesson along the way because the reality is every type of real estate is going to require a certain level of expertise inside of that real estate.   And what I found is it's very, very hard to duplicate results inside of multifamily properties inside of long term care facilities that requires so much expertise that it's hard to duplicate those results. And it's hard to plug into teams that do that. So for me, I kind of went a little bit crazy and tried to buy everything. And then I've realized at the end of the day, I'm gonna just go back down and simplify back down to the type of real estate that makes sense for me, single family, three bedroom, two bath Type homes, bread and butter. Because the reality of it is, there's always demand for that type of property always. It's the easiest property for a guy like me just getting involved to understand because man, I've lived in a three bedroom, two bath home, I know exactly what it's like to live there. I know what areas that are good areas, I intuitively know how that works. It's the easiest type of property to get financing for. It's the easiest type of property to scale inside of a portfolio. And it's the easiest type of property to use to become financially free.   So that was really kind of in the mid part of my game plan that was a major lesson learned is not all cashflow is created equally. And if I want to, you know, build a niche inside of long term care facilities, then I need to focus on long term care facilities. But if I want to be financially free, find a niche and get rich in that niche and just focus. So once I learned that once I learned the ability with my personal finances to focus, and it made my life so much easier now because it doubled down and duplicate those results. And the more I focus, guess what the better results I get, the better sophistication I get, the better I become an investing and I can get results fast now almost with my eyes closed because I focus on it for so long.   Michael: Yeah. Oh, that's so good. Get Rich in your niche. I love that. So Ryan, a question for you though, is when real estate investors first start learning about real estate investing. Their purview is kind of like this. And for everyone listening, I have my hands kind of over my eyes like blinders. All we can see is an inch wide. Yeah. But as you become more involved in the space, you start learning about oh, well, I can partner Oh, there's multifamily. Oh, this fixes that all there's a BRRRR. And so how do people know once they've truly found their niche? Or if they've just done something enough times to be good and comfortable at it? How should they know when to grow into something else?   Ryan: Yeah, man, That's a great question. Here's the way I like to look at it. You know, at the end of the day, this kind of goes back to money. And I think we kind of project onto money, all of our hopes and dreams thinking that money is going to give us what we want money will never give us what we want, right money is simply a tool. So at the end of the day, what I had to get really clear on and I still revisit this over and over because you don't find it and then it's that same thing forever. But I had to get clear on what I wanted. Okay, so once I was really, really clear on what I wanted, and why I wanted it, then I had to realize the only thing that was standing in the way of what I wanted and why I wanted it was me who do I have to become?   Okay, so for me, when I first started my game plan, I wanted to have more time, I wanted to have more control of my time. And I wanted to be able to walk away from a corporate job. I've always been the only income earner in my family, my wife and I, when we first got married my oldest son who had the heart surgery, and he was born with just some major complications and requires a lot of attentive care. So from the very beginning, my wife has stayed home to care for our children. I'm grateful for that. But I was put a lot of pressure on me, right. I mean, I couldn't just walk away from a six figure job without having a way to replace that. So I wanted to be financially free. And if I wanted that, then I had to focus on using my money as a tool to get that thing, right to get that thing to get my time back.   Now over time, my WHY has changed, you know, quite a few times, right? I wanted to walk away from a corporate job, I did that it was awesome. Then I found myself I wanted to teach other people how to do this. I mean, I have so many people asking me questions. Why don't I start a company and a business around this? Why don't I build my skills and expertise to teach other people how to do it. And so my WHY has changed along the way. But all along the way. I've been very, very clear on what I want. And when I know what I want, I can go back to money. And as a tool, I can say how do I use this tool of money to get what I want. Now, if I come to the table and I say hey, I don't have enough money, I want to go faster in my game plan maybe I now need to use money as a tool and develop some more expertise. Maybe burr is the right method for me because now I can inject some of my expertise to make more money and accelerate my game plan ultimately to what I want. So that's really for me, I think a lot of us we think money is what we want. Money is never what we want. So get clear on what you want. Then go back to Money and see how money can serve you in the purposes that you have.   Michael: Oh, that's so good. That's so good. Off the Cuff Ryan Lee in the flesh. Love it, man.   Ryan: Yeah, buddy.   Michael: That's great. So right. I'm curious to know, because you've interacted with so many people, you've coached so many people through money mistakes to financial freedom. What are some of the biggest hurdles that you see trip people up with regard to personal finance?   Ryan: Yeah, man. Um, you know, I think the hardest thing for me in the beginning was to realize that what had been taught wasn't just not working. It was dangerous is one of the biggest statements that we have inside of our community is one thing 97% of traditional financial advice is dangerous, misleading or outright wrong. Okay. And once I can look at money through that lens now, our definition of success is financial freedom in 10 years or less. Okay, so Anything that's not going to get me financially free in 10 years or less, if I look at it through the lens of 97% of traditional financial advice is dangerous, misleading or wrong, then everything out there is simply how to make something that's not working a little bit better.   But if I can put down 97%, of traditional financial advisors put it down, and I can look on the other side, the 3%, that is literally the exact opposite. And if you look at every self made X, you know, someone who's become self made wealthy in a short period of time, they haven't done mutual funds, they haven't done 401k, they haven't done diversification a little bit better than the average person, they've literally done the exact opposite. And that, in my opinion, is the first step towards financial freedom. Right? If I can let go of most of the noise and distractions out there, and solely focus on the few things that actually work and develop expertise and a system around those, then I can start to accelerate my results.   So that's one of the biggest things and that's kind of hard to realize whether it was done by deceit, whether it was done by default, whether it's just kind of the social conditioning, I don't know. Yeah, I don't know if there's some grand master plan to keep the, you know, American public trapped. But at the end of the day, once I let go of traditional stuff, and fully said, Hey, I'm going to walk away from average, in pursuit of extraordinary, man, that's what really, really started to open up my path to financial freedom. And so that's inside of our community, we're not for everyone, we're not trying to make you better. We're trying to truly help you rise up so that you can ultimately live free, that's going to require you to walk away from average,   Michael: That's so good. What was the hardest thing for you to spread yourself away from for you to give up from what you'd learned? Probably 97%.   Ryan: Yeah, I think even still to this day, right? I mean, it seems like the world that we live in is becoming increasingly more chaotic, and increasingly more complex, like, if I get on Google, today, I can find the 10 newest, greatest best investments that will make me a multi mega millionaire, but you know, Bitcoin, you know, online businesses, whatever it might be, right, all these different things. And they, they're all they all might be great. Or they all might just be simple distractions, right. And if we look back, historically, from the very beginning of like, economies, what has made people wealthy period, it's always been ownership of land. In fact, the American Constitution, the Declaration of Independence was formed around life, liberty, and property, the ownership of property. And so understanding that, man, if we understand that there's historical background of 1000s of years of success, instead of real estate, why not just focus on   Michael: Why reinvent the wheel?   Ryan: No doubt man, just, like, let go of the distractions. And then here's the here's the fun part. Financial freedom is kind of like a pathway, right? If I can get on this pathway, and start building consistent and predictable results, then financial freedom, unlike retirement isn't a destination, I don't have to wait until one day, I can actually start giving myself permission to live free today. And over time, over time, maybe once I've established a base level of cash flow that I'm comfortable with maybe then I can go dabble in Bitcoin and be a multi mega millionaire tomorrow or not, right. But I've built my financial freedom that gives me the permission to go gamble and play if I want to, because that's what I want to do.   Michael: That's great. That's great. So what's something that you would share with our listeners, one thing that everybody could do today, or starting tomorrow, to start them on the correct path towards learning more about the 3%, or towards learning about what truly is, in your estimation, the way to financial freedom?   Ryan: Cool, cool. I'm going to give you our formula. So we literally have a financial freedom formula. And this is because I partnered with a dude, when I when I first started this, I'm the guy that just goes and does it right. And I kind of figured out from a gut feel more than anything. And then I partnered up with this guy, he came from Wall Street's he literally, this is the funniest thing about my business partner. When he was getting married, when he was dating, he had a spreadsheets, right, and he would plug all of the people that he was dating into the spreadsheet, and he had a ranking criteria in a spreadsheet. And so math helped him choose his one,   Michael: Oh, my god,   Ryan: Math helped him choose which car to buy, Matt helps him, like this guy sees the world through numbers, and I kind of look at them, kind of like Neo in the Matrix, like Neo could look into the world of the matrix and kind of see all the rest of us like, I don't see I see the numbers. So when I partnered up with this guy, he helped bring math to what I was doing, and we use math to clarify and to help us focus. And so we built a financial freedom formula, and it literally gives people a systematic way to move forward. And I'm gonna give you one element of this financial freedom formula, and it's called the four pillars. And here's the crazy part. Every asset no matter what it is, every asset under the sun has four potential ways you can make money. It all depends on how you participate in Okay, so if you want to move faster, instead of your game plan instead of your financial, you know, journey, you need to align your money with assets that give you all four elements in the four pillars.   So let's do a quick case study. Let's take the stock market, okay, mutual funds, maybe I'll buy some stock and Apple whatever it is, and take the stock market and we're going to put up real estate side by side. Okay, so here's the four pillars. I can make money when I invest through appreciation. I can make money when I invest through cash flow. I can make money when I invest through tax advantages or tax deductions. And I can make money when I invest through leverage. Those are the four pillars. Every investment has all four, it just matters how I participate. So if I, as a, you know, just off the streets type of guy, go buy a stock an apple, how do I make money?   Michael: You'll make money through appreciation, you'll make it…   Ryan: That's it. Right appreciation, I buy the stock at Apple at one price, I hope I hold it for long enough. And overtime, it's gonna go up right out. I don't control that outcome. Right, I can't impact that outcome, all I can do is wait. And the only friend I have in the appreciation game is time, how much time has to pass before it goes up enough that I'm willing to sell them. Now, a lot of people got burned in the game of real estate back in 2006, and 2007, because they bought real estate using the same mindset, real estate goes up in value. And over time, it generally does. But sometimes things go down in value, right? So if all I'm getting inside of my investing is appreciation, I don't control it, I have to wait. And I'm just kind of along for the ride.   Now, if I buy a piece of real estate that I'm going to, you know, buy through you guys, and I'm going to have the real estate owned the real estate control it, I can have it go up in value. But more than anything, I'm probably buying it for a stream of cash flow, right? I'm gonna have positive rental income coming in every single month. Now, here's the cool thing. If I take that rental income and put it in my bank account, does that affect the appreciation of the value of the property? No, they're not correlated, right? It can go up in value, and I can take rental income.   And I believe the IRS came the very first statement in the IRS tax code. You know what it is? Everything you make is taxable. Sorry. But then like the 1000s of pages after that, you know what those 1000s of pages are written for?   Michael: Real estate investors   Ryan: To tell you all the ways that you don't have to pay taxes. And the IRS just uses the the tax code as a carrot to incentivize behavior. They know that everyone needs a place to live. So they say, Hey, if you go buy that place to live or rent it to someone else, you get lots of tax deductions. Not not deferrals like a 401k, but literally tax deductions. So if I can own a piece of real estate, I can earn a return through appreciation, I can earn a return through cash flow, and I can earn a return through tax deductions.   Last but not least, one of the most powerful tools and the most dangerous tools is leverage, right? If I want to go buy that piece of real estate, do I have to I don't have to have $100,000 in my bank account, I can, you know, put a downpayment down and go get that real estate, use bank money and get a high enough return to cover my debt, and to still give me a positive return. And so those are the four pillars, cashflow, appreciation, tax deductions and leverage. And so anytime an investment comes across my table, I just get to run it through that lens and say, okay, Bitcoin cool. How do I make money? Oh, I don't get cash flow. Okay, there's no tax advantages, and there's no ability to use leverage. It's just appreciation. And right now that appreciation game looks super fun. But that's the only game I'm playing or, you know, if someone brings me whatever, right, I can just run it through those four pillars and say, Guess what, if I'm not getting all four pillars, I'm not playing the game.   Michael: Yeah. Yeah. No, I totally agree. It's something I've touted for years about some of the benefits and power of real estate. So, between you and me, have you found any other investment vehicle that meets all four of those pillars other than real estate?   Ryan: Yeah man. So everything in our world has a reason behind it. The reason we say 97% of traditional financial advice is dangerous, misleading or wrong, is when I first learned about the four pillars. I was like, Yes, I found the Holy Grail. Now, what are all the assets that have all four pillars and here's the crazy part. The first two we all know about came number one real estate's number two is a business. Now, here's the crazy part came. If I go buy stock in Apple, okay, let's think about Tim Cook, the owner. And let's think about me, I'm a retail investor, I go buy stock in Amazon or an apple. So I'm just getting appreciate right, Tim on the other side, he's an owner of Apple, right? So he gets appreciation, he gets cash flow, he gets massive tax deductions, and he gets all different kinds of forms of leverage, right from people to processes and all that other stuff.   So business and real estate, those are two forms of four pillars. Now the third one is a uniquely designed high cash value life insurance policy. And when I first learned about that, I'm like, Dude, there's no what is crazy, but man, here's the crazy part. Go google it right now. Go Google bully and find out how much money banks keeping these type of policies they keep billions of dollars go Google Kohli CEO li find out how much corporations like Jim Harbaugh, like Michigan, University Michigan, they're number two ranked right now, right? Like Jim Harbaugh when he took the job when he left the NFL to come to coach the University of Michigan, you know how 35% of his compensation was structured, inside of contributions to a high cash value, life insurance policy, oh my god, what the heck is going on? It was nuts. And so these policies This is where politicians keep their money. This is where banks keep their money. This is where highly compensated executives keep their money. It's hiding in plain sight. It's been used for hundreds of years. It's a way to eliminate taxes, get Jay you know, gain, leverage, all of that kind of stuff, but the only three assets have all four pillars are a business that you own and operate, real estate which you have to operate somewhat like a business, and a Vault, which allows you to keep the money that you're making safe from taxes. Oh, we call it a vault, but it's a high cash value life insurance.   Michael: Okay. Okay. Oh, that's great. This has been super, super great, Ryan.   Ryan: Wow, that's so fun. Man. I love talking about this stuff. I do   Michael: That makes two of us make two of us. You also have a podcast, right?   Ryan: We do, man. So, you know, this kind of goes back to we joke a little bit. You know, those, there's three questions that we invite people to ask when they come into our world, I think it's gonna be all about investing in rates of return on this versus that. And it is right to a certain extent, we're talking to people about how to operate a system. But I truly believe that the only thing that's separating you from the reality that you want is you have to become a different person. Right? This is where the idea of rising up came from, right? You've done the best you can do with the mindsets and skill sets that you have your results are the best results that you personally could generate as of today.   So if you dream and see a new reality for yourself, you have to become a new person, you have to develop new mindsets and skill sets to bridge the gap from who you are today. And who you have to become to be a successful real estate investor or to become financially free. Right. And so our podcast more than anything, is designed to help people have a sense of courage and confidence that they can do it that they can truly rise up. So yes, we go through the framework, we go through the financial freedom formula, all that kind of stuff. But honestly, men are our financial freedom formulas boring. Like once you learn how to do it, it's just we tell you push the repeat button, do it over and over and over and over and over again, as simple boring.   So what we try to help people do is generate the confidence to understand how to live a life that matters because financial freedom and this is where I got stuck to. I mean, when I even got into the game of real estate, I still lost my way because I still kept thinking when I have enough real estate when I have enough cash flow that I'll give myself permission. So along the way, I had to learn how to become free how to act free how to use money as a tool, not for one day, but how to have a game plan that's gonna help me get to the results that I want long term, but live a life that matters today. So it's personal development wrapped up in financial freedom all delivered through the Rise Up Live Free podcast.   Michael: Sounds like a personal finance burrito.   Ryan: That is it dude I love, I love burritos. That's exactly what it is. It's a burrito with guacamole. I'll pay extra.   Michael: Oh, that's great. Ryan, this was so much fun, man. If people want to learn more about you reach out to you learn more about Cash Flow Tactics. What's the best Where Where can they do that?   Ryan: Yeah, first off, Michael, before I say that, man, I want to just thank you for what you do. You know, we talk a lot about this idea of being able to plug into teams and networks. And guys, whether you're a longtime listener of this podcast, a first time listener to this podcast, what Michael does, through his company, and through, you know, through the real estate that you provide a man, I think our, our clients are probably about hundreds of properties through you, right. And so we actually did a training probably a year ago, where we actually pulled up your website and show people exactly how to find the right properties, using your your inventory using what you guys do.   So number one, you guys are awesome. And I want to say thank you, because you've helped our people, our empire builders inside of our community achieve their their goals and dreams. So thank you for that   Michael: So glad to hear it. Thank you,   Ryan: All right. And then number two, if you want to get plugged into our game, you know everything for us centers on a game plan, okay, so we talk about the principles, and the principles are universal, it doesn't matter if you're, you know, it's just getting started out, you've been in the game of finance for a long time, the principles are, what the principles are, but then you have to understand how to tactically apply those principles to you using your goals, your resources, your desires, all that kind of stuff. And so, for us, the easiest way to understand what we talked about, is we have a five day five day financial freedom challenge, okay, that will help you understand how to apply the principles to you how to rank your investments through the four pillars, and another thing that we call the core four, and help you see how far or how close financial freedom is to you, and how to apply the 3% formula to your financial plan. So cashflowtactics.com/challenge. That's probably the easiest way for people to understand what we do and how it applies to them.   Michael: Love it. Love it. Ryan. This was really great, man. Thank you again for coming on. And I'm sure our paths will cross again soon.   Ryan: Man. Such an honor. I appreciate you.   Michael: Thanks. Take care. Already everybody that was our episode a big big big thank you to Ryan. This was a lot of fun. He dropped a lot of nuggets of wisdom in there. So as always, if you liked the episode, feel free to leave us a rating or review wherever you listen your podcast. We look forward to seeing the next one and Happy investing

We recently did an episode on the 10 cheapest cities to buy property in so we wanted to follow that up with a look at property taxes across the country. We pulled up a list compiled by Business Insider on the states with the lowest property taxes. In this episode, we go through the list and comment on what this means, and point out potential shortcomings of a list like this. This episode will answer questions, but it is really a starting point of where to do your own homework on this topic. And like Michael always says, "make sure to call the local county tax assessor".  --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Etsate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Emil: Hey, everyone, welcome back for another episode of The Remote Real Estate Investor. My name is Emil Shore. And today I'm joined by Michael Albaum,   Pierre: Pierre Carrillo   Emil: And today's episode we're going to be do some similar as we did on a recent episode, which was the if you guys remember the episode 10 most affordable states to buy a home, we're actually going to be covering the top 10 states with the lowest property taxes and this will be 2021 data that we're going to go over to help you you know, as you're looking for markets looking for states invest, hopefully all this data will help you in that journey. So let's hop into this one.   Alright guys, so we are sans Tom today. But we got we got Michael and Pierre, which Dynamic Duo here. Very excited for this episode. Last time, we did some fun where I have the list in front of me. And you guys guessed, I think you each took three guesses and see if you made it in the top 10 list. So let's follow that same style. Pierre, you get to start this time. So we'll go we'll go back and forth. So Pierre, you'll go one, Michael, you'll go one and we'll just flip flop back and forth. And I will tell you guys, if that state is in the top 10 list of lowest property taxes,   Michael: Love it.   Pierre: All right.   Michael: Good luck Pierre. You're gonna need it.   Pierre: Yeah, I'm just trying to remember all the different agents we've had on over the over the last year so definitely not Texas because they don't have income tax.   Emil: That is correct.   Pierre: I'll say Alabama because that was one of the reasons we chose Alabama because…   Michael: Dirty dog   Pierre: Man was it low.   Emil: Alabama. Ding ding ding That is correct.   Michael: Nice.   Emil: Alabama is one of the top 10 Lowest property tax states good job Pierre. Alright, Michael, what you got?   Michael: All right. I'm gonna take a flier here and I'm going to go and say Tennessee is going to be in the top 10   Emil: Tennessee… Eeen. Tennessee is not in the top 10 Lowest property tech states. Sorry, Michael.   Michael: Ah, swing in a miss.   Emil: Pierre looking good, dude. All right. What you got for your second guess.   Pierre: Can Kentucky   Emil: Kentucky is not on the top 10 list. Sorry.   Pierre: Oh man.   Michael: All right.   Michael: Virginia. Show me Virginia.   Emil: Show me Virginia. EEEn. not on the list. Sorry Michael.   Pierre: Oh man we're strugglin.   Emil: Mike you're struggling. You guys did so much better on the other episode. I feel like it was you guys were doing really well on that one. Come on guys. All right Pierre.   Michael: Alabama, Arizona Arkansas, California Colorado. Remember that fifth grade project the state's project and school you have to remember every state every capital.   Emil: Yeah. Those are some…   Pierre: Oklahoma   Emil: Oklahoma final guess. Oklahoma is not on the list. Alright Michael chance to tie it here or just go down in terrible blaze   Michael: Of glory. Like a like a phoenix rise from the ashes of embarrassment. Show me Mississippi.   Emil: Ding ding ding Mississippi.   Michael: Yes. Eat it Pierre.   Emil: Redeems himself. Hold on you guys.   Pierre: Just not Jackson, Mississippi.   Emil: You guys died. Good job. One a piece. You know, you have 33% You both failed. But you both at least got one on the board.   Michael: I went to engineering school 33 is passing for sure. Passing like that's like the highest grade oftentimes.   Emil: I get it. Yeah, if it's based on a curve, you guys both pass.   Michael: Sweet. This is a list compiled by Business Insider. And again, this is for 2021.   Michael: So top 10 states with the lowest property tax. We'll start at number 10 move our way to number one, or so like this is 10th least expensive. Number one is going to be the least expensive in the country. Right? How this list works?   Emil: Yes. So counting number one will be the lowest on a percentage basis property tax. Starting with number 10 We got New Mexico at 0.55% of assessed home value.   Michael: I just gotta say already this list is garbage. Because the way homes are assessed is so different in every state. So I guess that's just something to highlight and point out is like, look to understand and every county does differently, by the way. So like understand how your county that you're interested in purchasing property calculates property taxes. So is it assessed value is it sale price, sometimes those two numbers are the same. So it's really important to go do a little bit more digging after this episode. And these 10 places can be a great place to start. But I just had to get I had to get that off my chest. Assessed value is a bunch of garbage like they two assessors for different states who like the same property, and it says it differently. So whatever that's worth.   Emil: I've been the beneficiary of this on on my triplex in Missouri, the assessed value they gave was insanely low. So I've been the beneficiary of that. But yeah.   Pierre: You're just bitter that you're a veteran that tied with a newbie here, so.   Michael: Looking for any excuse to just to claw back some knowledge, some knowledge share.   Michael: What's number nine Emil?   Emil: I'm curious, Michael, if you know this so assessed home value, is that literally the structure? Does that include land? Does it not include the value of the land? Do you know how that works?   Michael: It's usually broken down between land and building is how I've seen it.   Emil: Yep.   Michael: And then I think oftentimes, the assessed value is the sum of those two. And so you're not depreciating the land on your taxes. But I do believe that the land is still taxed, because if you just go buy raw land, I think you'll still have property taxes to pay on that. It's going to be significantly less than but that's, that's my understanding.   Emil: Okay, so that's interesting. I just really quickly looked up an article on what is the assessed value of a house. So I'm just gonna read this. This is from a website called Value penguin by lending tree. So it says officials review other relevant information such as neighboring property values and the sales history of the property to determine the assessment value. This estimate is generally made without actually inspecting the home which can lead to an inaccurate valuation, which is a testament to what you were saying, Michael. If the assessed value is higher than the fair market value, the property has most likely been over assessed by the town and the owner is probably paying too much in taxes, which is one reason you know, you can actually fight your property taxes.   The assessed value of a home usually lags in comparison to the market since the valuations are only adjusted annually. While market values can change multiple times per year, the home that has recently been resold tends to be closer to the assessed value than a home that has not sold in a long time. Depending on the area's legal restrictions. Most assessed values cannot increase more than certain percentage each year. So interesting. Okay.   Michael: And I mean, that's another question to ask your cat like local county assessor is how often is the property reassessed because there are some jurisdictions where it's like once every three years or once every regular, some kind of frequency so it's not always an annual thing?   Emil: Yep. Yeah, I remember when I was recently buying that treeplex, triplex I just mentioned in   Michael: The treeplex!   Emil: You know, what, we have a new kid at home, I'm allowed to have brain farts like that. I called the assessor and they gave me like, the Calculate the formula that they use to calculate it. So a lot of times again, if you're looking anywhere, you can call the county assessor, they'll either give you the formula, or they'll give you a breakdown of how they kind of calculate these things. But anyway, back to our list. Number nine, we got Mississippi which is 0.52% of the assessed home value. Good old Mississippi, and.   Michael: MI SSI SSI PPI.   Emil: You like geography, didn't you? You're getting geography class,   Michael: Dude. I love geography. Yeah, I really like geography. My wife and I will sometimes play the geography game where she'll you know, we'll go back and forth naming countries and you gotta name the capitals. The good fun brain brain game.   Pierre: Have you guys ever played the National Geographic board game?   Emil: No. Tell us. Oh, it's, it is awesome. So I found this at the Goodwill. The Goodwill here has an entire row of board games. So we went there. And they're like, 3.50 each. So in board games are like 50 bucks each sometimes. So anyways, this is like a game from 1986 or something. And it's anyways, you build a globe flat out. So you have a bunch of hexagons and you you build a globe, and then you answer things about markets and people, geographic or planet planet Earth and you have like four categories and you get points based on it's a real fun game. So as a geography lover, you might really enjoy that game.   Michael: I'll Check it out. And that's cool that you build the earth flat because that's how it actually is in reality, so I mean.   Emil: That's right.   Pierre: Yeah. Well, because you make it flat you can make 4 Earth's because it's like when you unpeel an orange peel, it doesn't lay perfectly flat it leaves up open surfaces. Anyways, National Geographic plug right there.   Emil: Nice. There's, there's this app I downloaded a couple years ago and it like helps you learn continent geography so it'll pull up Europe and you know, it'll have the outline of each a bunch of countries and then I'll like list 10 And you have to like tap where you think that country is. So it helps you like are there in different continents. So it's cool to alright, that's cool. Number eight.   Michael: Back on the rails.   Emil: Back on the rails number eight, we got Arkansas at the same as Mississippi 0.52% of assessed home value. So we got to a tie between Arkansas and Mississippi. Moving up the list. This is a very popular hot state for for Mark for rental property and investing right now South Carolina at 0.5% of assessed on value.   Michael: Interesting. All right. All right.   Pierre: Yeah. Interesting, because we've had both Jackson, Mississippi and Columbia, South Carolina, Columbia, South Carolina, right. Yeah. And those were both very high in taxes. So this is just kind of an average of the states. And no necessarily those metropolitan centers.   Emil: Correct.   Pierre: Or metropolitan.   Michaela: Right cause every county can do it different.   Emil: Alright, moving up the list we got I think somebody mentioned Virginia but number six on the list was West Virginia.   Michael: Ooo man. Emil: Was that you Michael?     Michael: That should totally count Yeah.   Pierre: If that counts, Kansas counts for me. I'll just the add the Ar!   Emil: On Jeopardy. What is Virginia would not be the same as what is West Virginia. Sorry, Michael.   Michael: Alright, seems reasonable.   Emil: 0.49% of assessed home value on West Virginia.   Michael: West Virginia was actually I think the number one state that was on the top 10 list of most important places to buy. That's interesting. And get a cheap house and pay very little property taxes.   Emil: There you go. Alright, moving up. We got the District of Columbia DC at 0.46% of assessed home value. Obviously, homes are very expensive there. So you're still paying a lot in terms of nominal dollars, but percentage wise on the list of top 10.   Alright, number four, Delaware, we got 0.43% of assessed value. So business friendly, right. Some people like incorporate a lot in Delaware and then looks like low property tax there as well.   Number three, this was Pierre's guess Alabama 0.33% of assessed home values. Tiny.   Michael: Nice.   Emil: Go Alabama. Number two, this one was surprising to me. Hawaii, Hawaii 0.26% of assessed home value.   Michael: What? That I guess I figure you're paying so much for the purchase. You're still giving them like you said a lot  of nominal dollars.   Emil: Exactly. And then number one, can I get a drumroll please guys?   Louisiana 0.18%. Nothing's 0.18% of assessed on value. Crazy.   Piere: Beautiful.   Michael: Makes total sense.   Emil: And that is our top 10 list of states with the lowest property tax.   Michael: We should do another episode ranking the best school districts or the best school systems in the country and see if there's any any over overlap or direct correlation or parallels we could draw between high property tax states and very good school systems since that's so much of what those dollars go to fund. That's I think, like looking at the property tax breakdown, that's often the biggest portion of the bill in terms of like dollars and percent goes to the school system.   Emil: Right. It'd be interesting, though, because again, even though you could have, like California, I think is probably the bottom third, or it's definitely in the lower group, the bottom 50% In terms of percent, I think, but just because home values are so high here, again, like just so much property tax revenue. So I wonder if it's like, you know, this percentage matter? Does it just matter of like overall dollars being pumped into the system?   Michael: That's a good question, too. So for California, it's I think it was Prop Eight, I think I'm talking.   Emil: 13   Michael: Prop 13. That's it, where you have 1% of the sale price at a minimum   Emil: Forever and then never gets reassessed.   Michael: Well, it does it goes up with time. But like your base value, your base assessed value is at 1% of the sale price. And so   Emil: I thought either prop 13 in California was like your basically your property tax never changes. I thought that was the whole thing behind prop 13 is like once it sells it's calculated that value forever. I thought that was the thing with Prop 13. Otherwise, you know, you have someone who bought a home in California 30 years ago. And now their property taxes like astronomical compared to when they bought it because their values have gone up so much.   Michael: Well, I think it goes up nominally every year like, look at your last two years of property tax payments on your house. Like it will have likely gone up a nominal amount.   Emil: Okay, yeah, you're okay. So proposition 13, declared property taxes were to be assessed by their 1976 value and restricted annual increases of the tax to an inflation factor, not 62% per year. Okay, you're right.   Pierre: And don't some areas charge more on property taxes based on whether or not you're going to be investing or whether or not you live in the property?   Emil: Yes, I have a home in Indianapolis and you pay a higher rate if you're an investor, rather than if you're a owner occupant buying that home?   Michael: Yeah, I think it's like point 2% of the assessed value versus 1% For investor versus owner occupied. So like doubles?   Emil: Yeah, I think that's right. There's a there's a exemption to in California homeowners exempt or a home homestead exemption. It's pretty, it's pretty minimal. It's pretty nominal. But in other markets, it can be pretty impactful.   Emil: Yeah.   Pierre: Do you know if any of the states that we covered on this list are subject to that?   Michael: I don't.   Pierre: Okay. So that might be something to look into. You know, you might think it's the lowest place but then you go to invest.   Emil: That's right? This is only a starting point. We're leaving our our listeners with a lot of homework.   Michael: Yeah, well, it's just I think it's such a good place to start. And especially if you go listen to the other episode and overlay. Okay, where are their affordable homes to purchase and also affordable property tax rates? Could be a new new market for you.   Pierre: If you listen to more than two episodes, you will have heard Michael say more than more than five times call your county tax assessor.   Emil: Michael “call your local county tax assessor” Albaum.   Michael: Well, it's just one of those things like people are like, Oh my god, I totally burned by the property tax. It's like well, you didn't do the one thing that you should have done. It's so easy.   Emil: Raise your hand if you fell victim to that on like your first or second property. That's me.   Michael: Yeah, see?   Pierre: I heard it. I heard it too a million times.   Emil: Well, that's when was more so like the home in Indianapolis? I didn't again I didn't call the tax assessor I just looked at okay, what is it as a percentage? And I didn't look into Oh, for an investor it's higher so it's like you know during escrow I figured all that out. All in all still fine. Indianapolis is been a solid market could appreciate all those things. But again, you know, just got to go in eyes wide open.   Michael: Yeah, it could have not been.   Emil: Exactly It could have not been. The the joys of a bull market. Make Mistakes   Michael: Still win.   Emil: Feel the impact of a lot less. Alright, thank you everyone for tuning in. Hope this was a helpful episode for you. And we will catch you all on the next one. Happy investing.   Michael: Happy investing.   Pierre: Happy investing.    

As a real estate investor, you want to find properties where your investment dollar will go the furthest. To help you do that, we compiled a list of the top 10 cheapest states to buy a house in America in 2021. We analyzed data from several sources to find the least expensive states and the most affordable cities in each of them. In this episode, Tom, Michael, and Emil run through the top ten states. They highlight important metrics and discuss what this means for investors.  --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Emil: Hey everyone, welcome back for another episode of the remote real estate investor. My name is Emil Shour and today I'm joined by Tom Schneider and Michael Albaum. In today's episode, we're going to be covering the top 10 cheapest states to buy a house in 2021. So this is from an article off the roofstock blog that I wrote a while ago called the top 25 cheapest ways to buy a house in 2021. We're going to run through some of the numbers like median home value, one year price change five year price change and median rent to give you guys an idea of which markets may be good to target or at least do a deeper dive into So let's hop into this episode   Emil: Alright guys, so this is actually a blog post I helped create on the Roofstock blog, and it's covers the top 25 cheapest states to buy a house. We're going to cover the top 10 And just to give everyone some context, the data here is from Zillow for home values and historic price trends. And that is as of June 2021 So that data is a couple months old but still you know relatively easy for people to kind of compare the top 10 We also have the median rent data is coming from go banking rates and the median rent of a three bedroom place and I'm gonna just run through the top 10 But before I do Tom you look like you have something a burning question…   Tom: I do my mouth is like like half open alright a meal in writing this article states a pretty big area you know a big Is there a reason why it wasn't at like a metro just because like it I think of cheapest I mean you know California is a great example you know you can live in a very expensive area or you can live in a very less expensive area.   Emil: Yes   Tom: Curious. Go ahead.   Emil: Great point Tom. i We don't have an article around the best the cheapest cities I think just because there are so many unique city so look at that it would be very hard to compile the data. So we have cheapest states. I think it's just easier to get 52 data points rather than I don't know 1000s   Tom: Fair fair fair. I think there's I think there's I think there's a middle ground in there as well you know between from from city or whatever to state I dig I'm I'm picking you out a little bit I like I like this let's get into it. Let's get into it.   Emil: Tom just ruined the episode and we'll end it here. So thanks, Tom.   Michael: Timeout you said you said 52 So are we talking territories as well like Guam and Puerto Rico?   Emil: I Have not attended a geography class in quite a long time Michael so I don't even know if I'm correct in saying 52 Or if it's 50.   Michael: 50 states.   Emil: 50 states you know what? I'm just I'm done with this episode. guys. You guys take it from here   Michael: Emil's like enough of this so I don't get fired like enough of this. Just trying to help you out.   Emil: I'm doing you guys a favor. How about that? Alright, so let's let's get into this. I'm curious if you guys can get some states in the top 10 If you had to guess. Pick three each you guys…   Tom: Is Mississippi on the list.   Emil: Ding ding ding Tom one for one.   Tom: All right, Michael, your opportunity to take the lead. Do your two guesses…   Michael: Show me Alabama.   Emil: Alabama? Ding ding ding correct as well. All right, one one here.   Tom: Show me Louisiana.   Emil: Louisiana is a not in the top 10   Michael: Ah, man. All right.   Emil: First incorrect answer. Tom. What do you have?   Tom: I got two guesses here. We're tied one to one. Show me Arkansas.   Emil: Arkansas is ding ding ding in the top 10   Tom: All right. No looking at anything on your on your computer. Michael.   Michael: Keep your hands where I can see them   Tom: Show me Oklahoma.   Emil: Oklahoma in the top 10 Ding ding ding Tom is a liar. For three Mike. Michael you can you can take a consolation swing here and at least try to get two out of three. So   Tom: Earn your blue ribbon or purple.   Michael: That's right. That's right.   Tom: The one they give to the kids.   Michael: Show me, Ohio.   Emil: Ohio is in the top Ding ding ding.   Tom: There you go, Michael.   Emil: Alright, so Michael finishes two out of three. Tom three out of three. Stellar. Perfect.   Michael: Wow. That's what Tom's used to hearing.   Emil: Very impressed, guys.   Tom: That's kind of how I operate. I thrive on positive reinforcement. Thank you Emil.   Emil: You're welcome, alright, let's start at the let's, let's work our way backwards. So we'll, we'll start at 10. And then we'll go to number one and   Michael: Are these in order of pricing.   Emil: 10 being the least cheap. Exactly, yeah. So it's by median home value. So the cheapest will be number one in terms of median home value according to Zillow data. Alright, so number 10. We have well let's just keep this going. Thing number 10 is   Tom: Indiana   Emil: Jesus Tom, Have you have you read this article?   Michael: He memorized the last night before bed.   Tom: No, that's it that's great. That's good. I mean Michael said Ohio Michael said Ohio so I just figured you know someone who's kind of friends with Ohio   Emil: Tom you need to go make a lot of bets today because you're on it. So please just go like buy some alt coins and stocks and whatever today go buy a rental property till you can't miss today. Alright, so Indiana number 10 median home value comes in at 185,805. Our one year price change so looking at one year ago compared to today? Well this is as of June 2021 13.2% Five year price change 45.3% In the median rent on a three bedroom place I think this looks at apartment and a house from go bank rates $1,052   Tom: Some some gross yield there.   Emil: All right. So that's that's Indiana. All right, who's number nine Michael you get first shot.   Michael: And it's not one of the ones we've already named?   Emil: It is one of the ones you named?   Michael: Oh, shoot.   Emil: I'll give you one further, it's the one you it's one you named?   Michael: Oh, man. So I got a 50/50 shot. I'm gonna say Ohio.   Emil: Bing bing bang Ohio coming in at number nine. So our median home value in Ohio $181,756. Or one year price change 14.4%. And our five year price change coming at 45.3%. And median rents on that three bedroom place is $1,024.   Tom: A price change is so crazy. I mean, all those numbers   Michae: That's unbelievable.   Emil: Oh, actually, ooh, this this article has the cheapest lists like three or four cheapest cities within these states to buy a place. So I don't know where that was pulled. Exactly. Let me see if I can find it real quick from this article. So from Yahoo, cheapest place. So it was an article called The cheapest places to buy a home in every state. So that's where this looks at. All right, so Tom, maybe we get some of the stuff you're looking for. So I'll backtrack a little Indiana. The cheapest cities to buy a house are Gary Anderson, Muncie and Richmond. And then for Ohio. We have Youngstown, Warren, Dayton and Marion.   Emil: Alright, so number eight. I'll go ahead and just dive right in Kansas comes in at number eight. Our median home value is $176,898. Our one year price change not as high as number 10 or nine coming in at 11.3%. And our five year price change coming in at 33.8%. Our median rent comes in at $1,050 on a three bedroom place. Our cheapest cities within Kansas are Hutchinson Kansas City, Topeka and Salina.   Michael: Topeka, capital of Kansas.   Tom: You guys all invest pretty in that around that area. Do you guys have an exposure to Kansas? Or you're more of Missouri?   Emil: I'm Missouri.   Michael: I've invested in Kansas City, Kansas doing a flip out there so that's almost getting wrapped up?   Emil: Are you in the Kansas side or the Missouri side?   Michael: On the Kansas side? I'm like fairly certain I double check. Which sounds ridiculous as I'm saying those words.   Emil: Alright, moving on to number seven. I think you guys guessed this one as well. I don't remember who said it   Michael: Probably Tom because I mean he's flawless.   Emil: So it's Alabama who said Alabama?   Tom: I was gonna I was gonna say it I missed out I was gonna I was gonna guess that was the one.   Emil: Oh my god this guy is just he can't miss that.   Michael: That was me. That was me. Michael had Alabama. Yeah. With the second of my, one of two. Yeah.   Emil: All right. So Alabama median home value coming in at $170,184. Our one year price change 11.9%. Our five year price change. We have 34.6% and our median rent on a three bedroom place coming in at $1060 Cheaper cities within Alabama to buy a house are Gadsden Birmingham, Montgomery and Phoenix city or Phenix City   Tom: Another market Michael has some exposure to   Michael: Yep, yeah. Birmingham Alabama   Emil: Birmingham. Number six Michael is another place you invest in so go for it. What do you got here? What state   Michael: Oh,   Emil: We already covered Ohio so what else could it be? Other side of Ohio. Oh, other side of where you invest in Ohio,   Michael: Tennessee? Kentucky? Kentucky like South. I guess it kind of like like,   Emil: Yeah, Cincinnati right south of Cincinnati. Yeah. Toki See, I know what I'm talking about.   Michael: Geography is tough man.   Emil: Alright, Kentucky median home value we got $168,998 our one year price changes 10.8% or five year price change. We have 36.3% and our median rent on a three bedroom place comes in at $1,025. Our cheapest cities to buy a house within Kentucky are Hopkinsville Covington. Owensboro. And bowling green.   Michael: Oh, Convington made the list man. Covington that's where I heavily invest. Yeah, it's   awesome.   Tom: Kind of related talking about like, you know, West's of states are directional. There was this. I think it might have started on Tik Tok. This guy's like, he said, he's at a there's like a music playing in the background. He's like, Okay, here's the situation. And they're playing like, West Virginia. Take me home.   Michael: Country Road, right?   Tom: And he's like, here's the situation. This song is not about West Virginia. It's about the western part of Virginia. And that, like, closes and then opens them just like super hungover the next day. It's like, is there something like that's just like, so perfect about that. Here's the situation. I mean, I hope this stays in the episode because people who've seen this will be like, Yeah, that's   Michael: Really relatable.   Tom: But the western part of Virginia, not West Virginia. Anyways, continue.   Emil: I've seen tic tock videos I've ever actually been on tick tock. It just sounds like a black hole of silly videos.   Tom: Yeah,   Michael: I think that's a fair assessment.   Tom: Yeah, yes. Me too.   Emil: Is there other types of videos? Or is it just silly videos? It's only thing I've seen like silly tick tock video clips.   Tom: I think that's it. But it's funny all like a lot of it does ends up going on to other platforms too. So.   Emil: Right, right. I think I've seen them on YouTube. Anyway, moving on. Number five, we've got Iowa our median home value in Iowa we have $165,955 or one year price change coming in at 6.8%. Five year price change 23.1% And our median rent $1,021. Something interesting that I'm noticing as we climb up the list in cheapness is that the percentage price change so appreciation is getting lower and lower so far.   Tom: Huh? Interesting,   Michael: Seemingly, and also that the median rent is fairly consistent.   Emil: That too, yeah, median rent is hovering around 1000 bucks a little over 1000. All right, cheapest cities within Iowa to buy a house. We got Waterloo, Sioux City, Davenport and Council Bluffs.   Michael: Okay,   Emil: All right. Number four, Oklahoma, which I think you guys I think somebody mentioned   Michael: Tom mentioned   Michael: Tom!   Tom: Windy City, Mr. Three for three   Emil: Windy City. Man somebody is worse that geography than me. All right, Oklahoma. median home value $150,754. One year price change 10.4%. So stepping up a little bit from our Iowa numbers. Five year price change coming in at 29.1% in our median rent on a three bedroom place $1,015 Or cheapest cities to buy a house within Oklahoma or Muskogee, Muskogee Lawton Shawnee and Enid. I probably butchered every single one of those.   Michael: Yeah, if anybody knows the proper pronunciation, please feel free to leave us a comment.   Emil: Spell it phonetically for us. Alright, number number three we get into top three good stuff. All right. I think someone mentioned Arkansas as well or console comes in number   Michael: Tom again.   Tom: Mr. Three for three did.   Emil: Alright Arkansas.   Tom: T for T for short. TFT   Emil: Our median home value on Arkansas $149,120 our one year price change 10.4%. Our five year price change 30% And the median rent falling below $1,000 For the first time $926. Our cheapest cities within Arkansas to buy a house are Pine Bluff. Texarkana North Little Rock and Fort Smith.   Tom: I like Oh, I like all these areas anyways, just having like visited and I don't know,   Michael: Have you visited all those areas?   Tom: I pretty much most of them yeah.   Michael: Like every single one that a meal is listed so far or just physically in Arkansas,   Tom: I haven't I haven't visited a lot in Iowa but I mean, Alabama, I've visited lots of Alabama. I had that. I don't know that we mentioned a weird deal where I played football in college at UC Berkeley at Cal and then I got hurt my senior year and then found a weird loophole that I couldn't play D one because my eligibility was expired, but I found a loophole allow me to play D two. So in the best D two football is like in the south, so I lived in Muscle Shoals, Alabama and we like traveled around a bus and like went to tons of these like spots in Mississippi or Kansas. Arkansas. Yeah. Hello. Ours are in Texarkana. I That's just proving me as a you know, not as a novice if by calling it that anyways, go ahead. Pass the mic.   Emil: Such a west coast dude   Michael: This is the situation this is a podcast is not about Arkansas.   Michael: It's about the western part of Ar…   Emil: Alright, number two, I think you somebody mentioned Mississippi did someone mention Mississippi?   Michael: Yep. TFT did   Tom: TFT, yours truly.   Emil: Median median home value in Mississippi we've got $140,818 One year price change 8.4% Or five year price change 24.7% In our median rent coming in at $989   Tom: This just my last derailing on that on living out there. So I had like mentally prepared for the heat. I was just ready right dog days and it was hot. But I ready. I had mentally said I'm going to sweat a lot. There's going to be kind of hot but I honestly I honestly kind of enjoy it like you know give me a sauna give me whatever steamroom what I was not prepared for is come wintertime it snowed a little bit there. And I was not ready. Yeah, right. It snows there.   Emil: I had no idea it snowed there.   Tom: It's not like feet, but you know, you'll get dustings every once in a while and Alright, number one, go ahead and do it. Interrupting cow, mooo!   Emil: Before you before you come in, we gotta we got to talk about our cheapest place to buy a house within Mississippi. Okay, those are Jackson Greenville Meridian Gulfport, so now.   Michael: All right  All right. All right.   Emil: One. I don't think anyone guessed it. It was West Virginia.   Michael: This is a situation.   Tom: Wait  the western part of Virginia?   Emil: How ironic and perfect could that have been   Michael: That is so good.   Tom: TFT.   Emil: See, you can't miss today I'm telling you. Take every dollar you have and you'll make any investment that you possibly desire to get good day for you. That's West Virginia. Number one. median home value. We're dropping off a bit from number two. So 117,768 is our median home value one year price change at 7.1%. Five year price change 19.3% In our median rent for a three bedroom place, coming in at $912 our cheapest cities within West Virginia to buy a house Bluefield, Clarksburg, Beckley and Huntington. And there you go top 10 cheapest states to buy house in 2021.   Michael: So what are each of your biggest takeaways from this?   Emil: I think I already mentioned mine, I was surprised that the percentage change didn't like, I would think the cheaper the house is, you know, a $5,000 increase on 117,000 versus 160,000 is gonna be a higher percentage. I was expecting the percentage to be higher in price changes when it wasn't so that was surprising to me.   Tom: My surprising is in some of the states it's like they're like It's like bigger cities that are the least expensive one so like Arkansas, like Little Rock is I think might be the capital I love like in like capital cities and just in that there's like kind of like a natural draw for like economy and, and all that kind of stuff. So it's cool in some of these less expensive in some less expensive states like you can buy, you know in that whatever Capitol Corridor, whatnot city or like around the suburbs and still have less expensive so I thought that was an interesting tidbit.   Michael: Nice.   Emil: How about you, Michael?   Michael: MIne was just you could go to the 10 cheapest cities and over the last five years. Get A 20% increase on your value by doing literally nothing. And so it's crazy when we talk about the power of real estate and all of the great benefits that it has, like, if you bought a property there, for 100, grand five years ago, it'd be worth 120 grand today, like, that's unbelievable for the fact that you were getting paid probably that whole time, too, with a tenant in place. So like, it's just, it just speaks volumes to the power of real estate and how the multiple ways that it pays you even in like, less expensive markets is pretty profound   Emil: Ya true.   Tom: Yeah. I think also, Michael and I, we've done a bunch of webinars together, and one of them, we were going through some assumptions around building a passive income flow of $100,000. And within the assumptions, I think we had the purchase price, like somewhere north of $100,000. And like, someone had commented, like, Hey, you can't buy a house for 120,000 or 100 and whatever it is, like, yes, you can like that. You definitely can. And yeah, these are all 10 states in which that is very doable.   Michael: Yeah. And it was funny, I was like, I'm pretty sure I just bought two of them not to like shame that person. But I was like, guy, you just like incorrect with your facts, like I literally just bought two of them. So   Tom: I think it's a good exercise of like, kind of taking blinders off. Like perhaps that is your strategy only to buy in these really large cities. And that's great. And then you know, you can't buy $100,000 house or $150,000 house. But if you know, you're kind of open to moving around and shifting your strategy to meet specific goals, like there, there definitely are markets to do that.   Michael; I think even in some like in some of these bigger markets, and even capital cities, if the median home price is 100, you know, is $300,000, I'm sure you can still find properties for 150k. They just need a bunch of work. So depending on what your investment thesis is, and what you're prepared to do, I think that there are opportunities in every market, you just have to be willing to uncover them or be willing to do what it takes to then profit from those opportunities.   Emil: I've seen that a lot of like, like Midwest cities, like I invest in St. Louis, and there are their homes that sell for a million plus still even in St. Louis, and their homes that sell for 50k. Like there's a huge, huge, huge disparity. You know, one home was probably built 120 years ago and is fully dilapidated and needs need some love and the other one is like a mansion but still like there. You can same city, you can have a huge disparity.   Tom: Hey, guys, I think we're going full circle from the very beginning of the episode, when I was kind of teasing a meal about, Hey, why did you guys do states? Why don't you do like a little bit, you know, not like the largest possible, you know, where even within each city like there's just, you know, really dramatic range. I mean, here in the Bay Area where I live in Northern California, you know, there's much smaller cities like not smaller, but less expensive, right. You know, perhaps Richmond or Vallejo or like Stockton and then you have areas like Piedmont and Menlo Park and all of these spots. So you know, even at every, every level, there's just really dramatic range.   Emil: Yep. But in California there there is definitely no $100,000 properties, that's for sure. Maybe a shed in someone's backyard, but that's about it.   Tom: Working on one right now.   Emil: Are you doing a shed? Are you building an ADU?   Tom: Uh, it's in a level electrical. It won't have a bathroom in it.   Emil: It's made to be like your office like an office area   Tom: Exactly. Office gym 10 by 18 I kind of wish I did it a little bigger like man 12 by 20 would have been like kind of fun but 10 by 18 is still very good it's basically the equivalent of like two rooms in one room so and doing prefab I think I've talked about before but anyways, the long journey and getting it the concrete truck should be coming any any moment now to lay the piers for the foundation of it.   Emil: Alright guys, I'm gonna I'm gonna send this home before we meander as we always do. So if you've made it this far, thank you for watching. Thank you for listening, and we will catch you on the next episode. Happy investing.   Tom: Happy investing.   Michael: Happy investing.

Rachel Richards is an author and real estate investor that came from humble beginnings and 'retired' at the age of 27. Rachael demistyfies the overwhelming, intimidating and complex world of personal finances to making simple, fun and accessible.   In this episode, Rachel shares her story of how she got started as a financial advisor, lauched into real estate, scaled up to 40 doors and built a diversivied portfolio. Rachel's Site: https://www.moneyhoneyrachel.com/ Rachel's free passive income starter kit: https://www.moneyhoneyrachel.com/bonus Rachel's Book: https://amzn.to/3kFzKej  --- 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.   Rachel: What's up everybody, Michael Albaum here with the remote real estate investor. Today with me I have an amazing guest, Rachel Richards, she is a best selling author, finance guru, real estate investor, former financial advisor, professional speaker just did amazing all around person. And she's gonna talk to us today about all of those topics and more. So let's just jump right into it.   Rachel Richards, thank you so much for taking the time to hang out with me today. I really appreciate you coming on.   Rachel: Yeah, thank you for having me. I'm excited.   Michael: Oh, me too. So I mean, for those of our listeners who don't know you, I know you as a best selling author, finance guru, real estate investor, former financial advisor, professional speaker. I mean, is there anything that you haven't done?   Rachel: Well, I appreciate that you make me sound really good. So I don't know.   Michael: You have seemingly accomplished so much in the financial and real estate space. I would love if you could give our listeners a little bit of background on who you are, what you've done, and then what you're currently doing in real estate.   Rachel: Yeah, for sure. I started as a finance nerd at a pretty young age. I still am a nerd to this day and proud of it. But I grew up in a household where money was always a stressor. And so at a pretty young age, I was motivated to turn things around for myself and become financially independent, and went to college, I became a financial adviser. I'm kind of giving you the high level story. But I read Rich Dad Poor Dad in high school. And that was the first thing that yeah, that turned me on to real estate investing. So I always knew that was going to be my path.   I didn't know about all these other passive income streams yet. And my eyes opened on passive income a little bit later. But I knew real estate investing was one of the key pathways for myself. So I did start investing in real estate with my husband in 2017. I also self published my first book money, honey that year. And we had these two passive income streams, rental income and royalty income. And we focused on growing those as much as we possibly could over the next few years. So fast forward to 2019. So within the span of two years, we had accumulated almost 40 rental doors, six buildings, almost 40 doors, and we've grown our passive income streams, yeah, to over $10,000 per month. So by then I was able to quit my job. We were financially independent. And that is where we are today.   Michael: Oh, my gosh, well, there is a lot to unpack there. That's incredible. So taking a few steps back, do you think that you became a financial advisor because of that angst you were feeling at home. And that's never something you never want to worry about money. So you said if I can get as educated as I can about it, it'll be easier for me.   Rachel: I think there were a few reasons I became a financial advisor. That's definitely one of them. One of them is because my parents were really struggling with money. And I wanted to help them. And for some reason, I felt like I needed to have the credibility of calling myself a financial advisor to finally be like, okay, look, I'm taking over your finances. We're going to get you out of debt. We're going to turn this around, and I'm going to finally manage your money for you.   So I did that. And we did help them and they're doing way better now than they were this was like a decade ago. So that was one of the reasons was to help them. And another reason is because I had the passion for helping people manage their money, I was obsessed with learning about how to invest in the stock market. And the third reason is because I sold Cutco cutlery in college. Have you heard of Cutco knives? By any chance?   Michael: Yeah, I've heard of it. Is that the door to door selling?   Rachel: Yeah, it's like a direct sales company. So it's high quality knives. And of course, when I when I took this job, I had graduated from high school. I was terrified at the idea of taking out student loans because I had read enough books. I knew enough to be hesitant at the thought of that. And I'd seen what student loan debt had done to other people and how crippling it could be. So I was really scared of student loans. I didn't want to take on debt. And my parents were not able to help me pay for college whatsoever. It felt like all my friends I grew up in this really wealthy bubble and I felt like all my friend's parents were paying for their school and good for them, but I was kind of having to pay for it on my own.   So I took this job selling knives. And it was the first time I've been exposed to something where the harder you work, the more money you make. And I knew I could outwork anybody. So I sold knives my mom was less than thrilled about The idea of me selling sharp objects to family and friends, but that's what I did. I sold Cutco. I set sales records, and I paid my way through school and I graduated completely debt free, which is one of my proudest accomplishments. And because of the sales experience, and my passion for helping people with money, I figured becoming a financial adviser was my dream job. And that would be the perfect fit for me. I was wrong about that. But that was my thought at the time.   Michael: Good for you, Rachel. That's incredible. That's really, really incredible. So now you became,   Rachel: Thank you.   Michael: Yeah, you're most welcome. So now you've become a financial advisor, you are looking to help people with money, and their finances. And so I'm curious, where do you see real estate fit into that picture, because I know a lot of financial advisors and a lot of them push products that they make Commission's on or push more passive investments in the stock market. So curious to know how you blended the two for professional level as well as in the personal level, you investing in real estate and seeing how impactful it can be.   Rachel: Yeah, and honestly, that was one of the things that I found disenchanting about the financial advising industry is how financial advisors are incentivized. And they you know, they want you to sell certain products to people that maybe are not in their best fit. So I didn't last very long in that industry, I think I was only a advisor for almost a year, actually. But I always had the dream of becoming financially independent. And so I knew that working in a job where I was trading, my time for money was not the way to become financially independent. So that's where real estate investing made a lot of sense to me, I knew this was something that could be a passive income stream, if I did it the right way. You know, I always tell people, you don't want to have this huge rental portfolio and quit your job to become a full time landlord, right? That's not the goal.   So you have to do this, and you need to have a property manager, that's one thing that will help it become passive. And even with a property manager, there's always going to be an aspect of manage the manager. So it's not going to be perfectly passive. But it is a lot more passive than a nine to five job, or working a sales job or working as a financial advisor.   Michael: Yeah, nice.   Rachel: So it was always my goal to start investing in real estate. And doing that on the side. And my husband, I hadn't met Andrew yet my husband as a financial advisor, but I did meet him later. And together, we wanted to get to this $10,000 A month mark, because I think at the time, our expenses were like $6,000 a month. So it felt like we could cover our expenses and still have a lot of money to save. And just to back up, let me just define what passive income is or the way that I define it. I define passive income as money that is earned with little to no ongoing effort. There are not many things that are truly 100% passive, except for portfolio income.   Most passive income streams will require you to work a few hours a month or a couple hours a week to maintain them. But again, it's a lot more passive than working 40 hours a week as a full time salaried employee.   Michael: Yeah.   Rachel: And the epiphany that we had several years ago, is that once your passive income exceeds your living expenses, you're retired, you're financially independent. So once we realize that it was just this, this constant urge to have enough passive income to cover our living expenses. And even more because we wanted buffer room, we wanted to keep saving money. So that's why we came up with that $10,000 A month goal.   Michael: Love it. Love it. And so you started investing in rental properties in 2017, you said, and two years later, you've got 40 doors under your belt, which is unbelievable. So I'm curious to know, how did you get your start? And what led you or what allowed you to kind of take that first step? Because I think so many of our listeners, and so many beginning investors get plagued by analysis paralysis. So how did you do it?   Rachel: Yeah, that's a great question. And I'm glad you asked when people hear that I went from zero to almost 40 doors and under two years, the first thing they asked me is like, Are you a trust fund, baby. So I always like to clarify right off the bat. I'm not a trust fund baby. I never made six figures actually, from a job or a career. I started off as a financial advisor making $36,000 And my next job I was making $32,000. In my next job I was making $42,000. So by no means was I was making some huge salary to achieve this. We were kind of making average salaries, but working really hard and being frugal and being thrifty in order to accomplish what we accomplish. So always put that out there first. There was a lot of fear, for sure, in that first rental property, and there was a lot of discouraged discouragement along the way. So the first duplex we had been searching for months and months and months to find this first duplex that we invested in. We started looking in early 2016 I think, and I'll back up with a quick story of who was working for at the time.   I was working for this woman who was a very emotionally abusive boss. And I was overqualified for this job, I was underpaid. This is one of the most condescending people I've ever worked with. Like, I just I've never seen an adult person, treat another adult person this way in my life. She regularly made her employees cry. She just made people feel stupid. So it was an awful work experience. Yeah. And there was just this one time where she made me cry. And I was I went to the bathroom to clean up and I just looked at myself in the mirror, I was 23. At the time, I looked at myself in the mirror, and I just decided, I am so sick of this. And I am never going to let another employer treat me this way again. And I'm never going to be financially constrained, again, where I feel trapped in a job, and I can't leave because of finances.   And I remember feeling like I'm so sick of myself, I'm sick of talking about investing in real estate. I'm sick of complaining about this job and not doing anything about it. So it I had this enough is enough moment, where yes, it was a low point for me. But also the silver lining of that is that I finally started to take action. And I finally realized, I'm done with this, I'm going to start taking action, I'm going to get serious, and I'm going to buy my first rental property. And I share that because I think you have to almost have that moment and have that mental jump, where you just decide, okay, I'm going to do this because I'm sick of hearing myself talking about it. Or I'm sick of like living in fear or living in the what ifs or you know, what if I lose money, what if this bad thing happens? What if it doesn't go right? It's like, you just have to take the first step.   So I had that moment, I started to take action, we started to look for rental properties. It took a long time, way longer than I thought. And I think most first time investors experienced this. We put offers on properties. We had a an accepted contract on a property and it fell through. And so there were so many times we're like, this just isn't going to work. And we taught we told ourselves, Well, you know, this works for some people. Clearly, this just isn't meant to be.   Luckily, we got through that. And we kept looking and we didn't let it completely discourage us. And we finally found this duplex. And by then the great news was we'd analyze so many properties that we recognized, this is such a good deal. And we were able to take really quick action, make an offer on the property and close on it. And we were really confident in it because we you know, we made other offers on properties. We'd had accepted contracts, and it was to this day, the best deal we've ever done.   Michael: No way   Rachel: Saw it. We we recognized it. And we we took quick action. Yeah, I mean, the I think we have like a 25% cash on cash ROI or something something. It's at least 25%. So   Michael: That's incredible.   Rachael: That's how we got our first duplex. Yeah, it's crazy. Yeah.   Michael: And so you said that you were facing a lot of headwinds and discouragement and mental hurdles and physical obstacles. How did you and I imagine you're working with your husband at this point, right?   Rachel: Yes.   Michael: How did you know and how, I mean, how did you go about analyzing properties? Was it hey, we've just seen this enough times to kind of know what we're looking for. Did you have a mentor or coach kind of walk you through or somebody more experienced that was able to guide you or were you kind of figuring it out on your own?   So by then, I had taken a couple different jobs in the real estate industry. I partnered with somebody who flipped houses and I learned a lot from him. This job that I'd worked at with this abusive boss, she was a realtor and I was her admin assistant. So I did learn a lot from her as well. I read a lot of books. So one of the best books I read to help me with analyzing rental properties is the book hold by Steve Shader and then the McKissicks, Jim Melinda McKissick. Okay, that was a great book for me to learn how to analyze properties. So I was just kind of going off of what I learned myself to that point and using my own spreadsheets.   Michael: Love it. So you got a kick butt deal. That was your first one down. And then the next just started falling down like bowling pins, and it was a pretty sequential, it sounds like it happened fairly quickly over the span of two years.   Rachel: Yes, it did happen quickly. I'm happy to get into the numbers too, because a lot of people were like, how did you come up with all these down payments if you weren't doing house hacking, because we came up with 20% and down payments, one after the other, which was quick and it was a lot of money. So the first duplex was $100,000. That was the list price. We we had a few advantages going for us that allowed us to save money, first of all, so we both graduated without debt, I sold knives. My husband's a veteran and he used his military benefits for his college.   So we graduate without debt. That was a big advantage because even though we started out not making six figures and I never made six figures my husband did eventually even though We started off not making six figures, we could save a lot a large portion of our salary. Back when I was making 36 grand, I was saving 50% of my income. I was living off something like $1,500 a month.   Michael: Holy smokes.   Rachel: Yeah, in Louisville, Kentucky. I mean, it was very bare bones, I was very, very frugal. So because of that it only took me a few years to save up a decent chunk of money that I could invest into real estate. And then obviously, Louisville, Kentucky is where we invested, it's a great place to invest low cost of living. It's an affordable city. So the duplex we found was 100 grand. So those were some of the advantages that we had. And that's how we came up with the downpayment for that first duplex by 2017, we both had $10,000, we saved and we pulled together to get to the $20,000 downpayment. That's how it started.   Now how we scaled, we did a couple things. First of all, we did not give into lifestyle creep. So those few years leading up to that we were very frugal, we made a lot of sacrifices, we weren't going out to eat with friends, we weren't partying on the weekends. I mean, we were working full time jobs, we were acquiring rental properties. On the weekends, I was starting to write my book in the evenings, we were just working and hustling. It's not like we had these really cool lives or anything. So we made a lot of sacrifices. And after we bought that first property, and we were cash flowing $500 a month in profit, it would have been really easy for us to turn to each other and high five and just decide, wow, now we can really live it up, we have $500 a month, we can increase our quality of life, we could get a new car, we could do whatever.   But we didn't, we decided we're gonna save 100% of this cash flow. And we're gonna reinvest this into the down payment for the next property. So that was one thing we did, we didn't get into lifestyle creep. And the second thing, this is really the key for us. We I had my real estate license, I did not have it for the purpose of having clients. But it was just for my own purposes and representing us as the buyer's agent on the deals. So we would deplete our savings completely to buy the for the downpayment and to buy the property. But then I would be the buyer's agent on the deal, we would represent ourselves. And I would immediately get a commission check back for 1000s of dollars, sometimes it would be 10 grand depending on how much the property was.   So that would be an immediate boost that would help us save for the down payment for the next property. And by then to by 2017, my husband was making six figures. So you think about a 50% savings rate on our combined income. And those other three things that cashflow we kept generating from every successes, successive rental property, the Commission's from the real estate license, we were able to have some very, very fast momentum where we could come up with down payments, one after the other and scale very, very quickly. So that's how we did it.   Michael: That is so cool. That's so cool. Rachel, a question for you kind of about mindset. And how do you square saving so much of your income and being so frugal when it sounds like a lot of your friends and circle may not have been? I mean, it was that hard, like just emotionally to get through?   Rachel: It was definitely challenging. It was definitely challenging. I think from a young age, though I've always had this mindset of, or I always recognize that doing the opposite of what most people do tends to be more successful, I guess I don't know if that's the best way of putting it. But I always was like, I'm going to do the opposite of what most people are doing.   Michael: Yeah.   Rachel: And I was always able to, I guess delay gratification or just keep that motivation in front of me and stay very, very disciplined. So it was difficult. I remember there were times working when I did work in corporate finance eventually. And I remember my coworkers would invite me to lunch. And I always packed my lunch. And so the first few times they invited me out to lunch, I would eat my lunch first and I would join them because I didn't want to miss out, I would want to network and I would want to go to lunch with them because I liked them. And so I would say yeah, I'll go to lunch. And then I would go and just drink water. And so I would explain to them, you know, sometimes I would say I'm just trying to be healthy, or I'm on a diet or sometimes I'd be like, I'm just trying to save money. I would always tell the truth, whichever it was, but…   At first I think they probably thought it was weird. Not that they ever said that. Right? But then they got used to it. And they knew that if they invited me to lunch, I was gonna come and not eat and they were always supportive. And luckily, I've always had very supportive people in my life that helped me along the way. But yeah, I mean, you just have to get used to kind of being the oddball out because it is kind of weird. You're not getting the new car and you're not getting the new house but you know that in the end, you're going to have a lifestyle that's going to be freedom and travel and way different than than what anybody else can experience. until you know that it's going to be worth it. And if you can focus on that, it'll make all those sacrifices in between a lot easier.   Michael: Totally. I forget who said the quote, but it's something to the effect of live like no one now. So you can live like no one else later.   Rachel: Yes. That's a great one.   Michael: Oh, that's awesome. And I totally hear you. Because I mean, coming from a guy who lives in a van with his dog and wife, I totally get the doing the opposite of what everyone else does.   Rachel: Yes, I try to still live by that, especially with investing in the stock market, too.   Michael: Oh, okay. So that's actually a really great segue for something I wanted to chat with you about. So what is your take on the stock market? I mean, is that is that an asset class that you believe in that you invest in to get diversified? Talk to me about that?   Rachel: Yeah, for sure we invest in a stock market. I think the more diversification, the better. So we invest in the stock market, we invest in real estate. And within real estate, we do all kinds of things multifamily self storage, you know, we own direct rental property. And then we have syndications. And then we have REITs, and other types of real estate investments. So I always think the more you can diversify yourself, the safer your portfolio is, stock market investing, I think is an absolute must for everybody. My husband still works a W2 job, even though we're financially independent, he loves his job, he loves what he does. So he has a 401k that we max out every year. And we still have old IRAs that are invested in the stock market.   I am a big believer that what is boring, ends up being sexy in the long term. So we invest mostly in index funds and ETFs. And long term investing, most of the time, I'm not caught up in how the Dow has performed today, or how the S&P is performing or what's going on in the stock market, because I don't look at it. The way I approach the stock market is that it's none of my business. I know that in the long term, it's going to take care of me and that in the long term, the stock market has always gone up, it's going to be volatile, day to day, week to week, month to month, year to year, but over the decades, my money will go up as long as I keep it invested. So I don't think I've ever sold anything I've invested in. And I've started investing at the age of 18. So I'm like 11 years in now.   But that's how I've approached it. I don't invest in crypto, it's not because I don't believe in it. It's just that I haven't had the time to fully educate myself on crypto, and to fully understand it. And if I don't 1,000% understand something, I don't invest in it. It's as simple as that. And I would tell anybody that if you don't understand something completely don't invest in it.   Michael: That's a great tip. That's a great tip. So Rachel, I'm curious to know, because you used to work as a financial advisor, what did you see your really successful clients doing? And where were they investing?   Rachel: Yeah, the I would say the successful clients. I mean, I was a fee only advisor, first of all, so I was advising my clients differently than what other people were doing. I would say that my most successful clients were doing what I told them to do.   Michael: For someone who might not be familiar with the financial advisement world, what is a fee only advisor? And how is that different than some of the other fee structures out there?   Rachel: Yeah, it's really important that clients understand how their financial advisors are being paid. So if you're looking to work with a financial advisor, you definitely need to advocate for yourself and ask, Hey, how are you being paid, what's your pay structure, there's three ways financial advisors are paid. Number one is commission based, that means they're being paid a commission based on the products that they sell to you. That's not a good thing normally, because that means they might be incentivized to push products on you that might not be in your best interest. Number two would be a fee based advisor, which means they could be paid still commission some of the times and fees other times.   And then number three is a fee only advisor. And this is the best way. This would be somebody that is paid, for example, 1% of the assets under management. So they're paid based off of like a fee of your portfolio, or it could be an hourly fee. And this is the one that's the most in alignment with with your values, because the more money you make, the more money they'll make. So that's something you want to ask them, you also want to make sure that they're a fiduciary, that means that they are obligated to act in your best interest and look out for your best interests as your advisor.   Michael: So what you're saying is that there can be licensed and registered financial advisors that are not fiduciaries.   Rachel: Correct.   Michael: That's mind blowing.   Rachel: It is, isn't it and people don't know that. I didn't even know that until I was a financial advisor.   Michael: Wow.   Rachel: And so yeah, there you can have all these certifications and licenses and still not be upheld as somebody that is legally obligated to act in your clients best interests.   Michael: Wow. Okay, well, you have just armed all of our listeners with a Fantastic question. If they're chatting with financial advisors, and it's as simple as argue a fiduciary   Rachel: Mm hmm, that's right.   Michael: That's great. That's great. Okay. And then so getting back to to what you were saying previously about that the most successful clients you had were the ones that listened to your advice, what advice were you giving them?   Rachel: It was, it came down to the same things that I do with my own portfolio, investing in the long term, investing in the, you know, the boring things that I say in quotes, index funds, ETFs. But the thing is, when you invest a lot of your money in the stock market, it can be very scary and emotional. The most successful clients were the ones who did not panic and sell at the wrong time. Because when the stock market's going down, your instinct is to sell and you want to get out and you want to make sure you're not going to lose any more money.   The thing is, though, when the stock market's going down, you don't actually have a loss, right? It's a theoretical loss, you don't actually have a loss until you sell and then you've actually realized that loss, you make that loss real. If you don't sell, the loss isn't real yet. And if you look at the stock market over time, you see that it's always gone up. So if you can just hold out, you just if you can suppress the panic and the fear. And if you can hold out and keep your money in the stock market, even invest more in the stock market, because the stocks are on sale if the stock market has gone down. And if you can just wait that out, it will go back up, it always has in the long run. So the clients that were able to manage their emotions Well, during those times of panic and fear. Those are the ones who did the best in the long run.   Michael: Yeah, that makes total sense. So Rachel, would you say that it's a fair expectation of someone to have have their financial advisor to have the advisor help them manage their emotions and kind of coach them through the highs and the lows of those emotional roller coasters?   Rachel: I think so. Yeah, I think a good financial adviser would do that. And when you're looking for somebody, that's another question to ask. I've seen good financial advisors who set expectations helped manage their clients emotions through the when the markets very volatile. So I think absolutely, and again, this all comes back to the concept of doing the opposite of what everyone else is doing. So when you successfully invest in the stock market, if everyone's hopping on the latest trend and buying the latest crypto, then it could be a signal not to do that. Or if everyone's panicked and selling in the stock market is going down. That could be a signal not to sell. If you do the opposite of what everyone else is doing that can end up being very successful for you.   Michael: Okay, I want to shift gears entirely here and talk about the book that you wrote. Because again, just another notch in your belt, another accolade you have, it's called Money Honey, why did you write it? Who did you write it for? And what can people expect to get out of it if they end up purchasing in a reading it?   Rachel: Well, thank you for asking money, honey was a complete surprise for me because it was it was something I was just doing as a passion project. And when it took off the way it did, I was shocked. But I started writing it in 2017, because I was a former financial advisor and all my family and friends came to me for financial advice, which I loved. And I also began to wonder, well, why aren't they reading books like I did? You know, why aren't they learning on their own? And then I had this aha moment where I realized, oh, yeah, personal finance is boring. It's overwhelming. It's intimidating. It's complex. No wonder, no wonder people don't like to learn about it.   So I thought to myself, How can I make this topic sassy, and simple and fun. And that's where the idea for money honey came from. And the words kind of poured out of me at first, it was something I was really excited to do, just something I felt compelled to do. So I self published the book in September of 2017. And like I said, to my surprise, it just took off immediately. It really resonated with female millennials. And it teaches the basic topics of personal finance, budgeting, savings, stock market, investing, debt, it touches on insurance and taxes as well.   So that is what somebody would get out of it. And it's yeah, like I said, it's done well has over 1100 Amazon reviews now and it just sells more and more every year. So it just blows my mind.   Michael: Right on. And where's the best place for someone to pick up a copy of the book?   Rachel: It's on Amazon, and it's in ebook paperback and audiobook formats.   Michael: Right on, Rachael, this has been so amazing. I really, really appreciate you coming on here. And you're just like a Swiss army knife. Like you just got so many facets to you and so much experience that I love and I know our listeners will love. If people want to learn more about you find out more about your story. Where can they get ahold of that type of stuff?   Rachel: Thank you. I appreciate it. My website is Money Honey, Rachel calm, and my Instagram is money. Honey Rachel and what I would love to do for your listeners is, if anyone wants to download my passive income starter kit, I will give that for free so you can go to moneyhoneyrachel.com/bonus to download that.   Michael: Amazing. Thank you so much. We will definitely link to all of that in the show notes here. Who Rachel, thank you again. This has been so much fun and I wish you the best of luck and hope to stay in touch.   Rachel: Thank you so much for having me.   Michael: Already, everybody that was our episode a big big, big thank you to Rachel. It was so much fun as super insightful. We covered a ton of topics. I am definitely gonna be getting a copy of her book here shortly. If you enjoyed the episode, feel free to leave us a rating or review wherever you listen to your episodes. And as always, we look forward to seeing the next one. Happy investing

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 ever tell you guys what my favorite investment was?   Michael: Yeah, I don't think so. No.   Paul: My favorite investment is mobile home parks. I love investing in mobile home parks. I only wish I would have joined Sam Zelle, America's most successful billionaire real estate investor decades ago. In discovering this amazing asset class mobile home parks. Sam Zelle has over 155,000 mobile home park pads in his company and he's a billionaire and he's just it's just an asset class that's been long overlooked and mostly scorned or ignored. I know of people who have mobile home parks they say they used to go to parties and people would say what do you do a mobile home by Okay, where's where's the hors d'oeuvres?   But my least favorite investment on the planet is mobile homes. Mobile homes are my like, I've got three horror stories with mobile homes. I wish I would have quit after the first one because man what a nightmare. And so I'm going to tell you one of those mobile home horror stories today if that's okay with you guys.   Michael: Yeah, it sounds great.   Paul: Yeah, so I was I had a friend I had this idea wouldn't it be cool to renovate some of those like a mobile home and like put it on a lot and you know, set it up and then rent it lease it as a home you know, put a permanent foundation on etc, etc. So I got a double wide and it had been somewhat trashed, it only it was only like three years old. But mobile home tenants aren't always the very best tenants and sometimes they don't take a lot of ownership. They don't take a lot of pride in their place. And so I decided I was going to somehow be smart and do a lease to own on it. So it wouldn't just be a rental.   And so I got this mobile home doublewide and put it about an hour and a half from my house, found a lot there, it already had, well, septic driveway, set it up. And then I started getting friends who were between jobs, I just happen to know a couple people between jobs to start renovating it. Now, I found out something when I tried to build some houses, I found out that it's not smart to build a house if you don't know how to tighten the doorknob on your own house. And that's why I think people, you know, really appreciate companies like Roofstock, you know, who have experts do this kind of stuff for them.   But anyway, I had these couple guys who were doing the renovations, they were driving an hour and a half from Roanoke, Virginia, way down into the sticks of southwest Virginia. And they and for some reason this thing took like a year to renovate. I don't know how you can take a year to renovate a mobile home, but somehow it did. And so we finally got somebody moved in. And we actually made it into a lease to own.   And so it was a couple who had just moved from a state or two away. And they signed a rent to own agreement. And basically it said that they would make payments, rental payments for three years. And then they hopefully their credit would be to the right place where they could just buy the house. I thought, Okay, not bad.   So I was pretty excited about this. And they started making payments. And they made payments for one year, two years, three years. And then they just kept making payments. And so I was kind of hands off busy with my other business, I didn't pay much attention, the payments just kept coming in. And so finally I reached out to the lady. And I said, Hey, you were supposed to close on this, you know, rent to own? And she said, Yeah, we just we couldn't get our credit score to the right place. So do you mind if we just keep renting till we do. And of course, you know, when you got a good tenant who's only missed maybe like one payment in three years. You want to keep them.   So I said, sure. I'll work with you. So this went on your four year, five years, six years seven, year eight. And they had fortunately made a good number of payments, you know, as far as a percentage of what I had in it at that point. But then I didn't I didn't get a payment. And then I missed a second. I missed a third. And I realized, Wait, something's going on. And so I called her. And she said, Yeah, we broke up. And I moved back to Baltimore. And I thought you wouldn't mind, I went ahead and leased it. I sub leased it to a section eight tenant. And I said, you went through the effort of getting a section eight sub lease and you didn't, you didn't call me or anything. She said now she goes, I'm like two states away now. Can you go check on it? And I said, oh boy.   So I got there. And it was like a warzone this place. So I only checked on once or twice in eight years. It was like unbelievable. I don't even know what happened. The people were gone. All the appliances were missing. There were scratches and scrapes all over the wall. And I looked at the evidence on the floor. And let me say it was disgusting. I tell you, I mean, this story, I don't know who was involved. Exactly. But I know it involved a dog or dogs. I know it involved a baby or babies. And I know and involve alcohol, more than likely alcoholics.   And this was it was unbelievable. I don't even know how you could do this much damage to your own enemy. It was like some kind of war criminal camp. And like they just went around for like what would possess somebody who wasn't even paying their rent at all to want to destroy someone else's property? I never met these people. I never knew their name. But I went in there and I calculated you know, okay, so this place was in like not that bad a shape. Eight years ago when it took us a year to renovate it. I think it would probably take 117 years to renovate right now.   So I did the calculations, I actually had a contractor out there. And everybody was just like shaking their head, this is beyond salvaging. And so I ended up paying, I think it was like $1,000 to have it hauled away to the junkyard. And I ended up selling this lot, by the way I was supposed to make $60,000 63,000 maybe when it closed, and I ended up selling the lot for $15,000.   That's my Halloween Horror Story. Like I said, I've had four mobile homes over the years, and three were disasters at almost this scale. And the fourth one was my mom's. But seriously, I really don't like leasing mobile homes, it sounds like a great idea on paper, and even sounds a great idea to get these used mobile homes and push them into a park. If you can find a mobile home park and then sub or you know, lease them to tenants. And then you're the tenant of the park, I actually did that once and had multiple, like it was trashed, this old home was trashed multiple times, we finally hauled it off to the dump as well. And so not a great business, especially if you don't like being a landlord, which I don't.   Pierre: Is there a moral of the story other than don't invest in mobile homes?   Paul: If you're going to manage your own properties, you've got to be intense about it. You've got to you know, give them the impression, you know, I'm not taking any crap from you are not going to you know, you're going to pay on time and in full, I'm going to evict the day you don't I mean, I think that I've come to a conclusion that with real estate, and this is controversial, and I don't think a lot of people are going to like what I'm going to say, but I've concluded that you either need to be fully involved, intensely involved, treat it like a business, actively managing it, or you've got to completely outsource it to an expert.   I think a lot of folks and I talked to investors every week, and I talked to quite a number of investors, who say that when they try to go in and do something on the side, like they tried to build up, like this dentist I was talking about talking to he said, Yeah, I'm building a 20 home portfolio to replace my income. And I'm so excited about replacing it in. And then he took a deep sigh and he said, kind of exhausted talking, talking to painters between oral surgeries and screening tenants in the evening, and I'm getting tired already. And I'm only on house number three.   And I talked to a lot of people like that. And so I think it's really important that you find someone to outsource this type of stuff to if you're focused on either a great career, or hopefully a family or retirement. It's it's hard to juggle that. And I hear frequently people say, Man, this has just become like a second job. And sometimes the returns aren't as what you know, aren't as high as they expected either. So I think it's really important that people find somebody to outsource to if they want to get in real estate or do it full time.   Michael: It's so important for folks that are self managing really look at the the ROI on their time, and what they're actually paying themselves or what they're saving as compared to outsourcing. For me, that 10% That I'm paying every month is like the best 10% I've ever paid to buy back my time.   Paul: Exactly. Totally agree. Yep. That's a really good point.   Michael: Paul, this was great. As always, thank you so much. And we look forward to talking with you soon.   Paul: Man. It's always great to see you guys appreciate you and thanks for having me on again. Happy Halloween.   Pierre: Thanks, Paul.   Michael: Happy Halloween.   Alrighty, everyone, that was our episode. I hope that these stories just provide you with some great fodder and some takeaways. Lessons learned not to scare you away from real estate investing, but rather to help you learn from our mistakes going forward. We hope you enjoyed the episode. We look forward to seeing the next one and as always, Happy investing

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 bunch of long term buy and hold started back in you know, late 2010s. Crash   Emil: Alright, With that, let's sign off. Thanks everyone for tuning in. hope you got some value out of this one and we will check you out on the next episode. Happy investing.   Michael: Happy investing.   Tom: Happy investing.

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.  In this episode, we pull up inspection reports on homes that we have either bought or are currently looking at purchasing. We walk through the reports, point out the most concerning issues, and discuss how to go about addressing them to best position ourselves in these deals.  --- 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. Hey, everyone,   Emil: Welcome back for another episode of The Remote Real Estate Investor. My name is Emil Shour. And today I'm joined by   Michael: Michael Albaum   Pierre: And Pierre Carrillo   Emil: And in today's episode, we're gonna be talking about inspection reports. And instead of giving you guys kind of just high level overviews and hypotheticals, we're actually each going to pull out a recent inspection report on a property that we've either looked at or purchased and walk you through our thought process as we were looking at the different items and how we approached each one. And so hopefully that can help you feel more confident when you're looking at your next inspection report. So let's get into this episode.   All right, so I'm going to kick this one off, and I'm going to cover the inspection report from the triplex that I bought back in November of 2020. So let's pull it up. And I'll walk everyone through all the different things that we saw come up, and my thought process as we were going through each item.   Alright, so this is the inspection for for the triplex that I recently bought back in November. And what I'm going to do is I'm gonna walk you through some of the things that are common in in an inspection report, and the things that I find that I think are worth exploring more versus things that I think aren't a super big deal. And obviously, these are just relevant for me, but walking you through my thought process.   Alright, so the first thing I want to point out again, is is the inspectors job is to literally point out any potential oddity or you know, thing that doesn't look exactly 100%. Right. So here you can see that looks like the lock isn't lining up correctly. And there seems to be something with this top lock as well, maybe it's not like fully fastened, I think is what he wrote. So these things, these are minor, these are all things that we can, you know, probably take care of when we have a turn come to or if the tenant complains about it, we can just get it taken care of. These are minor, not a big deal. For me.   This was the first thing that really stood out to me when I was a valuing this property. So the ceiling at the first floor bathroom of one side of the property has an active wet stain. And so it looks like there was a toilet issue that they referenced here later. It was actually the toilet on the second floor wasn't secured properly. And there was a small leak from the top floor of the second.   So the first thing I did actually, when I saw this, you know leaks are are never something to be taken lightly. So the first thing I did is I contacted the inspector, you know, I had his number and I just asked him like, you know, how, how bad is it? What do you think, in terms of damage and potential here, he didn't sound super concerned about this, when I spoke to him, he made it sound like you know, you just got to get that that toilet fix, it's not super bad, you just have to, you're gonna have to patch the wall, repaint it, and you should be okay.   And this was something I was comfortable with proceeding. You know, this could spook a lot of people away. But for me, you know, water leaks, especially on a property this property is 100 years old, not uncommon. So we ended up just to kind of bring the story full circle on this one, we ended up replacing the toilet day one after we took over and got the ceiling patch repaired and haven't heard of any leaks since. So it looks like this has been taken care of.   Michael: Emil, you did something here that I really want to draw attention to and applaud you for not that you need any ego boost, but you picked up the phone, and you call the inspector. And I think too many people don't do that. And there's a reason the inspector provides their contact information. It's so you can call them and ask these types of follow up questions. Because if someone just sees a leak, or a wet spot in the ceiling, their mind can run. And they can tell you know, the inspector can tell you what they think the other report but actually hearing the intonation in their voice hearing. Like you said he didn't sound super concerned, that's different, conveyed via speech than via text that you're reading on a page. So I love that you did something that I also do, because a picture is worth 1000 words, hearing it from the horse's mouth so to speak, can be worth 10,000 words.   Emil: Right? And you know, especially as us investing remotely like we're relying on our people, locally, our inspectors all these people to really give us a full picture since you know we may or may not be there to view it ourselves. So this is something I just you know, want to talk to About it's also this guy's putting a full report together, he's not going to write me, you know, four paragraphs on how he actually feels. But if I call him, he'll give me that info if I asked for it. So always helpful to pick up the phone. Okay, so here are a couple things that I mentioned earlier, this was the toilet that was leaking, we replace it with a low flow toilet, so that he would save on the water bill and be obviously we needed to fix the toilet because it was an active leak.   So the inspector also mentioned here a kitchen faucet that was kind of loose, we actually just did a turn on this, this unit and we replaced the entire cabinetry and secured the faucet. So we're good to go. These are all again minor things that I knew we could get taken care of. Once we do a property turn, I bought this property knowing a couple of the units were under market rent. So I figured we were going to have a couple turns coming soon anyway. So all these small things didn't seem like a big deal to me, because we were going to have to make a bunch of repairs to clean the unit up before releasing it.   Okay, another big one in the inspection report this furnace. So this furnace got called out I believe, they said that it will, the unit did fire up and respond as expected when the thermostat called for heat. But budgeting for replacement in the very near term would be prudent. So I think they they mentioned this was like when I when I talked to the inspector I asked him about this as well. And he said it was 15-20 years old. So he said it's working. But this thing is on its last leg. So this was one thing that I went back to the seller and asked for a credit on and there's one more thing I'm going to mention later as well. And how I went about this and what the result was but for now I'll just leave it at this was one thing that was big enough where I went back to the seller and asked for a credit or reduced price.   So for me, I don't like to add up all the little little things and bring it to the seller. That's just not my style. I know some people do it. For me, I'm just looking at big things that cost 1000s of dollars potentially. And those are things that I'm going to bring up with the seller, if you know especially if they were marketing the property a certain way like fully turnkey or ready to go whatever, I'm going to bring these things up with the seller.   Michael: That's such a good point and the old because there's it's definitely a double edged sword in that all the little things like you mentioned, the $50 repair $100 repairs on their own, typically are not a big deal. But if you get enough of them, I mean that could be several $1,000 worth of repair items and so it could be death by 1000 cuts type of situation. So I think me personally I'm similar to you I don't nickel, I try not to nickel and dime people and get really nitpicky, if it's little, I'll take care of it myself. But if there are enough of them, that can also be indicative of some of the other deferred maintenance issues or how the property was managed for the life of that owner. So definitely let this kind of be a red herring if pay there are a lot of little things be on the lookout for maybe some bigger things as well.   Emil: And I you know, I think it depends on the kind of property you're buying right if you're buying a property that's marketed as turnkey and it's obviously very not then maybe you can pick those things apart. This is a property where I knew you know, tenants had been there for a while under market rent we're gonna have to do some some work and the price probably reflected that so i didn't, i didn't nickel and dime a bunch of the smaller deferred maintenance things   Michael: Yeah, yeah, so important to keep in mind.   Emil: So this was this is it in terms of the big things that were called down the spectrum for a couple other small things but nothing that was you know, a red flag for me. So you know, the other thing we always do any property we buy is we have the sewer line scoped. So have a plumber or you know, sewer line Inspector, your agent or whoever a property manager, somebody can can get you in contact with somebody. So we have the sewer line scoped and we found that there was a crack in one of the sewer laterals and so we got a quote for that the quote came back at $4,000 so this is again this is one of those things that a lot of people could see and immediately find as a red flag. For me I know it's not a huge deal we're going to break up the concrete replace it, which is actually not a bad thing right like now I know we have brand new sewer lateral at least six feet.   So but what I wanted to do was make sure that I could get credit from the seller so I brought the furnace and the sewer lateral to the seller told him what was going on asked him for I believe it was a combination of credit at close and a reduced price. And seller agreed on the full amount for the sewer lateral and then half for the furnace. They weren't willing to do full because they said it was still working but because it was all they were willing to do half. So we agreed on that. And those were the two big things in my inspection report that I brought back to the seller.   So these these are all i think that's that's a key thing to remember is that you know, maybe if I had foundation issues are something that was really big and the expense, you know, range could have been 5000 to 25,000. Maybe that's something I'm I'm not going forward with. But if I have, you know, pretty confident estimates, I can bring those to the seller and get the price reduced or get credits back so I can take care of those things. For me, those aren't going to be deal breakers.   Michael: So Emil, you did something that I don't know if you you mentioned, but in between the time where you got the inspection report back, and your due diligence window closed? Did you get bids for that, for this work?   Emil: The inspector gave me an idea of furnace replacement. I also asked the property manager, you know, their property managers, they deal with this stuff all the time, they can give you a good estimate, these sewer lateral, the, the person who sculpt the line was actually a plumber as well. So they were the one who gave me a bid and ended up fixing the sewer lateral. So that that was the nice part is that the inspector, the sewer line guy was also a plumber. So he could give me an estimate.   Michael: Perfect. And so was the estimate pretty spot on for what the actual cost was?   Emil: He ended up going in, and I think it ended up being around $6,000. Because the way the sewer lateral was cracked, they couldn't take the scope as far as they wanted to, because it could potentially I guess, fall in the cracks and cause more damage. So they ended up having to replace I think an extra two or four feet more than they had originally anticipated. So it came out to $6,000. Obviously, that's the risk you take when doing these things is these are estimates they're not 100%. Mine went up 50%. So you always have to kind of think about those things and determine if you're willing to take that risk.   Michael: Yeah, something something that I do is I'll try to go get bids, exactly like you did. And then I'll add a buffer on top of that, because there's the you know, you're you're paying for this repair, but there's also time, energy effort and risk, like you mentioned, involved with doing that kind of repair. And so in my opinion, depending on the scope of that, you should be compensated for that as well. But you should be building in some some buffer as well, because I've seen projects like that blow up. And that can be really, really scary.   Emil: Yep. Yeah, this was a sewer lateral is definitely not for the faint of heart. I mean, they could break it up and see so much other stuff, you know what I mean? Like, it was definitely a risk that I, I don't know, I bought a lot of turnkey properties. And I was like, ready for something that I don't want to say it was going to be more of a challenge. But yeah, it was going to be more work involved more of a challenge. More like getting to know the nitty gritties of a property. So it was a risk, you know, this was the fifth property I've bought, so I was ready to kind of just take a little bit more risk.   Michael: Yeah, and that's, you know, more risk more reward you got this property for probably under market value because of some of these issues. Now, like you mentioned, you've got brand new sewer lateral in place, you're never gonna have to worry about that again for the lifetime, but you own the building.   Emil: Right, Yep, and not gonna use it. Yeah, they used to use cast iron. So you know, they rot after a very long time and break now is replaced by PVC, which I believe has a much longer life.   Pierre: No, it's cool to it's cool to see your report after you've already closed on the property and get the the aftermath scoop as well. So mine is going to be from the other end of the transaction. This is active right now this is a property that we're working on. So we're still in the contingency period now.   Michael: Ooo a fresh one.   Pierre: This is first time. Yeah, since fresh, and this one's off of Roofstock as well. This is a roof stock select property. So yeah, this is my first time seeing an inspection report. So this is, you know, a learning experience and everything I know I've learned from this podcast here so listening off in the sidelines producing the shows,   Michael: We always joke about how they're so self serving. I mean, you're This is the epitome of the self service.   Pierre: I've been self serving from the beginning here, dudes.   Michael: You're like guys, we got to start a podcast, I want you to talk about remote real estate investing. I want you to view inspection reports.   Emil: Tell me everything you've learned.   Pierre: That's how I avoid my enrollment fee for Roofstock Academy.   Michael: That's the real long con, I'm going to get hired at Roofstock…   Pierre: Yeah, so this is the inspection report provided from Roofstock buy with the roof stock select property. So they give you two files. One of them is kind of an estimate summary which we'll look at real quick before and then we'll jump into the inspection report. I found it interesting to look at what they highlighted as needed to be done as opposed to going through all of the pictures individually and seeing other things that weren't mentioned.   So this is what they said the estimated total was, and here, here are some of the issues that they pointed out. So some, you know, shrub trimming near the walls of the outside, like the little line item total there, this house was built in 66. So this is kind of the old window structure, all of the windows were painted shut. So that is a hazard, especially for section eight. That's actually not up to the code of section eight. This was I'm working on this with my brother. And we're thinking we want to replace the windows, but not just yet. I don't think it's that big of a deal. We're just going to cut the windows open. They might, I don't know, I'm worried about the ropes on the inside of them being kind of rotten and not functioning properly.   Michael: Yeah, windows are expensive. Yeah, very expensive to replace.   Pierre: I got a quote on Windows and I think I can't remember I don't have the numbers in front of me, but I think it was like $7,000 per, wait.   Emil: Yeah, for all the windows. That'd be crazy.   Michael: That was probably for all the windows.   Pierre Yeah, yeah, it was it was seven or $8,000, something like that. So definitely not what we above and beyond what we had set aside for capex on this property, so we're thinking, let's just cut these open, make them up to code and then replace them later on.   Emil: That was a smart thing you did though, is going to get that quote right when you saw Okay, we think we're just gonna have to cut the paint so that they can you know, they're not painted shut, but what happens if we have to replace the windows? What does that cost look like? So that you can like you can pricing that risk for yourself, okay, if we had to replace all these Is it still worth it to us?   Michael: And something else that you'd sounds like you've thought about is like, what's the ROI on that replacement on those windows, if you're not paying for utilities, there might not be actual any ROI until you go sell the property and who knows when that's going to be so it's really that $7,000 I mean that could just be the cost of doing business that they get so bad that it's non tenable and you just have to replace them okay, so I mean that's that's property ownership but until you run that calculation and really understood what the risk is like you're mentioning Emil that's so important to put a number to it.   Pierre: The other thing to pointed out here was some roofing issues here I found all of these estimates to be like incredibly low.   Emil: Did you talk to someone else and get a maybe shingle repair estimate? Well,   Pierre: I did not speak to someone who's specifically working on shingles I got kind of just a contractor to look at the entire report here and see what they could do like as a lump package windows being separate Of course another little thing around the window around the does that like a little chimney some exhaust vent. Then cracking in the driveway and then this is the garage you know this isn't a livable unit so what do you do about that?   And then this this was the thing The only thing that really worried me about the garage was this little door here there are more pictures of it in the inspection report but there's like this is a metal door and there's like sharp pointy edges and I don't know if someone were to get scratched on that that seems more like it's not making the place less livable it but it is maybe a liability if someone gets hurt on it.   Then on the interior here we have this outlet, 38 bucks you know is that?   Michael: That just now yeah that seems pretty low for some electricians and electricity like trade fee just to show up to the house like 100 bucks so.   Emil: Yeah, that's gonna be 100 120 bucks for sure right?   Pierre: Yeah. Right and then there's some cracks here which I spoke to the agent down this is an Alabama so I spoke to the agent down in Alabama and he said there's any house that is of a certain age even five years old, you're gonna start seeing these cracks because the ground is soft and it is moving and so that you know that worried me like what's going on here is the is it's not stable was there like massive shifts in the structure but apparently that's pretty common on houses of age in that area.   Emil: Random aside here my house is fully renovated my personal residence before we bought it two years ago, and you know living in Southern California we fault lines and stuff but even after two years if you walk through the house you'll notice a bunch of little cracks throughout the drywall as well. Even though it's all new drywall and new, sheetrock everything, before we bought it.   Pierre: Okay, here was another thing. Recently, we had a couple of videos, we posted a couple of videos from our certified agents in different markets. And one of the things he brought up in from Memphis was the circuit breaker. So you can check that video up here, just look at the specifics around circuit breakers and fuses in Memphis. But this one looks like it's pretty overloaded. And so we're thinking, my brother, and I were thinking maybe if we could replace, because there is room you can see you can fit some more in there. But these are all the fat breakers, or how to I don't know, forgive my terminology here. I'm not an electrician. But I know that there are thinner attachments here. And if we were to replace these fat ones with thinner ones, we could fit a lot more. So we're not doubling up, you can see a lot of doubling up happening there.   Michael: Yeah.   Pierre: So instead of replacing the entire service panel, going in there and replacing some of the connectors with the thin connectors so that we can single up on them.   Michael: Pierre, did you get input on the aluminum wiring being present at the breaker because that definitely gives me the heebie jeebies.   Pierre: Yeah, so that is a concern. And we have a meeting today to speak about that. Can you tell me about what the issue with the aluminum wiring is, and because I believe that aluminum wiring does affect our, you know, the status as Rootstock certified.   Michael: Right. So aluminum wiring is just an older school style of wiring and prior to that, they use what's called knob and tube. And so it's just it has a tendency to, I'm not even gonna say tendency, it has been associated with overheating and causing fires. And it's just, I don't think it's as good of a conductor as copper, and so that there's more resistance in the wire. And that's why you get the overheating. And you'll see copper is is kind of the norm in newer properties. So there are different ways that aluminum wiring can be present in a property, it can be physically, the entire length of the wire, could be could be aluminum, it could be also what's called a pigtail, which is they have copper in the in the wire, and then at the very end at the breaker, they convert from copper to aluminum, and then you have aluminum going into the breaker.   So I would see if I couldn't get a little bit more clarity around. Okay, is this aluminum wiring just the breaker or is it pervasive throughout? Because a lot of insurance companies actually won't insure properties that have aluminum wiring, or knob and tube wiring. So that might be a question on your insurance intake form is Hey, is there what's the wiring material? And if you say copper, and the house burns down, and then they find out what's aluminum, they could then deny your claim because they said, Well, this is not, you know, you lied to us kind of a thing. So I would definitely look to go get some clarity around that.   Pierre: Okay, that's really good to know. And so if the house is wired through and through with aluminum what's what are your thoughts on that?   Michael: I would definitely say chat with the local agent and find out what's common for the area. Because this is just one of those things, all the houses that were built in the 40s 50s 60s, I think they used it up through the 60s even, had aluminum. And that was par for the course. And that was not a big deal at the time of construction. So unless someone's done a total rehab job on the house, it's going to have aluminum, so it's definitely something that you can find an insurance company that'll do it, I've done it in the past, but it's just gonna be more specific to that market.   So you might need to go with a local carrier or a local office, because there are tons of people that have this in their home. So it's not like it can't be done. It's just it's not as good as copper, though, if you if you can have the better one, choose that one, you know, right. But again, if this is the only option, that's just a risk that you're going to take in any insurance company that that insures it with knowing it has aluminum wiring, okay, then you're kind of covered, but it's just a risk that you want to be aware of that. That is present at the property.   Pierre: That's really good to know, that's something I haven't considered yet looking at this, I was just kind of concerned. I did see the note there about aluminum wiring, and I did see that that affected the status with the Roofstock certification. But I didn't quite know why. So thanks for that. The main concern I was looking at was like these double tapping here.   Michael: The double tapping Yeah.   Pierre: But it looks like there's room so I think that we won't need to play replace the service panel if we can, you know, get that addressed. So apparently the water heater is passed it's expected lifespan but it is still functioning. It's an electrical water heater. So Michael: That's 28 years. Wait, that's incredible. It's still going after 28 years? Yeah, it was manufactured 29 years is manufactured in 92. Yeah, little things still cooking away. They don't make them like they used to man.   Pierre: Yeah, that's true. So this should this be something that we start factoring in as a potential repair in the next year or two?   Michael: I would I mean, I would kind of like a meal situation with his furnace. It was assays but like yet, it still works. But you're on borrowed time at this point.   Pierre: Okay?   Michael: You were on borrowed time a decade ago, this thing?   Pierre: Okay.   Michael: So I would definitely say that's that's gonna go and the way that Murphy's law works is you're going to close and the things get a blow on day one I would definitely,   Pierre: Don't say that man.   Michael: You know, plan for this is this is coming up. Now something to think about is just getting a home warranty, whether that's provided by the seller or you get it, but I would say hey look, you go to the seller and say, what I would do is say, hey, look, this thing is well past usable life, I'm gonna have to get this thing year one, I need a credit for it. And you can decide on what that cost looks like. But that's how I would definitely play this. And then you can turn around and go get a home warranty. And the home warranty is hopefully going to cover this, the devils in the details, always. So make sure to talk to your local property manager around any good Home Warranty companies in the area. But it's kind of a nice insurance against it.   Emil: One thing about home warranties that I've seen personally and maybe it's just the warranty provider, I used, a lot of things that maybe pass their serviceable life and then you get a warranty on them. They're going to they're not going to cover that like we had my personal residence a, the condenser was way past service will live like a dog had peed on it or something before we bought it, but it still works fine. And then six months down the road. like Michael mentions Murphy's Law thing gets busted. And we went back to the the warranty company and they said no, it was it was faulty. So we're not going to cover that. So just a random thing they keep in mind as well, with warranties.   Michael: Yeah, you hear the good and the bad, because that's mine blew too and they totally replaced it.   Emil: Maybe it's just the provider I used. We won't name names.   Michael: I think part of it is the provider.   Pierre: That's cool. So looking at this, I want to show you a couple of other things just to show like what the inspector highlighted as things that we need to really take care of, and things that I found in the inspection report proper. That concern me.   So this is what the inspection report looks like. It gives you a summary of things that need to be repaired based on the different areas of the house. So I'm going to just a lot of these things that are yellow are what were addressed inside of the kind of capex summary at the beginning. But there's some other things in here that they didn't point out. So one of the things we saw was there was popcorn ceiling. That you know, it's kind of concerning, but not unless we really want to do a major rehab. So I don't think we're going to be doing a major rehab on this property anytime soon.   Michael: And Pierre, why is it concerning?   Pierre: Asbestos, it's like an older construction where they're using asbestos so a little dust isn't going to be a bad thing. But if you're going to be cutting major things open when the property is tenanted, you could be exposing them to carcinogens.   Michael: And just so everybody knows I'm not a doctor, I'm not a medical expert, asbestos expert, but from what was has been told to me is that asbestos is really only a problem when it's airborne, or it's in some form that is not solid. So you encounter asbestos in a lot of different places. And I know for me, I like I was super gun shy. I saw asbestos in a report, I was trying to run the other direction. But what I was made to understand is that if you There are many different ways to encapsulate asbestos to prevent it from becoming airborne, that are perfectly acceptable and safe. And so if you see asbestos on your inspection report, just go look to understand where is it? how pervasive is it? What remedies are available, that are perfectly acceptable, legal and safe, that you can that you can go through to make that no longer an issue?   Pierre: Cool. Yeah, the first time I saw that I was like, Oh, no, but then just kind of digging deeper into it, you realize it's not going to be a problem for us.   So this here, this is on the underside of the roof. It's a little bulging thing. They didn't point that out in the in the summary the repair summary,   Michael: It looks like they just did a cheap replacement on the roof deck when they replaced the decking so they use plywood everywhere else. And here they use this cheap Yeah, this is called particle board.   Pierre: I think it'd be pretty easy just to support that with a couple of two by fours and a piece of plywood and a pin nailer but just getting up in there is going to be a pain but that's something that I want taken care of.   I think that that was pretty much it the aluminum wire and and this that that are my big concerns that weren't pointed out so much on the repair estimates.   We asked the seller to repair all of this stuff, and he agreed to to to repair all of these things. Before the sale   Michael: That's fantastic.   Pierre: But now I have a couple more details now that I didn't have after walking through this with you guys. It's like you know what to wear. what extent is the house wired with aluminum wire? And yeah, so that's that's a big concern now that I'm going to need to bring that up and see if we can. And then also, can you put it in new water heater? Is that part of   Michael: Right? Yeah, that it's not called out as broken or needing repair. So is that included in the scope or not?   Pierre: Right? And is that a reasonable thing to ask? Or am I starting to nitpick?   Michael: Is that it's not a hypothetical. You're genuinely asking?   Pierre: I'm asking the wise words of the sage Michael Albaum.   Michael: If I am the wise sage then we're, we're all in a lot of trouble, guys, believe me? No, I mean, I don't think it's, it's nit picky, the water heater, that's honestly one of your biggest ticket items on this report. And so it's, it's not called out as a expense, or the cost associated because it's still working. So truth be told, it's not something that I would actually have the seller replace, I would much rather get dollars for it, because it's still working. And the thing might go another five years, who knows, and so why replacement isn't broken. And other people might have different opinions on that. But that's, that's my personal belief. And now you're empowered to have the dollars in your pocket to take care of it, when it does become an issue. And then you can decide what am I going to go the Home Warranty route and save some money? Or am I just going to keep these dollars set aside to actually replace the thing when it when it needs to be replaced?   Pierre: So what you're saying is to ask for a credit for that?   Michael: That's how I would play it, I would either ask for a credit. And I like a credit better than a reduction in purchase price. If you're using a loan, is the credit is truly dollars in your pocket, that reduction in purchase price. Well, if you reduce it by 1000 bucks, your savings is only the 200 bucks, if you're using alone is 20%, or whatever your down payment is.   Pierre: Tight? Yeah, that's that's what we're going through right now. We have a meeting today, we're in the inspection contingency period now. So we need to, we're coming up on the end of it. So we really need to figure out the rest of this and make our call.   Michael: And, Emil, how would you play that?   Emil: Exactly. Like you said, I think having the money in your pocket is better, because then you can just put it aside or whatever, maybe the thing lasts another two years, right. So you don't have to replace it right now. The other thing that the other reason I would I would take the money or ask for money is, you don't know how poor of a job they're gonna do, they may replace it, but do the minimum amount possible getting like the cheapest person, you know what I mean? versus you like really thinking about how you want to get it done and find someone you trust or whatever. So wherever you can, I would ask for credits and reduction to make the repairs yourself, versus having them kind of make as cheap as possible to get this thing sold.   Pierre: Okay, so you're talking about the all of the repairs, not just the water heater?   Emil: I think the other ones are small. I mean, if you can, yes, I would ask for credits, and whatever. I think at this point, you've already asked them to make those fixes, and it's fine. I don't think any of them are major enough where it's gonna be a huge issue. But that's kind of how I play it. Now, knowing what I know.   Pierre: Do you know if there are any protections, if they do do a crappy job, and we go back in and look, and they just just did some stupid work, and we got duped into buying the property?   Emil: I think of that point? It's on you. But you'd have to ask a lawyer probably.   Michael: My guess is there's going to be language in the PSA, or the addendum around acceptability? Because like, like if they're just phoning it in, you know, and not really doing the work to an acceptable degree. I think that there's got to be some out for you. But I think the language is going to be specified in the contract.   Emil: Pierre, what would you have done, had they said no?   Pierre: Well, I'd already started getting quotes from contractors, although those are tough to get if they because the property is not under our ownership yet. The property is tenanted, and so a lot of them were like, well, when can I get in there? And do it or get in there and take a look, I don't want to look at these pages, you know. So, I did get a couple of estimates. We were ready, we were ready to take on the repairs ourselves, if we would get a reduction in purchase price. Well, I mean, the numbers still work for us. I mean, all of these repairs, were still under the capex that I'd set aside for the pro forma so the numbers still worked, although I'm not about to just you know, give people money they don't deserve so I would have asked for the repairs or now i don't know i wouldn't I didn't know about asking for a credit. That's cool. Like give me money.   Michael: Most lenders have a cap around how much and this is again, using a mortgage hub will have a cap around how much you can get back and credit versus production and sale price. So just something to be aware of. It's like one or 2% I think is really common. Every lender might be a little bit different, but that's kind of what I've heard and seen. So if you're buying $100,000 house, they're gonna win. get you to a grand or two in terms of credit, but the less you reduce the purchase price, because that's an agreement to you and the seller as much as you want. But I'm curious, what was the bid, that there are bids that you've gotten thus far? And what were you prepared to ask the seller for?   Pierre: The bids I got were between like five and 6000 total for like all of the stuff and not not including the water heater, and not replacing windows, of course.   Michael: And so were you going to ask the seller for all six of that, or was it some a different number,   Pierre: We were going to also consider the findings of the appraisal. So we also have an appraisal contingency. So I wanted to just bring it all together. So we're not just like nickel and diming. But just kind of big, big picture. And I don't know, this is my first time. Like trying to, I don't know, I'm not like so bullish and confident going in and be like, Yo, I need this fool, I'm trying to be I don't know. polite. I don't know, dude. First one.   Emil: I think you're doing just to set you're doing a good job on your first one. I probably wouldn't have even asked for anything because I had no idea. I was just like, up it is what it is like, I got to deal with it. For what it's worth, I think you're doing a better job than I did on my first one. So don't beat yourself up.   Michael: No, I mean, you're definitely you're going through all the steps. Yeah, like Emil said, hats off to you man. I was very in a very similar boat to a meal just like stumbling through like I guess this is how this works now.   Pierre: You guys are really just giving yourself a round about compliment to yourselves because everything I'm doing is what I hear you guys say all the time. So…   Michael: You'll have to keep us posted on how it all goes and how the quality of repairs come out and how the deals have a deal shakes out.   Pierre: Cool, thanks, guys.   Emil: Alright, so we are actually going to cover Michael's inspection report in a part two episodes since this one's running a little bit long. So make sure you're on the lookout for that one. Michael always has tons of good advice, so it's gonna be a good one. We'll check you out in that episode. And happy investing.   Michael: No pressure, no pressure,   Emil: No pressure, Michael.   Michael: Happy investing

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 design these houses, with foundations that are oftentimes fairly porous. And then when you combine that with the amount of rain that we get here, we see issues like mold, we see issues like dampness and basements. And then, you know, some settling and foundation shifting that's associated with age and moisture.   These issues are pretty common around here and definitely can be caused for large concern, but oftentimes are not. And, you know, I talked to Mark about this a few weeks ago, I work with one guy who says mold is gold, because it scares people away. But it's really easy and common. It's an easy thing to fix. And it's so common, but you know, when you deal with people from Arizona, for example, they hear the word mold and they just shut down right?   So that was those would be a couple things. A couple other common issues around here have to do with the age of buildings and cause people to hesitate or odd layouts. We have sometimes these duplexes or triplexes that were single family homes maybe 100 years ago, and they'd be repurposed over the last 100 years. They've got really bizarre layouts and they're not your traditional uptown or side by side duplex. We've got very small bedrooms that really should be closets, attics that are finished, basement bedrooms, things like that, that if you trace the lineage of a property back, you'll find that every 20 or 30 years or so something was done and changed it a little bit so those are a few of the things and that just other issues that are associated with older buildings which we kind of already touched on.   Michael: Yeah, that makes total sense.   MarkL Yeah Max I think one of the important points to the mold aspect is it's so cold up there that you know mold really thrives on heat right and that's where a lot of water just kind of you know, it turns in the mold once the heat gets to it but out there the freeze you know, really takes care of it so you're not going through these vicious mold cycles out there. It's really just maybe more seasonal if anything, right?   Max: Yeah, I would say it's not as common in the winter but these basements again, they a lot of them just let a lot of water in and if you're not running a dehumidifier or you know there's a lot of people that do external French drains and things like that there's ways to combat these once you remediate the actual mold issue.   Michael: That's great.   Mark: Mold is gold well we'll save that only for the more high level investors out there that really can coined that phrase I think that's good for anybody so it doesn't freak them out you know once they see some of those items.   Max: Right.   Michael: So max I come from a long long background in the insurance industry so I'm curious to know in Pittsburgh Do you guys have natural disasters? Do you have tornadoes, floods, hurricanes, that kind of thing?   Max: You know, it's funny you say that I it's another thing I like to talk to out of state clients about while our weather here is not notoriously great, you know, we get a lot of rain and it's fairly overcast, we actually don't have many natural disasters. We really don't have earthquakes. We have tornadoes one tornado me we every, maybe every three to five years. And you know, it touches down and it's gone. And, you know, I guess we do have some floods, because of the topography and the amount of rain. And they're, you know, you coming from insurance, I'm sure you're familiar with, we do have a lot of properties that require flood insurance. So that's something that we dive into, you know, before we commit to a property, because that can be a little pricey and can hurt hurt the numbers if that's another 1200 bucks a year or so. Right?   But the weather here, it doesn't get too hot. It's really not as cold as some places, you know, in New York, or, you know, Minnesota or Wisconsin or places like that. It's not as hot as you know, some places in the south. So it's fairly mild here, in my opinion.   Michael: You're talking to a guy from California. So the fact that snow is a part of the equation, mild is no part of that sentence.     Max: That's right. Yeah. Well, yeah, with no earthquakes here so we'll take that.   Michael: That's a big win. That's a big win. Sign me up.   Max: Right.   Michael: Okay. And so Max, I'm curious to know, or for investors to know, because I think property taxes is one of the biggest misses that investors encounter in investing remotely, they often know how, what their property taxes look like in their county or their state, but going across the country across state lines can often change things. So how do you know how people should be calculating their property taxes?   Max: Totally. That's the biggest one I've seen. Mark and I have talked about this as well. You know, a lot of times we've got buildings here that have been owned in the same family for 70-80 years. And on the surface, you look at the taxes, it's like, wow, $200,000, and it's only $950 a year in taxes. Well, that's what it is now, but it's going to change.   So that's one of the conversations I like to have with people. It varies county by county here. So Pittsburgh's in Allegheny County, and that's where most of the properties that we're going to be talking about or Roofstocks going to be publishing are going to be located in Allegheny County.   Generally, in Allegheny County, the way they reassessed these properties is approximately 80% of the new sales price. And then the millage rate in each Township, which we just discussed, there's a ton of them, varies. So I can't really give a one size fits all answer there other than you can calculate the assessed value based off your purchase price, and then go check out what the millage rate is for whatever neighborhood that property is actually in and go from there.   Once you get outside of Allegheny County, in the neighboring counties, such as Westmoreland, Butler, Beaver County, places like that, they're all calculated differently. So we could go on a one by one basis there but Allegheny County for the most part, that's how it's done.   Michael: Okay, perfect. And that's what I always share with folks too is Hey, just go call the county assessor ask how you calculate your resale property taxes. So this is super helpful. So for anybody listening, who's interested in investing in that market, go look up the millage rate for that specific area and multiply it by 80% of the purchase price.   Max: Approximately varies year over year. Sometimes it's 75. But yeah, that's a safe way of calculating it   Michael: More or less. Okay, cool. Mark, do you have some other questions for Max?   Mark: Yeah, I think it's good to know really what your expectations are because it's a two way street. You know, buyers are putting in offers on Roofstock for MLS properties, we would kick those offers over to you as a referral. And you're going to work with those buyers. But when you have that first conversation with buyers, what is it that you always emphasize or some of the common things that you say hey, before we move forward into and submit this offer. Let's make sure we have these things in a row. What What is it that you go through?   Max: Well, I'll tell you this, Roofstocks done a really good job of making sure buyers are pre qualified and ready to buy. So it's a little different for buyers I work with from Roofstock, that may be someone I've met through another means. But the biggest thing with expectations is I try to let people know that the market still pretty hot, it has slowed down a little bit, especially in the multifamily world. But if we see a property that the numbers look really, really good, a lot of other people are seeing that property, and they're running those same numbers as well. So you just got to be ready to go.   And I know a lot of people a lot of times being from out of state have a lot of questions. And some of which we've just covered, how do I calculate taxes or some of these issues? So I like to just try to have this conversation with them initially, and say, Hey, you know, here's, here's the answer to these questions. By the way, we also have a 10 to 14 day inspection period where we can make sure we're not getting into something that we shouldn't be getting into. So if a property looks really good, I just want people to understand that it's going to be gone still within 24 to 48 hours around here.   Michael: That makes total sense.   Mark: That's great. And when you submit an offer, and you hear back from let's say, a listing agent, you know, what's the typical back and forth that you have with a buyer, because I know some agents give you extra information and give you some ideas about you know, where you need to be, how do you approach that with a buyer to give them as much market Intel, just so they can really either submit that offer, say, Hey, you know what this may not be, you know, the the best offer on the table. So let's go shop for another property.   Max: A lot of times, especially with deals that are really competitive, I just tell people, even if it's not a highest and best situation, sometimes it's best to put your best foot forward and just say, Hey, this is what I'm willing to do. This is my personal, highest and best situation. And if someone else wants to do 10,000 more, or is able to offer cash, then so be it right, and this one wasn't the one that was meant to be. But that way, at least you know, you're not trying to squeeze out two or $3,000.   I try to help people understand that if you're going to look at this as a long term investment, two or $3,000 off of sales price, when you're doing a 30 year mortgage is so small, that if you think this is a property that you really want, it looks like a good deal. Let's go for it, right. And we can do our due diligence on the property and some of these other things during an inspection period, when we can still get out of it, and you can get your deposit back.   Michael: And Max to your point. I mean, even putting your best foot forward, knowing that you might still lose out on the deal allows you to potentially become that backup offer. If the first deal falls through this just happened to me…   Max: Totally,   Michael: You know, the selling agent came back and said, Oh, you know, our other buyer fell out. Are you still interested? And I see Yeah, you know, we can talk? Yeah, let's have that conversation.   Max: Yeah, we can talk about that offer. That offer might go down a little bit right?   Michael: Exactly. You gotta pay for rejecting me.   Max: That's, that's right. Yeah. But you know, that's that's happened a lot around here. And I'm glad you said that, because I think we've had a lot of appraisal issues lately. I'm not sure if this is happening in other markets. But I think appraisers, especially around here, are tasked with the difficult job of trying to cool off a hot market, right? They see these prices going up and going up. And they don't want to be the ones left holding the ball like 13 years ago, or 12 years ago. And so we've had a lot of, you know, appraisals come back low lately. And that's really open things up for what you just mentioned, hey, this person doesn't want to buy it anymore, you know, hey, is your offer still stand? So I'm glad you said that, because we've seen a lot of that here.   Michael: Interesting. And so in terms of the offer prices that you're seeing properties go under contract for, are they and keep in mind everyone listening, we're recording this end of September 2021. But are they at list price? Are they over list price? Are they under list price? Where are you seeing the off the winning offers coming coming in?   Max: With single family homes, we're still seeing them above list price pretty often. With multi families not quite as often. I feel like there's a few reasons for that, you know, obviously the first and foremost being there's less people looking to buy multifamily properties that are single family properties. But multi families are still going to be around list price. I just had a client lose out the other day we went 7000 over on $125,000 duplex, and I think the winning bid was probably about 10 or 11,000 over so that's still common.   We don't really have anything, you know, more than, you know, 10 or 20,000 over for the most part, just because you don't really go 50,000 over, you know, on a $200,000 purchase. I'm sure in places like California, you may see it more often because the initial price is higher, right? But here the percentage is, you know, never really too much more than 10% above list price.   Michael: Okay. And are you seeing people get really aggressive and creative with the terms that they're offering?   Max: Yeah, yeah, I mean a lot of people still waiting inspections and I know that's something that's hard for a lot of Roofstock clients. And I really honestly expect a lot of Roofstock clients to want to waive inspections as they've never seen the properties but sometimes you have to remember you're competing against local investors as well, who have experience and they've walked that property and they're comfortable waiving inspections, because they already know you know what's needed or what's not. So that's obviously still a big part of it.   And we're seeing, you know, lease backs to the owners, because it's hard to find properties for them to move into. So they're letting owners stay, you know, for three months for free. There's a lot of creative things going on right now.   Michael: Interesting.   Max: There's still people covering appraisal differences as well, even if you're doing a purchase with a loan, you know, you can still waive the appraisal contingency, but you're going to be responsible for covering that that gap. I've seen that more often in the last few months than I have in the past as well.   Mark: And so Max, are you when you're getting an offer submitted through Roofstock? How many times are you doing a leaseback? Like what percentage? Or what percentage? Are you waving? You know, the inspection contingencies or any of those like what's what's the common ratios that you're seeing out there?   Max: For Roofstock not as much again, the clients are usually out of state. And so they they feel more comfortable, at least having an inspection done. And so I try to help them understand other ways that we can improve the offer, you know, obviously more money is helpful, but maybe more deposit money, maybe a quicker closing, whatever it may be, there's other ways to make your offer more attractive. Maybe you just tell them, hey, I want to do an inspection. But it's going to be an as is sale, I'm either going to take it or leave it I'm not going to use this inspection to really beat you guys up and negotiate any further. I just had a Roofstck client do that this week. So leasebacks not as often. But you know, other creative strategies are pretty common.   Michael: Awesome. And, Max, when you're putting up properties onto the Roofstock select program in the Pittsburgh market, what criteria are you looking for? What is it that when you see a property screams Oh, perfect investment property candidate?   Max: Yeah, Mark and I have talked about this a lot. And I'm still trying to find, you know, what's best for the Rootstock investors? And I think the answer to that is there's investors that are looking for all different types of things. So I'm trying to get creative, and put all different types of properties on there, I've been doing a lot of properties in these Lawrenceville types areas where the initial return doesn't look great. But I found that there's Roofstock investors who are from California or Washington, and they're still looking at us. And when these are still really good numbers.   So that's I'm doing some of that a lot of the B to C plus properties where we're looking at a 1% rule. That's one of the things I'm looking for. And then I've I've been uploading some properties to Roofstock lately that are in some of the areas where the returns are going to be a little higher. And on the front end, I've really found it's important with those properties to have these conversations about potential issues. So there's there's all sorts of different criteria for what we can find in Pittsburgh.   Michael: That's great and cool to hear that Pittsburgh does really cater to to every investor type or every investor persona with the type of asset that they have that you have in the market.   Max: Absolutely.   Mark: Yeah, I have a few stats I want to throw at max and just see what he if he has any comments around these because I was just studying John Burn's real estate data, which is a great source of information. It shows that rents were up 2.7%, from 2020, basically. So over the last year, it was 2.3% in 2020, and 2019 is 3.6%. So slow and steady, I would say is always good. The existing home prices jumped. This is a median number from 173 to 192 in 2021. So over the last year is jumped up a nice percent was that clip about 20% clip, it's not too bad or 10% clip, excuse me.   Here's the number that stood out. And I would love to hear what Max has to say on this. So I'm looking at the cost of a payment and maintenance to own versus the cost of rent. And it shows that the cost of a payment with maintenance for let's call it an entry level home is $997 a month versus that same entry level home to rent is about $1416. max, are those numbers accurate? What do you see in the market?   Max: That sounds accurate to me, like I said, you know, $1400 a month in rent would be about probably $170,000. Home, depending on the area, but so that average rent sounds just like the average purchase price you just mentioned. So that sounds spot on to me. And I'm glad you brought that up the rent increase to one of the other things that we see around here a lot, which I've had conversations with a lot of Roofstock investors about is the current rents of these properties we're uploading, we have a lot of properties here that are older, have maybe been passed down through families, tired landlords, and the rents are just crazy low.   And so you know, when we initially upload properties, if there's tenants in there, the numbers may not look great on where they are now, and there's a lot of reasons for that. And the most common reason is landlords, just really not raising rents and keeping up with how fast they've appreciated, like you just mentioned, Mark, I think a lot of these older, tired, landlords don't really go and check the real estate stats like that and say, oh, holy cow, I should have raised this, you know, 10% over the last three years, because that's what it's gone up, you know, and people don't realize that, you know, they're still sitting at 650 a month for a one bedroom. And, you know, it should be at 850. Now, and that changes everything. That's really, really common around here.   Michael: Yeah, that's such a good point, Max. And I was just having a conversation with some investors yesterday talking about the difference between buying on pro forma or buying at true value. And so what we're talking about is because of single family is a little bit different than multifamily. But for single families, if the potential is truly there, I think it can totally make sense. But you just want to avoid is a seller saying, Oh, well, the market rents 850, my current rents at 650. But you have to pay the price to buy the home at 850. And really, the market is 700. That's where you get yourself into big trouble. Max: Max: Right? Right. It's like, well, you should have gone and done it then. Right?   Michael: Yeah, why don't you do it? And then I'll pay for it. Right?   Max: Why don't you do it then and keep the house. But you know, what I'm seeing a lot of times is that, in this market, we're kind of purchasing in the middle of the pro forma and true value. You know, people are pricing them at the true value, and the performance, you know, 20,000 below that, or 30,000. Below that. And oftentimes where we're settling is somewhere in the middle. So yeah, I'm glad you said that.   Michael: Okay, that's that's super good to know, as well. And what tools would you recommend investors utilize to get a handle on what are the true market rents?   Max: Well, I this is a conversation I have all the time, I wish there was some sort of rental appraisal software where there was an actual correct answer for that. But really, you know, we have this conversation a lot, there is no such thing as a rent appraisal, right? It is, whatever someone's willing to pay. The tools I use are probably the ones that a lot of other people use. I use Zillow rentals a lot. I use Rentometer a lot. I use Craigslist, I look what's out there, I just try to look at everything that's, you know, really available. And then oftentimes, if it's still available, I'll take 10 or 15% off of what that is, and say that's probably about where we should be otherwise, again, it would be rented at that price. Right?   Michael: Right.   Max: Yeah, it wouldn't be available still, if it was if it was priced correctly, but we use rent ometer I use rent ometer a lot. Zillow rentals a lot.   Michael: Yeah, those are those are both great tools.   Mark: So I have two more quick stats. One of them's vacancy. So we're showing the vacancy rate is actually like 5% going all the way back to 2016. So 95% occupancy, as you guys would say, Do you find that that's true? Or you know, it sounds like it's a very competitive rental market out there. Is that right?   Max: It is a competitive rental market. I've I always go back to two things when I think about how competitive the rental market is and how people don't really realize how competitive it is I purchased a building in December of last year, so it's been about you know, 9-10 months, and the owner was living in the downstairs unit which was a really nice unit and they told me it's probably worth 750-$850 a month. Well I went on Facebook marketplace, listed it for 1100 a month I got all these comments You're crazy. You're crazy second day rented so it is competitive. You know people don't realize what true rents really should be and how many people are actually looking for a nice property if you've got a nice clean property people are willing to pay because there's not a lot of those available.   Michael: Awesome Wow.   Mark: Well the backup statistic to that is 53% of the housing units are tenant occupied. So renters are occupying 53% of the property so that shows you homeownership rate out there is just not as strong and that's in the city as Pittsburgh so that's where the competitive nature is coming from versus ownership rate is 64% nationally right so you flip those numbers around and you see that there's that many more renters than in Pittsburgh.   Max: Yeah you know what it's really I've heard that stat and it's really amazing to think about when you think about the cost of you know purchasing a property here it's it's amazing that it's not flipped around and you can buy a nice house for $170,000.10 minutes away from the city but rental rates are really high here and I'm not really sure why I think maybe it's because we have a lot of out of state investors and you know, I'm not really sure beyond that, but the opportunity is there there's a large rental pool and not a lot of vacant properties as you just mentioned.   Michael: Interesting.   Mark: That's great Well to me that that's what sums it up right there is that it's there's the the slow steady your rental growth, there's a tenant occupancy, there's a there's a demand for tenants that are coming from both your side as well as they're looking for properties. So it sounds like the supply and demand is very healthy on the renter side which is the I really drive investors to the market.   Max: Yeah, and rising rents and rising ARVs as well so it's a good time to get in.   Mark: Max this was great. This is the the comments on just you know what, what the common things are that you're seeing out there. I mean, this is the information that you probably have the conversations every day, maybe 5-10 times a day so glad we could get that out there and share it with a listener. So Michael, this was us, he was probably one of the better interviews I would have to say because it's, it's a demystifying right, all the all the little things that people hear about, but you really need to hear it from the locals.   Michael: And I can say wholeheartedly, Max that   Max: I'm gonna have to go back and watch the other interviews how to make sure. Thanks, guys, I appreciate it.   Michael: This was great.   Mark: Thank you so much.   Alright, thanks again, Max, for joining us. And thanks to all the investors for listening and we'll catch you on the next one. Happy investing.

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 Plex I was talking about as we got into the property started taking off the sheetrock. My contractor calls me goes look, Michael, the electrical and plumbing is all done very poorly. So this needs all new electrical and all new plumbing throughout, that wasn't in the scope of the project. So that's $40,000 that was not accounted for. Like that you pay for it now pay for it later kind of thing. So absolutely. I think big risk, big reward potential but also big risk for things to go sideways and get overhead get over your head and over your skis fairly quickly.   Michael: And less passive back to the original topic.   Top: Back to the original topic. So now kind of getting getting through some of the other asset classes I'm fortunate enough to own a couple double net and triple net leased properties. And if anyone doesn't know what that is, I highly encourage you to go check it out. You can Google it, it's abbreviated n n capital or N N N for double net and triple net lease respectively. That is about as passive as you can get in my opinion, with still being a direct owner. Now you can go invest in syndications or funds or crowdfunding any of that kind of stuff, which is truly passive, I mean, it's like stock market investing, you set it and forget it type of a thing, you're not a decision maker, you don't get to decide when things are done, ie being a decision maker, but double net and triple net leased properties often come with very, very little landlord obligations or responsibilities, if any. And so that in my opinion is is another definition of mailbox money. And if somebody is interested, again, highly recommend going and check check stuff out online about those   Tom: And those leases are almost always you know, commercial or retail shop right?   Michael: Exactly at the CVS is the Walgreens the McDonald's, the Carl's juniors. A lot of these companies will use utilize triple net leases and not actually own the property. And so it's it's definitely a different beast different asset class unto itself, but still within the real estate space.   Tom: Future episodes thrown in the queue.   Michael: Let's do it. Let's do it. Hopefully you can't hear the dog snoring next to me.   Tom: Calming, it's calming   Michael: Soothing. Awesome. Tom, anything else before we get out of here.   Tom: Nope, I think that's pretty good. We got it.   Michael: Awesome. So takeaways, do your homework on the front end? Do the legwork. Get the train moving so that way it's easier on the back end. Alright everybody, that was our episode. Thanks, Tom. Always a pleasure to riff on these with you. If you liked the episode, feel free to leave us a rating or review whatever it is listening your podcast with the chorusing on the next one. Happy investing.   Tom: Happy investing.

Investing in real estate is a powerful way to build long-term wealth and achieve financial freedom. But if your assets aren't sufficiently protected, you may be putting yourself at risk of losing your hard-earned income.   Clint Coons is a real estate investor, an attorney, and an asset protection expert with Anderson Business Advisors. In this episode, Clint gives a clinic on how you can set up asset protection for your real estate portfolio.   Get a free strategy session with Clint's team here: aba.link/roofstock --- 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 everybody, Michael Albaum here. Welcome to another episode of The Remote Real Estate Investor. Today I've got with me a very special guest, Clint Coons with Andersen Business Advisors. And Clint is gonna be talking to us today about all things asset protection, and what we need to know about them as investors. So let's get into it.   Clint Coons, thank you so much for taking the time to hang out with me today. I really appreciate you coming on the show.   Clint: Mike, thanks for having me on. Looking forward to it. Yeah,   Michael: Absolutely. So for all of our listeners, if you could tell us a little bit about yourself and how you got into the world of asset protection.   Clint: Well, okay, so I'm an attorney that that that goes right. How do I how do I fall in asset protection? Well, I think a lot of it stemmed from the fact when I was growing up, my father was an avid real estate investor. And he, he wanted two kids, he got two sons, because he needed indentured servants for 27 years. And so I grew up working on my own my dad's real estate for free, he always said, hey, it's gonna be yours one day, so you better do a damn good job, or you know, I'm sending you to college, and I'm paying for it. So this is your payment. But what was interesting to me is that my my grandfather, my dad's dad, he's an attorney, and he never wants to told my dad, you should do this, this, protect your assets, reduce your taxes.   And so the few times that my father was involved in a lawsuit is more about let's just write a check to make this thing go away. And when I was in law school, start thinking about this, hey, there's got to be a better way to do it, rather than put yourself out there and, and have all your assets exposed, because there'll be some times when he would be legitimately concerned about a situation that came up maybe at an apartment building, that he thought, you know, there might be a big lawsuit coming down the road and hit him.   So that got me really started with my partner, when we started our firm, Anderson business advisors, you know, it was, I never thought I'd be where I'm at today with, you know, close to 400 employees and in multiple states. But when we started out, we saw that there was a real need for this and that people just weren't getting the right type of advice, I guess, when it came to protecting their assets. And so that's what I started doing.   Michael: No, that's awesome. And you so graciously are going to be offering everyone, all of our listeners a consult with a link in the show notes. So definitely check that out, if you are interested in scheduling a time with Clint or his staff in the show notes section of the podcast.   So curious to know, Clint, I mean, give us a high level of what asset protection is, what does that entail? Because I think it's a term that gets thrown around a lot in real estate investors love to sound fancy schmancy. So we love throwing terms around but give us a breakdown of what does it actually mean?   Cilnt: So So here's the thing I'll do, I'm gonna answer your question, but it's gonna be a little different here. You know, right now I have a portfolio that's over 250 properties spread out, cross unite, well, not all I don't have as many states as I used to. But it's in multiple asset classes, predominantly single family homes, that have multifamily commercial, also have warehouse and mobile homes. And when I started investing, I went about the approach of, you know, set up an entity, an LLC, or a corporation, that's what you're going to do to buy property and, and you're going to protect it. And I thought that was the way that it should be done.   And over the years, I started to recognize the fact that when it comes to asset protection planning, you just can't look at that by itself. And that's the mistake that I made when I first started practicing my partner and I, Toby, we came out of the gate and our firm we were doing really well and the first couple years and we could make $500,000 and, and because our firm works both on the tax and asset protection side, you know, we have CPAs tax preparers, bookkeepers and stuff, we would work to reduce our taxes down to zero, so I can make a half a million bucks and pay zero federal income tax. I thought I'm the smartest guy out there and   Michael: I have made it   Clint: Yeah, yeah. You want to be like me? Alright, let me just show you some of the things that we could do for you. And all of a sudden, at about 2004 or five I realized that all that stuff I was doing on the tax side really wasn't helped me out on the investing side. Because I wanted to be in a real estate mess or just like my father I want to go out there and buy and buy properties and I started struggling because you know when you go to an underwriter What do they ask for copies of your tax return. So I turn over my tax returns and they look at and they say hell you make no money. Yeah, it just doesn't show up there. Yeah. Thank you. You're a drug dealer, right? You're running coke to Miami.   Not the best scenario to be in. And so when it came to the asset protection side, I started realizing Alright, so you got the tech side, get this asset protection side, so, so you can put stuff in entities and you can overstretch yourself, I started realizing too, on some of the investments when I was trying to apply for an SVA loan, they would look at some of my structuring and they go, What the hell are you doing, you know, I don't see your name associated with this, and I'm trying to get a loan closed, and I can't get it closed because of some of the planning that I had done, which sounded really great at the time. And so for me, it was a matter of finally coming to this realization that for any investor, you have to look at three things, you look at asset protection, you look at tax planning, you look at business planning, and you understand that the entities and the tax planning that you do, should further you're investing and investing to me as a business.   And many of the things that I tell our we tell our clients run contrary to what a CPA is going to say, or possibly what an attorney is going to tell them because they themselves only look at that one leg. And they don't understand the wider picture of what it takes to get a deal done. Unless you have tons and gobs of cash floating around where you're going to you're not going to use leverage, you have to be sensitive to that. And, you know, even when I started, I was flipping properties in the Vegas market for a couple of years, my partner and I and we'd set up an S corp to flip them, we had separate LLC set up to minimize the risk and everything's running great, then we decided to wind this thing down. As you know, more California investors started coming in and screwing up our returns on these deals were picking up.   Michael: Yeah, we have a tendency to do that kind of across the board!   Clint: I know we would look at something and think, oh, man, that's it. That's a 60% return like not touching anything less, it's 28 to 30. Because you get a taste for that. And you don't want to deal with anything else after that point. Right. And so I started winding that business down. And because of the way I'd set it up through an S corp, you know, I thought it already solved my problems. I went away from, you know, deferring on my taxes and changing, I started showing more income and then I set up this flipping business and then that flipping business starts to become an anchor around me because every time I turn over my tax returns my 1040s. It's a what's going on with this business over here, it looks like it's about out of business. So I'm just winding it down. Well, how do we know you're just not very successful, and you have outstanding obligations and all this stuff that the bankers or underwriters like to throw out the brokers throw back on you? And it was it's been a learning experience, to say the least.   And so when I went to your question, when you talk about asset protection high level, you need to think of it at that what I described think of as a three legged stool that the entities can help you do more. And that's what they should do, you should set up structures that are going to protect you, but at the same time allow you to achieve your goals. You don't want to create a structure that's going to handcuff you. And it's going to make it hard for you to get to where you want to be because you have to deal with title companies, you're going to have to deal with underwriters at the end of the day and local attorneys or CPAs. And so you have to be able to explain it. And if you can't explain that you don't understand it, it's really not going to be beneficial for you.   And so I always approach it in that manner. Look at what you're doing, and then design the plan around the investing rather than stick the investor into one common plan, which so many people end up doing when they're working with people who don't who aren't real estate investors themselves.   Michael: Yep. I think that makes so much sense. And I love that you have kind of all three components at your company because I think so often too many of us have a great CPA that we've worked with and become investors and say, Okay, well, this is what I'm doing. Talk to a CPA, TPAs, tell them something, they go do it and then they go talk to their attorney and attorneys like yeah, I shouldn't have done that, like, Oh, crap. Well, the CPA told me and the attorney tells you one thing you go do and his CPA goes, I wish you hadn't done that. It's like, come on, can't we all talk under the same roof? So I think makes…   Clint: that I would probably step in and tell them a completely different strategy.   Michael: Yeah, there you go. So talk to us a little bit about some of the different vehicles that are involved with, we'll call it a quote unquote, asset protection, a typical asset protection scheme, somebody a lot of our listeners have a couple of single family homes, and they're looking to protect themselves, what are some of the different options or vehicles that they have likely heard about that they might want to consider utilizing?   Clint: Typically what we're going to look at, of course, as a limited liability company, LLC for for single family investors, if that's what you're doing, you know, the buy and hold type. I like to use limited liability companies and about 90% of the time, because that structure allows you to control how the income is going to hit your tax return, which is which I think is oftentimes overlooked by people, professionals who are not real estate investors. And I'll, I'll come back and circle back to explain that in a minute.   So the LLC is a hybrid entity, it gives you asset protection, something happens inside of the box, you know, I always say it's going to stay inside of the box verse and it also protects your assets from what you may do, you know, say you sign a personal guarantee on something and then you default and they sue you. Typically LLC should protect the assets from your creditors. And so when we're working with investors, we want to make sure that they're utilizing that structure in the right context. And you know where you're investing as well, because it could change if you're investing in Florida, I'm probably going to use a land trust in Florida because most people have a mortgage on their property, if they want to protect it, and they transferred into an LLC, well, then you have the doc stamps, which is going to hit you for one to $3,000, possibly on that transfer.   But if you use a Land Trust, you've got to pay any tax, and you get the same asset protection as the LLC if something were to go wrong. Whereas if you're in California, I'm probably gonna use a statutory trust out there, because in that context, you're gonna save $800 a year in a franchise tax, whereas the LLC in California, they're gonna want $800 for each LLC set up. And there's other nuances…   Michael: Per year for all you California listeners.   Clint: Per year. Yeah, maybe in Texas, it's a series LLC, or a Tennessee might be the same thing. And so what I tend to do is we want to look at where you're investing, number one, and then we'll decide whether or not it's going to be a limited liability company, or a trust for single family investments. But the mistake that I see that people make, and I used to make this mistake when I would teach, when I first started teaching asset protection workshops for real estate investors, is that I would tell people, hey, you know, if you got four properties, look at the equity value, and if it's under 250, to $300,000, put all four properties into one limited liability company.   And the reason I would tell people that is a, I looked at asset protection from an equity standpoint, you know, I got four properties, what's the most I stand to lose that if something goes wrong with one of those properties, there's toxic mole, the smoke detectors not working in the place burns down, because the meth dealer that you're renting to disable them, and then their family turns around and sue's You these are all stories that have from our clients, by the way?   Michael: Oh, yeah, I though you were grabbing these from thin air.   Clint: No, Hell no, he got a multi million dollar lawsuit for wrongful death. And I'm like, he must have been the most successful meth dealer in that county. You know, they say his life was worth that much. But you say you approach it with this, you that mindset that it's all about the equity. And when people think about setting up LLC is, you know, they're they're trying to save, they think, well, I don't want to spend the money, they don't see it as an investment. They see it as a cost. And that's really a preservation mindset, not a growth mindset when you go that way.   But then it dawned on me, when my investing took off, and I started buying more. And I started to realize, as a single family investor, it's not about the equity, I'm not buying these properties, I do a lot of investing in Winston Salem. And you know, that's not an equity play, that is just purely income. And that's why I buy residential real estate is to generate that that monthly cash flow that mailbox money that comes in.   So I started realizing Wait a minute, I'm buying for cash flow, let's say had four properties in one LLC, and one lawsuit takes out all four properties. Yeah, I lose $200,000 equity. But that doesn't hurt as bad as losing the $24,000 in income I was bringing in every year because that's what I had my wife quit her job, and now she's working full time in real estate. Or maybe we're sending her kids to college now and that $16,000 or $24,000, and we no longer have it. That's life altering for a lot of people to lose that money that you'd come to count on.   And I started thinking, Wait a minute, I'm doing this wrong, I'm doing people a disservice. And so they start telling, hey, when it comes to asset protection, put one property per LLC, that's and and that's not uniform, okay. Now at my level, I probably I typically group 10 properties for LLC. And people say, well, you're hypocrite you just told me to put one you're just trying to charge me more for make more money off me. Yeah, that's exactly that's all you know, I'm an attorney. Right? What's the difference between lawyer and liar, pronounciation.   So why? Why is that? It's because when you hit my level of investing, you have 200 properties, and you have 20 limited liability companies with 10 properties in each. And each of those LLC, let's say is thrown off 50 grand a year, I can lose a 10 pack of properties in a lawsuit and that $50,000 Yeah, it sucks to lose 50k but I've got 19 others giving me $50,000 a year. Whereas if that was all you had, and you just lost that $50,000 in income, that's life altering for me. It's not changing the wine I'm ordering at night, that's not changing where I'm vacationing, it's not changing anything about my lifestyle. And so I often tell people you know, when you get up to about 20 properties, then look at starting to group them, because I would never put myself in a situation where I have 250 limited liability companies set up to protect my assets, right? But when you're starting out, that's when you really need the protection, because that's where you're more apt to make mistakes as well.   Michael: Yeah. So I come from the insurance world, for better or for worse, I was raised in that world and used to work in commercial property insurance. So I'm curious to get your thoughts around people, because there's kind of the two camps, there's the pro LLC camp, and then there's the no LLC camp. The no LLC camp says, especially for the California investors, for 800 bucks, you can go buy a lot of umbrella insurance, a lot of excellent coverage. What are your thoughts around that for especially for folks that are just starting out?   Clint: Well, I mean, you need the insurance no matter what you do. And so you always have to get a policy. The way I look at it, when it comes to insurance planning is Do you trust your carrier is going to actually step in when you really need them? And going to pick up that claim? Or is that claim even covered, most people never read their policy, so they don't have a clue as to what's excluded.   Michael: Right. And that's a very long list, by the way   Clint: It is, and it keeps getting longer my business. But my partner here at Anderson, he used to be on the insurance side, he represented insurance companies, and he has a great little story where he talks about they always, you know, have these conventions about how they're excluding more and even charging more for less coverage,   Michael: For less coverage.   Clint: Yeah. So what I tell people is, it's the way I go about my planning for our clients is that I want to create a situation where number one, people don't even know what you because the way we structure the LLC is on the single family side, if somebody run an asset search, you're not going to be associated back to these properties, it's really difficult for them to find that you're the owner, because you can set up LLC, in a way in which your name is not tied to it on the public database. So you know, Secretary of State's website.   And so the whole reasoning behind this strategy is to get the plaintiff's counsel to take your policy limits. The Listen, that's my whole goal. I said, you know, if you're likely to be in sued those is pretty small. I've never been sued on my real estate have come close, but I've never been involved in a lawsuit. But if it did happen, I'd want it to be where, you know, they say we can't get after anything or better. They don't even know what you have. And and they'll take your policy limits and go away.   In fact, one of my clients in California, you brought up California and they have a nightclub. And two guys were injured. When they walked out of the nightclub, they got hit by a car by somebody who was in the parking lot. And so these three attorneys representing these two individuals, were suing for 15 20 million bucks. And my client that had the nightclub, which is probably the most responsible party for over serving, someone was able to walk away with policy limits. That was it. And in Why was that? Because all of his assets that are close to 15 to $20 million, were completely hidden from plaintiff's counsel, they couldn't figure this out, couldn't tie it back to them.   But then they went to the building owner, the least culpable person in this neurology was on a building's leasing it to this nightclub. And when he tried to settle, they're like, man, we did an asset search and live this, what they said is that we know what you're worth, and we know you can afford to pay. So you're gonna take we're gonna take policy plus on you. And he's looking at the other guy, which happened to be his son, he's like, this is BS, you have more than me, and you're walking away without paying anything and said, well dad, that's why you don't hold things in your own name the way you do. And so that's the way I approach planning. You know, you can't see what you can't see. And if you set it up that way, it's a great defense.   Michael: Interesting. And as someone who has set things up in a certain way, how easy is it to change once it's already in place?   Clint: Yeah. So I mean, you can do some things. But unfortunately, there's always going to be a trail there. If somebody were to dig hard enough, they're going to be able to find it out. But I often tell people I said, most attorneys in my experience that bring these types of cases are lazy. And they're just going to do a cursory analysis. And they're not going to dig deeper to see who's actually involved. So it's worth pursuing. But what's even more important to when you're setting up these structures is understanding the tax side of it that, you know, when you set up an LLC, we all know their pass through entities and a lot of people like to set up disregarded LLC, so they don't have to pay a CPA to file a tax return. And I get it. I mean, most of my LLC is are disregarded, they don't file federal tax returns.   But I like to filter that down on my 1040. By having that I call it a holding company will set up an LLC in a state like Wyoming or Delaware, and it will own all my single family residential LLCs as well point down to it. And on that one, I'm going to have it set up to be treated as a partnership. So it's going to file a 1065 and I know that's that some people say it's a cost I'm going to tell you it's an investment and when you pay a CPA to do that Because most of the loans that, you know I've dealt with, or my clients are dealing with on the single family residential side, they're underwritten by Freddie Fannie guidelines because those brokers are selling them off. And so they're going to take your 1040, they're gonna look at your, your schedule E, and they say, all right, look at all these properties, you're a new investor, you have three properties, right? And they're on your schedule E page one because either you hold them in your own name, or you hold them through a disregarded LLC, where you got the asset protection.   But when you're applying for the next loan, and they run a debt to income ratio on you, to see whether or not you qualify, you're pulling in $50,000 a year in rental income, but they're not going to give you credit for 50k, they're only going to give you credit for about $38,000. And you say, well, that's not fair. They say yeah, but we have to take 25%, throw it out the window, because Freddie Fannie will buy this stuff. If we give you full credit, we only can give you credit for 75% for vacancies.   But if you hold it the way I'm describing, you take that same amount of income, you put it on a different page of your tax return, the way it filters down, then you get 100% of that income credited towards your debt to income ratio. And it's just I mean, I find it astonishing how many people continue to make these mistakes where they start getting up against his debt limit on investment property loan limits, and he's wondering, Well, why is that, you know, I can pull out their 1040? Or are teams doing like, right here, right here, I need to change this. And it's as simple as just changing what you're doing   Michael: Very, very interesting. So at what point would you say it's appropriate for someone to sit down with someone such as yourself or at your firm? or do some real business and tax and and legal planning? Is it their first property before they got their first property? Is it after they have five? Is there are a good number?   Clint: Well, it depends on what you're doing. So if you're just strictly single family, then the next question is going to be if you have money properties at your single family investors, my next question is gonna be how you're going to fund the deal if you're going to use traditional financing. And then what I would tell you is listen, get the property First, if you're going to buy a property, maybe you think that you're going to be able to do a cash out refinance in a short period of time on it, within six months, you're going to try to angle for that, well, then I can't even touch that property, you can't do any planning with it for the first six months, but if it's not that type of play, where you're buying the property and rehabbing it and then go on to do a cash out refi on it, then then my recommendation would be after you get your first property that would be the time to explore what we're doing as far as asset protection is concerned.   Now if you're buying for cash or private money is coming into the deal to finance it for you and so you're not dealing with a broker or maybe it's a portfolio lender. I often tell individuals I always tell people that I work with or in our events, Hey, go out and find a community lender develop a relationship with a community bank that's going to be one of your best friends going forwards I mean it hasn't been for me and those deals I can't put together through other means and they have different lending standards so in that situation maybe you explore possibly taking title in the LLC itself so it never hits your name Yeah, you're gonna be on the debt but those types of lenders are they will allow you to close in an LLC. Whereas your Freddie Fannie stuff, it can't happen you're gonna have to close in your own name and then you can transfer later on into the limited liability company.   So I'd like to close in the name and the way I typically tell people to write up their agreements if you're making an offer you know, put your name and or designated entity on the offer and the reason I use that language is so that if it turns out that I'm working with a portfolio or private I can then set up an LLC and close in that LLC and the lender couldn't object to or the seller couldn't object because I had that language in there and if you ever asked by the realtor or the seller Why did you put that extra line in there? best response is my and then fill CPA or attorney you choose told me that they're not sure yet on how I'm going to take title of this property for either, choose again tax or estate planning throw it in there purposes and so they may want me to close in and one of the entities I've set up for me and then whenever you throw those names out there CPA or attorney tends to make the sellers and their agents go Okay, no problem.   Michael: Okay. Yeah, sounds good. Yeah, all right. That's great. That's good. Something I actually do on every offer I make or every purchase I make is Michael album or assignee because I need to be able to move that around.   Clint: Perfect. Yeah, that's I mean, you know, you're you're an avid investor. So you've been doing it.   Michael: Yeah. Now that's, that's a great tip. That's a great tip. Clint, I'm curious to know and hopefully you can shed some light on is something I've heard in the past is, if if I go get a really big umbrella policy, even inside of an LLC, or a big a big high liability limit on an insurance policy, I'm putting a big target on my back, because like you mentioned, a lot of these folks are not going to go much deeper in So they're gonna say look here's the policy limit we could can see this guy is worth 5 million or this gals is worth 5 million so how do you think about how much to insure something I've heard is insure up to the the property value or the equity rather in an LLC or in the property I'm curious to get your thoughts around how much insurance should you get?   Clint: Yeah, I agree with that um, I think that's a is typically a good way to approach it whatever your foreseeable risk of loss could be on that property. So typically, you're going to be looking at somewhere around 200,000 250 total for any type of bodily harm injury things like that that can come up from that but it's not to say wouldn't still have an umbrella policy if you can get it I mean, I'm sure you've had some other events where you've interviewed people who work with real estate investors and they offer those types of policies there's a number of them there's a few of them out there that I direct people to as well because it's good just to have the umbrella now if you go excess liability what a lot of people don't realize with insurance is that these things get stacked on top of one another so if any layer there gets cut out many times it throws off the rest so you could say well I have this umbrella policy or excess liability policy but if you're if it's predicated on your umbrella paying first now then if they doesn't pay then they don't pay and so that's why I'm not into the stalking the insurance get game because many times they find ways to get out of it.   Michael: That makes sense. And I'm curious if you could share with us some common mistakes that you hear people come you know that experience in their life whether they're a new client they're like Clint, I tried to do it the cheap route and do it on my own and now I need you to fix it or are you someone that was working with somebody else and you know, regale us with some with some of America's Funniest Home Videos   Clint: Well typically comes down to this is not understanding the investment that they're getting into and and what's going to happen down the road for example I was working with this was last year a guy called me yes I met him on YouTube, he calls me up and says hey, I've been trying to sell this multifamily deal that I got into I bought and I'm buyers keep falling out of under the financing contingency I've gone through two I've got my third one on right now and what's going on? I said well how's it held? You said an LLC so like let me get your LLC is a disregarded LLC said yeah, that's why I set it up on whose advice well my CPAs that I wouldn't file a tax return if I did it this way.   Well he's, right but the problem is is that when you go to sell you know the underwriter is going to look up they're gonna pull title it's gonna say LLC and the what they're asked for is tax returns. I mean, that's they assume every LLC has to file a tax return. So that's your problem. You can't verify income and expenses, you should have been set up filing a return. And so it's things like that, that that that creep up on people or let's say you you don't understand the state law with regards to holding property, I brought up Florida let's say you buy some property in Florida, you set up an LLC deed your property into the Florida LLC, got $150,000 in debt on it, the assessor sends you a bill a month and a half later saying you owe 100, or you know, 1500 bucks in doc stamps, like, well, where did this come from? Well, it's because you put in the LLC, you should have never done that.   So those are the things that come up, or Pennsylvania, for instance, you know, if you set up an LLC in Pennsylvania to transfer your property in the county is going to nick ya for at least between two to 810 $12,000 on that property transfer. So knowing what you should do to get that protection is so important. And that's where investors oftentimes make these mistakes, where they just don't do anything. And that's the worst. And I often tell people when I teach you before COVID we always teach these you know, live events, 3d asset protection events for real estate investors. And on break, you always got attendees that want to rush in and ask questions. And I can always pick that one guy that had the story and I knew the story before he even got up to the front of the room because of the look on their face. And I always start out like this, you know, I used to have and now I don't and I wish…   Michael: Back in the good old days.   Clint: Yeah, I wish and my wife told me and I didn't listen but I do now. So those are the things that you know, you cannot predict when a lawsuit is going to occur. And if you're going to start getting that start investing in real estate, you know, just understand what you're getting into and look at setting up a structure as investing back into your business and that's what you need to look at real estate investing as a as a business. And then not only do you need the right structure, you need the right tax and accounting firm to work with or CPA who's gonna keep keep good books and records for you know, profit loss balance sheet, because there's going to come a time where someone's going to ask for that information.   And if your stuff doesn't look professional Like you actually pay attention to the details, then they're going to whoever you're working with is going to make an assumption that you're too risky to do business with. And then it's going to create doubt in their mind. And those instances come about, at times when you least expect it. I mean, look what's gone on now with COVID. You go back to, to last year where they had the idol loan and the triple p loans. A lot of people we couldn't help get this money because they'd never paid attention that to their financial side, the loss and balance sheet. Yeah, I mean, they guys would write down their p&l on a napkin. I've got pictures on it. Yeah, they would. They would take a picture of it and send it in and say, Here, give this at the SPM like, a series a napkin? Yeah, buddy, you can't help you. And then they'd be mad.   Michael: At least use graph paper. Come on.   Clint: Yeah, something. And crayons. So it's interesting, but that's what I often tell people, there are certain things you need to do, and you're sticking your head in the sand, saying that it's never gonna happen to me, it is going to happen to you. But it seems like you appreciate the risk and you take reasonable steps to mitigate that risk, you're going to be in a much better situation, because no one wants to give it all away after you've spent, you know, 5 10 15 years, building this this stuff up? Yeah.   Michael: Yeah, that makes total sense. Then I've got two more questions before Yeah. And then I'm gonna let you get out of here. One is, I've actually heard of using debt as a form of asset protection in the sense that of, hey, if I, if I saddled this property with debt, I take out all of my equity possible, no one's gonna want to sue me over it, because they don't stand a whole lot the game Is that a fair way to think about it?   Clint: We'll see. Alright, so I tell people the exact same thing, we show them strategies where they can put, I'll call it Phantom debt on their own property to make it look unattractive to a creditor to want to go after and we've heard these is friendly liens. But at the end of the day, they're just smoke screens, number one. And that's to discourage that the shakedown lawsuits right where somebody is coming after you really don't have a claim, they think they're just going to put pressure on you, and you're going to capitulate and roll over and pay him, right, but on a legit judgment, now, that's not going to help you because what what attorney would do in my instance, I would just record the judgment in the county, wherever you're located. And that that's just going to sit there. And if you try to sell or refi, any property, I'm going to get paid. And so I'm going to sit back, I'm going to make 10% rate of annual interest on that debt. And what you're going to be doing is working for me, but you just don't realize it because you're not going to default on your debt, you're gonna keep paying that mortgage down. And eventually, one of these days, you're going to want to sell that property or refi, that property, and that's the day I'm going to get paid.   Or I'm going to move against the property at such time where I figured there's enough equity in there because the equity is going to continue to go up. So it's a payday. I mean, a lot of times that's what what plaintiffs will do, they're not going to move on the property directly. We're gonna sit back and wait, let that judgment, you know, grow at a 10 cap, who doesn't want a 10? cap? So so that's what it does for you.   Michael: Yeah. So not necessarily a cure all of Hey, I just laid the thing with debt, and I don't have to worry about it.   Clint: You do when you want to sell a refi? Because that's when they get paid.   Michael: That's when they get paid. Okay. That's really good to know. That's really good to know. And then my last question for you is because you mentioned California, and I'm a California guy, and I think we've got a lot of California listeners. they'd heard over a year, California Franchise Tax fee just sucks. Like there's no other way to put it. So how you mentioned that there's a way to get around it. And was that via a trust?   Clint: Yeah, actually, there's a couple of ways around it. One way is to use what's referred to as a disregarded limited partnership. And that is an entity a similar to a limited liability company. But the issue I have with with that strategy is that it's predicated upon a Franchise Tax Board ruling in 2019, that held the disregarded LP did not fall under the revenue tax code provision that assesses the $800 to disregarded LLC. They said hey, if the legislature intended to they would have put limited disregarded LPs in there, but they didn't, they just said disregarded LLC.   Well, the Franchise Tax Board moved to get the legislature to change the law, the revenue tax code, which they have not done yet to incorporate disregarded limited partnerships in that definition has been subject to the $800 franchise tax. You can use them and I have some clients that prefer to go that route because they're more familiar with the limited partnership and working with third parties, but there's always a risk California changes it and incorporates it into the revenue and tax code because of this Tax Court ruling.   Now on the other side of that is to use business trusts. And you've probably heard the term Delaware statutory trust which is a trust that it That has become synonymous with 1031 exchanges. So if you sold a piece of property and then you wanted to roll into a syndication, it wouldn't qualify into a typical syndication structure as an LLC. But if you structured as a trust, you can, the IRS has ruled that it's an acceptable interest to roll into. And so a lot of syndicators that want to bring in 1031 money started using that Delaware statutory trust framework to allow this to occur.   Well, the trust itself offers asset protection. So if you put an asset into it, and something goes wrong with that asset, the beneficiaries of the trust are completely protected from the claims of the trust creditors. Wyoming has a statute that's very similar to Delaware. And I choose to use Wyoming just because it's a little less expensive. And it's a little more flexibility built into their trust statute. So what we'll do for California investors, oftentimes this create a Wyoming statutory trust, then registered in California as a business trust, we have to make one filing in California, and then they can start holding their California real estate in these business trusts, instead of limited liability companies and the business trust is not subject to that $800 franchise fee.   And in fact, if you invest outside of California, I mean, the Franchise Tax Board has taken the position that since you live in California, any LLC you create on this planet, or some other planet is doing business in California, and out of it, yeah. So so many times, we'll just set up the trust in in every state that we can, that actually recognizes a business trust to hold real estate.   Michael: Very interesting   Clint: That's a way around it.   Michael: Very, very interesting.   Clint: I'll still have an LLC, though for you will still have your interest in that trust owned by typically a Wyoming Limited Liability Company, and you'll still have to pay $800 on that. So you can't get away from the $800 fee completely with the way we put the structures together, we'll just minimize it down to no more than $1600 a year total. So you could have 50 trust and you're not paying more than 16 $100. And banks. I mean, I just did a deal with one of my clients, we set up for Ws T's for some buildings in California, and they were able to go through the refi process with Chase Bank, I had to do some work with Chase to get them to understand it. Namely they said these don't exist. And I say well, hell you guys underwrite this loan right here. And it's in a Delaware statutory trust. So what am I missing here? Are you guys are obviously using these things? And yeah, went through. There is a little bit of a learning curve there for some some institutions, but they di work.   Michael: All right. Well, I might have to schedule a call with you here offline, because there's definitely something there. Well, Clint, this has been so great, man, thank you so much for taking the time, where can folks get a hold of you, or some of your colleagues, if they have additional questions want to reach out to you for your services?   Clint: Yeah, I'd be happy to give anybody that will would like a free strategy session, if you just go in the show notes. It's ABA.link/roofstock, you can go there and click on that link, it'll bring you to a website and just put in the information. Or if you just want to, you know, Google, my name, YouTube, I got a ton of information. I mean, we lead by educating people and we give it all away for free the education because we want you to make informed decisions when it comes to your investing.   And it's really based upon as I stated, you know, real world experience because we're doing what you're doing when it comes to investing and I'm sharing with you those strategies that I'm finding that make better helpful for me and those for our clients to help them find success and build their business.   Michael: Love it. Love it, Well Clint. Thanks again. Definitely look forward to chatting with you and do yourself a favor. Take care. All right.   Clint: Thank you, likewise.   Michael: Alrighty, everybody a big big, big thank you to Clint, that was an awesome episode. I know that I got a lot out of it. And as he was talking, I was like, Oh, I need to be doing some, some changing around here. So definitely give that one another listen to definitely check out the show notes with a link to a free console with Clint and his team. I think it's definitely something that everybody can learn and use from. If you liked the episode. As always, feel free to leave us a rating or review. We'd love to hear about new episode ideas. So leave us a comment in the comment section. Looking forward to seeing you on the next one

Real estate is a powerful way to build long-term wealth. But like any business, it comes with challenges that make you question why are you are even doing it. This episode is a quick reality check with some suggestions on how to look at the challenges in front of you. --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only and is not intended as investment advice. The views opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Emil: Hey everyone, welcome back for another episode of The Remote Real Estate Investor. My name is Emil Shour, and today I am only joined by one of my co hosts   Tom: Tom Schneider, more than just an only you ARE joined by Tom…   Emil: Glad I am joined by THE Tom Schneider, no Michael Albaum today he's he's traveling around in Portugal being the true remote real estate investor that is so just Tom and I on the episode which I mean, I don't think is a bad thing. You know, Mike, Michael is kind of dead weight around here anyway.   Tom: Nice. Throw him under the bus.   Emil: Throw him under the bus. I'm just kidding. Michaels, Michaels man will miss him. But today's topic, we're going to be talking about dealing with the hard parts of real estate investing. So contrary to what some people may believe it's not all mailbox money. It's not all rainbows and butterflies and sunshine and making money. This business will test you It's hard. There are points where you may want to throw in the towel. And I've certainly felt that Tom, I think you've probably felt that at certain points, too. I know many other investors have talked about it as well. So we're going to be talking about how do we deal with that we deal with the those emotional moments and those moments when you want to just give up? And how do you overcome them? Keep going. So let's get into this episode.   Emil: All right, Tom, I hope I hope people don't see this as like a pessimistic episode, I'm more so you know, we talked about this before we started recording, I think it's just important to be aware of these things. You know, when I first got into investing, it was just awesome. And then something, something happens, right, you have a large expense, or you're dealing with probably, maybe your property manager isn't communicating the way you'd like, there's all these various things that will happen.   And it's going to test you it's going to test you emotionally, it's gonna test your resolve to kind of stick with it. And so I thought it'd just be good for us to talk about, like, these different points.   Tom: I love it. It's just, it's something just kind of add onto that it's not a question of like, if something negative is going to happen, it's like, okay, when you know, like, it's go ahead of me.   Emil: Yeah, exactly. It's, it's going to happen. And that's okay. And that's part of it. And I think, you know, anything where you're gonna make money, and there's opportunity, part of your job is to handle challenges. There's really nothing in life where you just kind of, you know, limp in and put some money in. And it's not that challenging, and you just have awesome out weighted returns, right?   So this is a business, you know, it's not just like putting your money in the stock market. And what happens happens, there is a business, you manage it, you have tenants, you deal with people all the time. So, you know, these things can throw curveballs in your life. So, Tom, do you have any moments recently that you can think of when you kind of when this has happened? I don't know how recent it's happened for you.   Tom: Yeah. So I guess one more thing, kind of high level throw in is, you know, we all understand the benefits of real estate investing, right, you're getting loan pay down, you're catching, you're collecting rent, you're getting appreciation, there's all this good stuff, you know, but these challenges, they, they provide a little bit of a moat, in getting into it, you know, in being able to deal with it. For people who don't want to deal with some of these challenges that come up, that's that's a bit of a moat in kind of the perseverance and patience and all that good stuff.   So let's see something sort of recently that happened. So this happened maybe two years ago, I bought a property where there was a tenant in it for a very long time. And so there was what's really called deferred maintenance. And one of the things ended up being in the bathroom, the I think it was like the tub or something, there was a little bit of leaks going on, in in the plumbing. So like it, it's like the worst type of leak where it wasn't a lot where was obvious it needed to get fixed. It was a little that it's just enough to wear down some of the sub flooring.   So I ended up on this property needed to do sort of a full sub floor gut job on the bathroom. And, you know, when you're mapping out these acquisitions, you're, you know, putting some assumptions in on how much you think renovation was going to be and this ended up being I think, like, five times like what I had for the year, is like several thousands of dollars to have floorboard, new tub, all of those trades. So this was a a real backbreaker in looking at this property as cash flow, which, you know, hit it for next few years thinking about cash flow.   Emil: Yeah, I think that's when it hits me the most is like, anytime you're you're doing, it's usually with maintenance stuff, right? It's like things that cost a lot of money. And it's always the unexpected thing. So like, you go in, you're like, oh, we'll just have to, you know, clean the tub or whatever. And then they they open some things up, and they're like, Oh, your sub floors rot. And you got to change that out. You're like, man, why do I do this?   Tom: Why do I do? Yeah, Does somebody want this? Emil: It's always with turns, mine is mine is the same thing. I'm doing two turns at the moment. And it's like, it's the ultimate emotional test is when you have a tenant leaves, and you think, oh, maybe we'll just have a couple $1,000 in repairs, and, you know, usually adds up, usually adds up.   So I guess my next question is like, how do you deal with it? Alright, you feel like this waits, and you're like, oh, man, this is way more expensive than I thought, you know, like, like, walk me through how you're feeling? And how you kind of deal with it?   Tom: Yeah. So I think with any kind of challenges, it's good to break down, like, what is the path to being done like, on the other side of the good. And for this particular case, and also to kind of evaluate, like, what your options are, and have some long term context of like, what you're trying to do. So getting to the other side of this, it was like, Okay, I don't really have a lot of options outside of making these repairs, this is safety, this is habitability, this is function, you know, I like where this property is located, I, it is appreciated a little bit, is continue to appreciate quite a bit. Since then I'm, I'm still bullish on this, I'm going to keep kind of marching forward, and just take my licks, fix this up, I'm going to be in trouble and cash flow.   But giving it context, like I said, so I am very long on real estate, and this kind of stuff I know is going to come up. But if you you know, sure this is going to take a big kick in the teeth on the cash flow aspect of it. But the way that this property is continuing to be in demand, like it, you know, and occupied and appreciating, you know, I I'm okay, not needing, you know, the extra 5000 or $10,000 needed to fix up this issue. I am long term on sort of reinvesting these funds, that is going to go into fixing that to continuing this keeping this thing moving along.   Emil: Solid I think that's great.   Tom: So yeah, having a broader context. And then also, just not thinking abstractly and just thinking sort of, okay, this is what what I need to get to a point from where I'm at right now to where I want it to be. And having that broader context. And in the back of my mind.   Emil: Smart, very smart. I think it's so important, whatever you do to surround yourself with people who are doing that as well. So if you invest in real estate, join groups, watch YouTube videos, listen to podcasts, like ours, or many others out there. Because I think, knowing that you're not alone, like knowing it's so easy when this stuff happens to be like, Oh, man, I made a bad investment, or I'm not good at your job, whatever it is, right? And think you're so singular in this problem. When you think follow more people talk to more people, you realize, everyone hits these speed bumps. Everyone deals with these really, you know, painful challenges, especially if it's the first time you've dealt with it, right? I think as as you keep going, and like, these things come up, you're like, Oh, just the cost of doing business. They don't like, they don't mess with you emotionally like they once did. So I think just like hearing other people's stories, surrounding yourself with people, allows you to realize you're not alone, and that this is all just part of it. And it's common, more common than you think.   Tom: Yeah. I love just to echo that community aspect. I think it's important in that community that you build around you, as you know, has kind of similar experience or more experienced than you because, you know, if you start talking about these kind of issues with someone who doesn't invest in real estate, they're like, it's hard, harder context for them to get it.   Emil: Right. Yeah, they'll tell you to sell like, oh, why do you do that? Like if someone doesn't invest in real estate, they'll be like, why are you even doing that?   Tom: I think the one of the worst things that can happen as a real estate investor is being forced to sell, you know, thankfully, in my situation, I had proper reserves to go and apply it to fixing the property up I didn't you know, the property didn't have to go be dilapidated or whatnot. I had a friend who got involved in real estate investing and needed to sell for whatever, you know, whatever reason how to sell really quickly. And during escrow, the person came back to him and said, Hey, you know, you have a roof that's having some issues like I want you to take $10,000 off and he was in a rush to sell so he didn't really have a great negotiation chip and ended up selling during a super hot market for like $10,000 under what he could have had and that's just like bottom line money gone.   So I think another really important thing in managing the hardest stuff is to make sure that you have the right reserves behind you. Because that's really the the main way you can lose in this game is not having the proper funds. When stuff like this comes up.   Emil: Yeah, you your first line was the most important thing. Don't be a force seller. That's when you lose money. Like you want to be in the position to sell when things are are doing well. You don't want to have your hand forced in this game.   Tom: What's some recent nightmares in Emil's real estate investing?   Emil: Mine is, you know, like I've been mentioning these turns man, like, I bought this property this triplex in November and like I underwrote, I don't know, I think like $5,000 for turns or something, because I knew, you know, a couple tenants were super under market, I was like, Alright, we're gonna try to raise rent, they'll probably leave let me write in some, some repairs. And just right now with the way things are, it's hard to find contractors, they're charging a lot, right, just given the way like, labor costs are going up, supply costs are going up. So like, are severely underestimated my underwriting. And so it's going to cost us a lot more to do these turns.   And they've taken a lot more time than I thought, right? Like some of these are taking four to six weeks when I was like, Oh, we can get them done in less than a month. I think it's always when your expectation and your reality is way off. That's when frustration or just like disappointment occurs. And that's what's been going on.   So for me, it's just been with this triplex like getting it turned getting at leased. Luckily, during this time, rents have also gone up. So like, I was way conservative with my underwriting on what I thought we could get for rents. And so like now, even with these expenses, it's like my cash on cash is gonna look much nicer than I thought it was when I bought the property. So, you know, not all terrible things. But man, you know, every time you have a turn and getting the unit renovated and leased out takes longer than you think it's just, it's always painful. It's always like, tough dealing with your property manager, because you're like, why are we getting this leased and blah, blah, blah. So, I don't know that for me, it's always during tenant turns that it's like, frustrating.   Tom: Yeah, I think another point that I like that you brought up is just comparing your expectations, you know, against reality. And what's probably also like that much trickier and your your position is you're getting a little bit more on some more multifamily stuff where it's kind of like newer expectation building, you know, of what you know that versus if you're in a swim lane that you understand really well, like you just have a much better understand on the kind of expectation of a beta around like, timing. And so getting into either a new market or a new asset class, it's a whole new set of expectation setting and, again, to that community aspect, that's why it's important to have these people to bounce like, Hey, does this make sense for in this market for this property type talking to somebody who has that experience? To You know, let you know if like, yeah, you should be upset or no, that's that's normal Emil like for what you're doing what you're managing. I think that's an important to have for sure.   This is may or may not be related to the topic, I think it kind of is. It's it's a story that I heard yesterday that I thought it was just so intense. So this guy was trying to time the market, which is something that is like patently impossible to do. And this wasn't with the rental property. This was his personal property. So he has a house in the East Bay of San Francisco over in Walnut Creek, nice suburb. And two years ago, you know, the markets been climbing like crazy, he's like, no way the markets gonna go up anymore, I'm gonna sell my house and then rent. So he does this, he sells his house, and he rents for the last two years.   And meanwhile, his home is probably appreciated, like 30%, or some crazy amount, and now he's trying to go back and buy a house. And, you know, trying to buy just the same house that he was in before he like out priced himself because it appreciated so much. So this is not totally related. I mean, when you think about the different ways of going down as an investor like not being successful, it's I think it's important to think about what would make me more upset. So like, if you have this rental property, and you ended up, you know, selling it, and you no longer kind of have access to this type of a wealth builder versus managing through these waves of the challenges like I think it's important to kind of run scenarios as impartially as you can, kind of playing out these different paths that you can have when you're in a frustrating situation.   Having that five year 10 year 20 year mindset is I mean If that's your strategy to build long term wealth through real estate, it makes it a lot more palatable in going through these, Oh, darn, I have to change the sub floor out. But, you know, hopefully, that's something I don't need to do again.   Emil: Right? Right. It is important to remember that, like, you know, when you want to throw in the towel, when you're like, man, am I maybe this just, I'm just not cut out for this, or whatever it is. I always think about all the people who bought 20 years ago and still own a property, and I'm like, man, imagine if I had bought 20 years ago, you know what I mean? Like the people just, they deal with the problems, they they persevere, they go through it, they maintain the hold for the long term, you know, the longer your time horizon, generally, the more smooth your returns will be. And all these these bumps will kind of smooth out with the periods where you have three years, same tenant, no issues, you know what I mean?   So I always try to remember those things in these moments of frustration and, and hardships, we'll call them.   Tom: Yeah, some, some grit.   Emil: It's mental. You know, it's funny, because it's a mental game, especially for us, we invest remotely, it's not like you or I have to go change out the sub floor or anything, right. It's really just like, we have to take money out of our pocket, give it to somebody else, and they fix the actual problem. So it's all just like, the mental game, we're playing.   Tom: It was something I was, like, an angle I was going at a meal is, you know, while we are like in really fortunate positions, to be able to have extra income to invest in real estate, because there is a barrier of entry of like, being able to buy it, right. We're not like, like, overly wealthy, like, this is like a meaningful part of the, you know, the extra savings that we have that we're applying towards this and you know, very grateful to have the opportunity to do it. But it like is really meaningful. Money. It's not like, you know, abundantly wealthy to be able to do this. It's,   Emil: Yeah, I wouldn't everyone thinks or their landlord is like this super rich dude living on an on an island, just sipping pina coladas. And it's like, I forget where I heard this joke or something. And he was on Twitter. It's like, like, some real estate investors, like, Oh, I'm wealthy, but I don't have any cash. Because it's like, your cash is always kind of tied up in your assets. And so it's like, you're building well, right? A lot of the times, you know, sitting in, in your portfolio, so…   Tom: Totally, but you know, again, it's not like lost on me, like it's very unfortunate, very fortunate position to be able to save enough money to partake in this type of investment. But, you know, it's not like there's a money tree behind. So like, the mistakes and those issues are real, for sure.   Emil: Totally. Yeah. Yeah.   All right, I think good spot for us to end this episode. Hope you all found this, this helpful next time, you know, you're dealing with a challenging situation. Hopefully, we gave you some tips to to break through that feel better and keep moving, keep chugging along and ride out your investment journey. So with that, thank you all for listening, and we will check you out on the next episode. Happy investing.   Tom: Happy investing.

There are so many benefits that come with investing in real estate investing. in this episode, we do a draft pick of the most valuable and heavy-hitting perks we have access to as investors. Shout us out on Twitter with who you think won, and some important picks we overlooked! @Roofstock  --- 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 am joined by   Michael: Michael Albaum   Emil: Emil Shour   Mark: Mark Woodling.   Tom: And today we've got a fun episode. So as an investor, there are a lot of different events and things that happen, you collect rent, you pay your mortgage, and today we're gonna be focusing on all of the good events. And the way that we're going to do this is a fun segment where we're going to draft our favorite moments as a real estate investor. And then after we do our draft, it's going to be a snake order draft, we're going to post it on a Twitter for you guys to vote on. So again, this episode is going to be on great events or moments as a real estate investor. All right, let's do it.   Gentlemen, just to reiterate the rules, we all are going to have three picks, it's going to be a snake order. I've got a ping pong ball machine behind me with all of our names to define what the order is. And after we complete this draft, we're going to throw it up on Twitter, and let the people vote. I'm feeling pretty good about my chances here. I put a lot of research into great moments as an investor and good luck to get in second place too you guys.   Emil: Trash talking already? Alright. All right. Let's see if you can back it up.   Michael: You know, trash talking is like the epitome of someone who's not confident in their ability. It's kind of the way I see it, but you know, to each their own.   Tom: Smoke smoke and mirrors let's trash talking right there. What you just did. Alright, so   alright. ping pong balls. So the with the the order is with the first pick of the great moments of being an investor is Mark Woodling. That's good. You get the first one but you have to wait all the way to the turn to get your next one. Up. Second is Ooh, Tom Schneider, ooo I like that second. All right, up third. Is Emil Shour. All right, good job and right, bringing up the rear and the turn, Michael Albaum.   Michael: Is this is this because you thought it was talking trash to you? Is that? Why is that what your pinball machine gave me fourth place.   Tom: The ping pong ball. The ball Don't lie. As, was it Ben Wallace that said,   Emil: Can you show us proof of this draft order cuz you're just you're just looking at nothing and magically make taken names out of a hat. So I don't believe you, sir.   Tom: Don't question what's behind the wizard.   Michael: Off screen.   Tom: Alright, so alright, let's let's get into it. So again, we're each gonna pick three rounds of events as a real estate investor that you love that are just like, awesome. And then we're going to shoot it out to the twitterverse to vote on the who, who has the best draft? So Mark, why don't you go ahead and start us off, kick off the draft the draft.   Mark: Cool. So I named mine to add to the fun, and you'll be able to reference that later. But my first one is what I call Hail Yeah. Where I live in the state of Texas and a property that I own here had some hail damage. So I was able to get a new roof for about a 10th of the price, which is gonna run about $30,000 for this home. So you know, I paid the insurance premium and or the deductible excuse me, and it came out to be about a 10th of the price.   So the property needed a new roof anyways, and the timing was good. And so I scored that new roof, Hail Yeah!.   Tom: I love it.   Michael: Great.   Tom: You know, and coming up with this. And coming up with this concept. I would never think of insurance covering some needed cost as an event. And I'm already I'm already digging it. Alright, that's a good one Mark.   Emil: Like we got we got to all have sports analogy. So guys, come on, Mark, Mark started it, you get, you gotta you gotta have a sports analogy with your pick.   Tom: All right, I'm up second. I'm going to simplify a little bit so this is going to be a cha-ching nice and boring rent. The rent collection hits your checking account. So rent   Emil: off the board rent.   Tom: Cha-chiing rent collected that mailbox mailbox money hits it, so that'll be my second pick.   Emil: What's your sports analogy? Come on, Tom.   Tom: I mean I said cha-ching i don't i don't have I don't have   Emil: The layup the layup?   Tom: Yeah layup that's a great one. Yeah. layup that's what we'll…   Emil: I'll be helping you guys all episode. Geez, you guys don't watch no sports.   Tom: You're the marketing guy. You're the marketing guy. Yeah. Okay. Yeah. layup just nice and boring rent collected. That's my first pick.   Emil, You're up next.   Emil: I can't believe this is falling to the number three spot you got you guys are obviously amateurs here in in drafting. So I get the Supermax contract extension. And so what that is that's a renewal with a rent increase, baby. So I'm taking that number three, the super max contract extension. Coming in at number three.   Tom: With an increase in rent cash. That's a good one.   Mark: And the sports analogy or name?   Tom: Supermax contract!   Emil: Supermax contract extension.   Mark: All right.   Emil: That's a basketball one.   Tom: Love. Love that.   Emil: Mark. Paid pay attention, Mark, come on.   Mark: I find no relation, sir. But yeah, I'll keep going.   Tom: Alright, Michael, you've got the next you've got the your pick and the turn. Yep. I'm not really a big sports guy. So I could use a little bit of help kind of finessing this one I call I'm calling it the forced error. But I feel like the error doesn't really apply here. So it's basically forcing appreciation on a property. I'm able to take out about 100k in the course of two years by increasing the rents and decreasing the expenses, sacrifice fly. I'm trying to think of how I'm like, I'm like forcing the appreciation.   Emil: So sacrifice sacrifice, like kind of works.   Tom: Well. How about this? I think you're I think you're including a lot of moments in that one. Why don't you when you get that appraisal back? So like, or whatever, when it's like the moment that you have the higher value.   Michael: Yeah, that's perfect. So right. Yeah. Realizing that you have created equity in the property via forcing appreciation.   Tom: Oh, yeah. It's like the squeeze or   Emil: Yeah, the squeeze bunt squeeze bunt.   Michael: Yeah, squeeze bunt.   Emil: That's not really a bunt. It's like a squeeze Homer, but maybe it's a homer.   Tom: Inside the park home run?   Michael: Okay. Yeah. And inside the park Homer, let's go with that.   Emil: Michael's like, what is this hockey term, homerun, I don't understand.   Michael: All right. So then for my next one, and I just came up with this. Alright, I just came up with this one, the name, it's called, stealing home. And that's where you can buy a property for significantly under market value.   Tom: Ooh, that's a that's a good one.   Michael: And you get a boatload equity day one.   Tom: I like that Emil, you're up with your second pick.   Emil: Oh, man, I'm trying to think of the name for this one. And maybe you guys can help me out. I don't know the name for this one. My pick is when Mr. Market treats really well. And interest rates go down while your property value goes up. And you're able to cash out refi your full initial investment. And the refi basically makes it so that your payment is no different than it was before. So you're doing a full cash out refi and your payment goes up like 10-20 bucks. We can call it the Mr. Market BRRRR   Michael: I've got I've got one, you guys, you guys. Let me know I'm gonna throw it out there, feel free to throw it back. We'll call it a buy. Right? It's where you get the win. But you didn't have to do anything to get it.   Emil: Okay. All right. Or maybe it's like, maybe it's like winning the division where you get to skip the first round or something. You know, you get to advance to the second round of playoffs without having a   Michael: Wildcard?   Emil: No the wildcard you got to play to make   Michael: Oh, I don't know how I know Zilch about sports.   Emil: Homefield advantage, I don't know?   Tom: Oh, I think you're right. They're like buy when like if you're like the one seed like you know, you don't have to do anything and you're just getting that getting out that way. Yeah. So   Emil: Good job Michael see you even though sports kind of   Michael: Awesome. I like came in hot and then immediately fumbled over myself.   Emil: Fumble There you go. For sports analogies. This is getting good.   Tom: I got one that happened. I'm thinking of one right now of a property. This was an event where a tenant moved out. And before they even started to do the turn work. The property manager found a new tenant that wanted to move in right away so they didn't have to do any of the turn work. It wouldn't have been a lot but you know, probably saved me. 1000 bucks. 2000 bucks of the person moving in right away. I kind of like that. Stealing analogy or maybe handoff? That's what it is. Yeah. Handoff. Yeah. Handoff.   So it's a new property. Least before turn construction. That makes sense?   Michael: Yeah,   Emil: Yeah.   Michael: That's a solid getting it leased up early that's great.   Tom: This is really working the right side of the brain coming up with these sports analogies that go with this   Michael: Sure is, especially on the spot.   Mark: Well, I have to say,Emil did take one of mine, it was you know, asking for over market rent getting a two year lease signed, and I called that one, Bill it and they will come. Reference the Field of Dreams. But that was already taken. I just had to one. Because that doesn't happen too often from the marketing genius.   Somine's a little different, but it's, uh, you know, again, in Texas, cash out refi on investment properties is almost impossible to find. But I was able to find one a year ago after making close to 20-30 phone calls to banks to, you know, any type of financing institution, and I found one, so I called it the walk off home run refi. I mean, to me, it was just like the ultimate winner to have that money now sitting there out of a ton of equity that was building up in a property.   Emil: Nice.   Michael: Wait, Mark, are you saying that   Mark: Walk off refi.   Michael: Are you saying it's tough to do a cash out refinance on investment property in Texas? Is that what you said?   Mark: It's very, very difficult. Texas has some different laws about home equity lines of credit, and on. I mean, it is probably one of the most strict in the country. And on investment properties. It's next to impossible, but I found a company that will do it. So if anybody is ever interested, I have the one that will do it.   Tom: Is it the, So I'm assuming it's not the financials of the property? It's just the lending rules. Is that right? Mark?   Mark: Yeah, lending rules enemy in this in this instance. And you know, I kind of use cash out refi, in a sense of like, they also they just left me a line of credit. So you know, in a sense, I just have a dry powder sitting there, they're in a checking account ready to be used at any point. So I kind of maybe use that incorrectly. But the line line of credit is not easy to come by.   Michael: Good to know.   Tom: You got some good creative ones, I love the insurance cover the cost of needed repair too.   Alright, Mark, you're up. And then our last round our third round, you're on the turn. So you do the first one in this round.   Michael: Make it a good one.   Mark: All right. This is a little trick because you know, I am a real estate agent and I am an auctioneer. So I'm calling this one, I'll come up with a creative sports name, going once going twice, rented. So have an open house, make sure you schedule it during a tight timeframe. So this is you know, again, for a property that I've I've managed on my own in the past. You have the open house tight timeframe, you have multiple people all show up at the exact same time. So you create competition. So once that competition starts to boil, people get a little more aggressive.   Hey, I'll sign a two year lease, Oh, great. Actually a one up you know, you know, they'll pay a little bit more. So I let that competition drive just like an auction. And man, it pays dividends because a I get all this time back in my schedule B. You know, I create that competition let people bid up a little bit and then get longer, longer terms and better terms overall.   So a sports analogy. Slam Dunk unno.   Michael: For the competition piece of it. We could just call it sports.   Tom: Or, or or what about this? crowding the paint? That's a lot of people in there.   Emil: I was thinking full court press.   Mark: Yeah, that's it. That's it. I'll take them all. So yeah, good job. I'll take it.   Tom: I'll Alright. So I'm going to go I am up next. And what I'm going to select is, I'm a busy professional. I bought these properties as some ancillary income and you know, it's it's enjoyable, but you know, it's also enjoyable is when nothing happens. Just nice and boring. Call it chalk, right.   So, chalk is a term when everything goes to plan on like your NCAA bracket, and I'm going to call mine chalk so no news is good news. Just nice and boring collecting. You know, nothing no, no news, right Chock. That'll be my there.   Emil: Those are my favorite monthly understatements when it's just rent management fee and that is nothing else.   Tom: Two lines. Yeah. Charge rent, collected rent.   Mark: Can't you just call this a soccer game where like, nothing happens for like, forever. I mean soccer fans, the Olympics are on and I gotta into it, but otherwise, it's nap time almost like golf.   Tom: Yeah, that's a good one.   Michael: Shots fired.   Tom: Shots fired. It'll be interesting, like a little personality test and looking at the ones that we've selected. Because Yeah, anyways, this is this is good. Emil, you're up next.   Emil: Alright. My third pick is going to have to be when you buy a property expecting to do some work to get higher rent. And when you get a new lease, the lease ends up being higher than what you originally underwrote it for. And so I'm calling this one pulling up an all star from the farm system.   Tom: Ooh.   Emil: Michael, that's a baseball reference, in case you're wondering what I'm talking about.   Michael: Thank you very much. Yeah, you saw the blade in the headlights look on my face.   Tom: So I'm just gonna go right down. So this is…   Emil: What's a farm, We're talking about animals now? What's going on here?   Tom: Higher rent than expected? Would that be the short way?   Emil: Yeah, higher rent than expected. On a new lease.   Tom: Sorry, farm system, pigs, I interrupted your guys's banter.   Michael: That's great Emil. Thank you for teaching all of these sports things.   Tom: Yeah, Michael's learning a lot in today's episode.   Michael: Yeah, today, I get to learn all of the sports, all of our listeners get to learn real estate stuff, I get to learn   Mark: All the sports   Michael: Yeah. All the sports!   Alright, so then my third and final one is the fact that you get to have, if you use leverage, you get to have a very high degree of control over your asset. And so you can buy $100,000 asset and that appreciation that you see is on $100,000 asset, but you might have to put in 20 or 25 to get it. And so because you can have a high degree of control. I've called this one to Tom Brady.   Tom: Okay, what is the what is the event here? What is the event?   Michael: Leverage using leverage to purchase real estate because he established a higher degree of control right where he deflated the football.   Tom: Oh.   Mark: I call it the Emmitt Smith personally, just because he's a legend and a real estate investor but I'm a Cowboys fan. So sorry.   Tom: That makes sense. Alright, so I like that you're getting using some leverage to buy and, and all that good stuff. So okay, we're gonna go through very quickly everybody's picks. And then we'll, when this episode goes out, we'll shoot it out to the twitterverse and see what see who see one. So Mark's picks are Hail Yeah, this is…   Mark: I would change that to Hail Mary just to make sure that we're sticking to sports references.   Tom: And that is when insurance covers the cost of a needed repair. That's super Yeah, that's, that's a winner. His second one is a walk off home run. And that's the doing a right refinance in Texas, where it's very difficult to to manage it. A refi. And then his third one is I think I picked the name you're crowding the paint. This is when you have multiple tenant applications, building come some competition, and just getting better terms and offer so. Excellent, Mark. Excellent. pick my….   Michael: Very nice, very nice.   Tom: Mine is a little bit more vanilla than mark so I have a layup that's when just rent is collected. I have a handoff that's when a new property is leased before the turn of construction starts or in the middle of term construction. That's always great news to see in your inbox. And then lastly, a draw chalk there's a there's no news nothing nothing new I don't have to worry about I don't think about it. So that's that is mine.   Let's see next we have Emil and he has some excellent naming you can tell he's got a good marketing mind here. The Supermax contract extension This is a renewal with a rent increase. Excellent Emil. Then we have the the buy win this is appreciation plus, at the same time, lower interest rates. So being able to have a pretty awesome refi perhaps even pay less and get a cash out. And then lastly, he has a an all star coming up from the farm system. And this is when you're getting a higher rent than expected. Excellent excellent.   Michael: Just such a ridiculous like crazy ridiculous name.   Tom: All right. All right. Last one. Michael you have a inside the park homerun. This is a forced appreciation. This is an increase in the rent doing some stuff. So that moment of when you completed that and have the forced appreciation. This is stealing a home buying a property on undervalue equity day one. Love that. A lot of that a lot of home runs here. And then lastly, you have Tom Brady deflate gate using leverage to buy those. Those are our list of, the yeah pantheon of excellent real estate investing moments.   Alright everybody, thank you for listening to the episode. If you enjoyed it, please like subscribe, all that good stuff. And as always happy investing. Happy investing, and happy investing. Happy investing

Picking a new real estate market is a huge challenge when you are starting out. Learning about the returns, the economic growth, the geographic attributes, risks, and all that must be considered can be overwhelming. In this episode, we share what we find to be the most important things to look at and critical questions to ask yourself when settling on where you will put your money to work.  --- 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 to another episode of The Remote Real Estate Investor. My name is Emil Shour. And as always, I'm joined by   Tom: Tom Schneider,   Michael: and Michael Albaum.   Emil: And today's episode is going to be a little bit unique we're going to be talking about it's actually a follow up episode. So if you scroll way back in the archives, we did an episode called the art and science of choosing a real estate market. That was Episode 21. And today, we're going to be doing a little bit of a follow up talking about some additional things we've learned and thought of, in thinking about choosing a market that we think are super important, especially for new investors, who are still in that phase of selecting a market. So let's dive right into this one.   Alright, guys, so all I'll actually kick this one off, I am going to be talking about property taxes, and specifically choosing a market where the property taxes are reassessed based on market value. So I'll bring up an example from my own portfolio. And then another example, I've heard through our good friend Michael Zuber.   So I invested in Indianapolis in 2017. And when I invested I did not know this, I learned this the hard way. But Indianapolis actually reassessed his property value every other year, and they base their property tax on that. So every other year, they look at the market value of your home, whether it's gone up or down, and they say, Okay, here's your new market value. And let's just say property tax is 2%. We're charging you 2% on that. So your taxes have gone up or down.   And since 2017, it's only gone up, which is great. From a profit standpoint, if I were to go to sell, it was great from a cash out refi perspective, which I've mentioned in the past. But it also, you know, when rents don't rise as quickly as your values do, and your property tax goes up, your cash flows getting potentially crunched more and more each year when that thing gets reassessed.   So this is something to be mindful of right? When you're looking at a market call the county assessor talk to investors who are in that market and learn what a win is, obviously, you want to know, what is the property tax rate, but be how often are property values reassessed. So how often is your property tax going to change? If at all, I don't think every state does this, it may even be on a city level. But just something to find out.   The other example I was mentioning, so Michael Zuber, I was chatting with him. And he mentioned a friend of his who invested somewhere about a decade ago, and that market has exploded in growth. I'm sure you all can imagine, you know, which markets have have gone crazy over the last 10 years. So his friend is in one bought a decade ago, was cash flowing about a decade ago. But now with this, this is a state where property taxes are super high already. And values have gone up like crazy and rents haven't kept up anywhere close to the pace of value increases.   So now, this investors basically has a portfolio where the values have gone up a ton on paper, he's doing really well. But his cash flow has basically been wiped away. And so he's he's at a point where he's thinking, who do I need to sell to go fund cash flow market? Or do I kind of sit and wait for the market rent to catch up? So point here, just make sure you're informed? Make sure you know how often property taxes are going to reset. And go into you know, choosing a market eyes wide open knowing, you know, it's not going to be fixed forever.   Tom: I feel for that guy that is cashflow got hit but like I don't know. I mean, he's appreciated so much. I'm not losing any sleep for Yeah, Mr. Right? Yeah,   Emil: But let's say you're a cash flow investor, you're trying to supplement your income and like, let's, I'm just gonna use easy math. Let's say you're at $5,000 a month in, in cash flow from your, from your portfolio there. And then your property taxes change, things change. And now you're at like, let's call it 1000. Right? And maybe you semi-retire or something based on that previous cash flow. So it's like, it could, you know, change your position. Or like, I don't know that that's crazy to think about, like if you were like semi retired because you're like, Oh, I have a cash flowing portfolio and now I don't really I don't know, that's kind of crazy.   Tom: Darn I just like, you know, doubled by equity or something. I hear you, I hear you. But like, you know, all those are happy, happy person problems.   Michael: No, most definitely, most definitely. So I mean, I'm so glad you brought this up. It's something I talk about in the Roofstock Academy all the time about the importance of calling the county assessor, just understanding how you know how property taxes are calculated. And if you're a brand new investor listening to this, you're probably thinking, Oh, my god, there's just this is like another thing I need to add to my checklist of things to be thinking about. And you could easily be falling into the analysis, paralysis, coma, with just adding more and more to that list.   So something we were chatting about before the episode was my my prior career, I worked as a professional fire protection engineer, we would often look at meet with clients and have all of these recommendations to share with them, like just laundry laundry list of things that they needed to do differently or better. And what we talked about is internally is just getting the big rocks, right, just get the really big stuff, right, and the rest of it will probably fall into place. Okay. And I would categorize this as a big rock.   When you're doing an evaluation or property or analysis on a property, you're looking at your expenses, property taxes can often be one of the biggest and far and away one of the biggest. And so we need to focus on the really big things. Again, property taxes being one of them. So what are they today, but what also do they have the potential to become in the future. And so, again, not intending to scare anybody not intending to contribute to analysis paralysis, but I think it is so important to highlight that this is a this is a big deal. It's a big issue until you want to get it right. And as an investor, the buck stops with you.   So you need to be capable, able and willing to go get the answers and the proper answers. So again, to drive the point home to beat up already pulled through. I don't know if that's, that's a phrase, but we'll go with it. Because dead dogs just sound too, too sad. It's something that you want to go spend time energy and effort figuring out.   Tom: One thing I love about this talking with you guys about this sharing on the podcast is sharing mistakes that we've made in the past. And one of the mistakes that I've made in the past is going and looking up what the property taxes are and not realizing that there's a big difference between owner occupied taxes versus investor taxes. So many states areas, actually the counties offer what they call a homeowner exemption. My saying that right, Michael, I think I am where it's, you know, the tax might be cut in half.   Michael: Yeah,  they call it a homeowner exemption or a homestead.   Tom: Homestead That sounds very, like you're, you know, planting a flag into the ground and claiming a lot. So,   Michael: This is my hectare.   Tom: Yeah, you know, the last, the last thing I'll plug on taxes is if you currently own properties, and are looking to see if you can push those property taxes values down within Stessa has some partnerships. I think we'll we'll name them at the end of the episode as they don't have it in front of me right now. Where some partners who can help if there's opportunity to lower your property taxes, it's a company that will help you with that appeal process. So we'll mention that in the ending credits of the episode.   Emil: Nice. Tom, you want to actually take the mic and talk about your other tidbit in choosing a market?   Tom: Yeah, my last tidbit and choosing a market. So within each market, there is a different type of return profile. Right, some smaller markets there tend to going to have higher cap rates and higher cash flow, and more competitive markets are going to have less cash flow available. And what we've seen where a ton of appreciation has happened in is in those markets where the cashflow is smaller, be it you know, Atlanta's your Dallas's your, these these bigger, Florida's these bigger markets.   And my you know, the longer that I'm doing this, the more I kind of realized as a longer term investor, you know, with values, there's going to be ups and downs, but over the long horizon that it tends to go up into the right. So what my tidbit is, is if you are in a position an acquisition cycle, I would I have had been putting more stock on, you know, market fundamentals that are bigger markets and trading that for a little bit less cash flow.   Now I'm not saying I want to create in Michaels Zubers word alligators where they're negative cash flow, but there's a lot of smart institutional money going into these properties where the cash flow is a little bit thinner. And if I'm, you know, at the point where I have some capital to deploy, I'm okay Putting a little more weight on the market fundamentals even though the cash flow might be a little bit leaner. I know oftentimes, as a newer investor, you could, you know, you see these these high cash flows in these markets that are like really little. But man, there's a real boon to be had for over time, the appreciation going going up, which tends to happen a little bit faster in markets that are that are larger.   Michael: That's a great point.   Tom: A little bit long winded. But I think, at a super high level, it's, you know, of that spectrum of appreciation versus cash flow, if you're holding for a long time. There, the returns on the appreciation are very real.   Michael: Yeah, I think it's such a great point. And also, to just piggyback off that, I think so many newer investors, myself included, when I was first getting started, put so much emphasis on the cash flow, and so much focus on the cash flow, that if you're targeting $150 a month cash flow, and you're ending up at your run your numbers at 120. You might say, No, it's not worth it. But at the end of the day, I mean, that's $360 a year that you're giving up to get into potentially a great deal that will appreciate. And as long as that appreciates more than $360 a year, that was probably the right call for the long term growth model, and the growth mindset.   So again, I would urge people not to get so locked in to a specific dollar amount, especially if it's your first deal. Of course, it's important and like he's mentioned, Tom, don't go buy alligators. Don't go buy bad deals, just for the sake of getting deals done, go buy good deals, but be a little bit flexible with yourself. Just with regard to your, your experience in the market, as well as kind of where we are in the market cycle. things just aren't the same as they were two years ago. So don't bring two year old expectations to today's market, because you're going to be severely disappointed.   Emil: Solid, alight Michael wrap us up. What's your tidbit?   Michael: So my tidbit is, and I talked about it all the time in the academy, there's two ways that I really like approaching finding a market or finding a deal. And one is you can let the deal dictate the market, or the others, you can let the market dictate the deal. And so if you're gonna let the deal dictate the market, this is what I did when I first started investing because I was traveling all over the country for my prior job. And I said, Oh, wherever the good deals are, I'll go by I don't care where it is, geographically, if the numbers make sense, amen. And it just got to spread out, it was a pain in the butt. So later on in my career, I said, Okay, well, I'm gonna let the market dictate the deal. And one of those two ways is going to feel easier. And kind of what I mean by that is, if we're going to deal to shape the market, again, that's going to find where the numbers work, and then zooming out and saying, What is this market? Is this acceptable to me, based on my investment thesis, my investment criteria.   The other way is, hey, let's go do market research. First, let's go find a market that I'm really interested in, and then dive deeper and determining if there are any properties locally, that meet my criteria, both ways are going to be iterative, in that you're going to come up empty handed both times. So you're gonna go find awesome deals with killer numbers that are in markets that you want nothing to do with. And conversely, you're gonna find these amazing markets. And as you dive deeper, you're gonna find that, you know, there's no deals to be had there.   If we look kind of at the market level, San Francisco is a great a great example of that. So you see, there's a diverse economy, there's a lot of stuff going on there, given the population change, we're going to ignore for just a minute. But from a high level, you could think that, yeah, this is a very strong, robust, economically robust market. And then to come to find out that your average sales, a million dollars in rent is 4500. So those numbers really don't pan out from a cash flow perspective.   So again, either way, your approach is going to be iterative, but one of those two is probably going to feel easier. You're either someone that really likes the high level macro stuff, and you like learning about markets. Or maybe you're more numbers focused. And you want to get into the nitty gritty details and go look at deals first, and then zoom out to the macro to learn about those markets.   So just as a tip to get the ball rolling, pick three or four markets if you're starting from the market, or pick three or four deals in different markets, and just start to go analyze those and learn about those. And my guess is you'll hopefully start to find out more than you would expect. And it helps prevent analysis paralysis, and that you can just start learning and start making informed decisions by doing these analyses.   Tom: Circling back to a meals point, this ties kind of well into it in getting spread out on too many markets. Like if you're targeting a ton of different markets, that's a ton of different sort of tax implications to or tax rates, whatnot, because they can be kind of unique by market and sub market. So a good a good podcast ties back to some earlier themes in the episode and I'm going to do that right there.   Michael: Bow tie.   Emil: So do you guys think it's more important to choose the right market? Or is it choosing a market and getting to know it? Well, networking, is it more about what you do in the market, or is it about choosing the right market?   Tom: I think what you're saying is like, Is it better to spend a lot of getting the time to understand a very specific market? or spend a lot of time and just analyzing many different markets to find that perfect one. And I think where you're kind of alluding to is like, risks around paralysis by analysis, versus kind of getting in there and getting your, you know, proverbial hands dirty or whatnot. Am I picking that up? right?   Emil: Exactly. I'm saying like, should you spend hundreds of hours analyzing and dissecting and saying, Okay, this market has all the right factors, employment growth, supply, constraints, yada, whatever, right? If you're choosing a remote market, or is it like, Alright, here's my shortlist of three. Here's one I like, I'm just gonna go and learn and get really good at this market know what a good deal looks like? Learn all, you know, talk to different PMS, talk to different agents, talk to different investors there and just like know it really well and become a good investor in that market.   Tom: The latter. I think, I like that kind of question. I think you're kind of like teeing up the, the direction is, it's I think, as an investor, it's easy to get lost in analysis, by paralysis by analysis. And there's a lot of people that have a lot of success and a lot of different markets. So you know, in the upfront, top of the funnel, right, I would whittle that down fairly quickly. And then spend the majority of your time understanding, you know, what's what's going on to that market like monitoring sold properties in the same profile, that you're looking for looking at new listings, in the same profile that you are looking for. So I would say the latter for sure would be my input,   Michael: I would agree, I think that your time is so much better spent getting your hands dirty, because I would argue that there will always be a better market. Like, if we're looking at market specifics, there will always be a better market, and I can almost guarantee you, there will always be a better deal. And so if you get really hung up and caught up on getting the perfect market in a perfect deal, you'll probably never do anything. And I would also argue that you can likely make lemonade out of lemons.   So even if you bought in what would be considered a quote unquote, bad market, if you've got a great team in place, and the numbers make sense, and you can still make it work. And that's only going to happen is if you're doing the legwork to develop a team and develop relationships locally. And again, you could spend your whole life trying to find the perfect market.   And the thing of it is like we're seeing market demographics change over time. So by the time you've done your research, the initial market that you started learning about could have changed in that time. So again, I agree with Tom wholeheartedly, just go find a couple that you're interested in, and then just go go do it, go pull the trigger, go make moves, because nothing's gonna get done otherwise.   Emil: I ask this as a kind of a trick question. Because I honestly think both are right, I think you can be someone who analyzes the crap out of a bunch of dots and says, alright, this one looks primed for growth. And you can be totally right. And you can be someone who's just like, like a move quickly, dog had, you know, like, get in there. And I'm just going to choose a market get started, get really good at it. And you can succeed. There's both I've seen people do both. I've seen people just like choose a market get really good at it. Do awesome. I've seen people who like really scrutinize and analyze every market, they choose to market it appreciate the time, you know, rents go up a ton. And they're right.   So I kind of proposed that as a trick question just to see what you guys would think I wasn't trying to lead you one way or another link both work,   Michael: We fell right into his trap, you Joker.   Tom: Sneaky Emil.   Michael: One last thing I'll say, and I think we've talked about it on other episodes. You know, I consider myself a reasonably intelligent person, you know, but I by no means any kind of genius and predictive analytics only get you so far. But I would say that so much of the legwork from a market data and analytic standpoint has already been done by people that make that like are getting paid to do this that have masters and PhDs in doing this. And one of the things I love to see is people riding the coattails of people more successful for themselves, or people that are doing things or have access to information that they don't have access to. And so one of the best I think, is like a whole foods or Trader Joe's, you know, they have entire teams dedicated to market research. And if they're going into a market, you you bet I'd be willing to bet the farm that they've done their homework, and they've done that research.   And so if you can just follow and find out where the whole foods is are going just as an example, right? That type of insight can be super valuable. And then it prevents me from having to do all of that market research and analytics. And that's information that's relatively easy to obtain.   Tom: Like one of those fishes that you know, jump on the back of a turtle that goes to where the foods that and you want to be. You want to be the fish you don't want to be the turtle you want to be.   Michael: That's it. Turtles get caught and fishing nets all way too often.   Emil: Alright guys, this is probably a good spot for us to end this weekend wisdom. So thank you guys again for tuning in. If you're watching us on YouTube, make sure you subscribe if you haven't already, so you get notifications whenever we release a new episode. And if you're listening to us on whatever podcast it is, make sure you subscribe there for the same. And with that we will catch you on the next episode. Happy investing.   Tom: Happy investing.   Michael: Happy investing

Last year we hosted a debate over what is a better asset class - single-family rentals (SFR) or multi-family rentals (MFR). In this episode, we look back on the performance of our portfolios over the last year to see which asset class performed best. --- Transcript   Before we jump into the episode, here's a quick disclaimer about our content. The remote real estate investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Emil: Hey, everyone, welcome to another episode of The Remote Real Estate Investor. My name is Emil Shour and I got my co hosts with me today who are   Tom: Tom Schneider,   Michael: and Michael Albaum.   Emil: And today we're gonna be doing a little bit of a look back episode. So we're slowly crawling out of the pandemic and we're going to do a look back at our single family rentals and our multifamily rentals and we're going to do a comparison How did each do during the pandemic? Alright, so let's hop into this episode.   Alright guys, before we hop into this theme, let's let's do quick updates. Always love hear what's going on in your portfolio. So Thomas, kick us off what's going on, man?   Tom: What is going on? So not a whole heck of a lot I mentioned before have done a bunch of refinancing and big milestone, it's a new month. So the new payments came in a little bit thinner on the old cash flow because those loans are a little bit bigger, but the interest rates are a little bit lower, but net a little bit of a higher payment. So you know, getting getting used to that and still in acquisition mode, underwriting properties doing all that I'm doing the work like doing the investing work. So Go Bears? Yeah.   Emil: You're in a couple markets. Right, Tom?   Tom: I am. I'm in three markets, Atlanta, Pittsburgh, and Orlando, Florida. So debating adding a new one, but I don't know, I'll probably take a note from a meal and just densify densify. But I don't know we'll see. You know, I'm not limiting myself right now.   Michael: And are you looking at multifamily Tom or single family?   Tom: Looking at both. I am looking at both. I mean, I don't want to steal the wind from the episode but single family has been awesome. So you know, and it's simple. Great. Probably 70 30% I go 70 70% I go single family some more. But we'll see.   Michael: All right. All right. All right.   Emil: You anticipated my question I was gonna ask if you are going into marquee already in or if you're looking at new markets, or what's kind of your next step. So good anticipation.   Tom: You know, it's such a funny double edged sword with appreciation is awesome. You know, you have these properties are appreciating value, but it's it's time for Acquisition time. It's like, oh, man, everything's appreciated a lot. There's still acquisitions to be had, but not not like the good old days. good old days, Wild West.   Emil: I feel like, every real estate investor will say that for the end of time, just like the good old day like it. We're gonna be like, Oh, man, remember and remember in 2020 or 2021? Gosh,   Michael: I was so cheap back then. Yeah.   Tom: Here's the thing is the good old days, like always, like, I mean, we're probably in such a weird time where it's been, you know, hockey stick for a little bit, is it but it seems like it's always like four or three years ago, like we look back three years ago. Oh, man, that was great. And he looked back three years from now. Oh, that was great. Like, I think we're in a particularly weird time. But I know the good old days is always just a few years ago, no matter where,   Emil: Unless you're in 2011 2012. No one was looking back to 2008 2009 2008 2009 thinking, Man, those were the good old days.   Tom: Yeah, if you were buying that was the good old days. And I think it's probably more circumstance that were just such a weird stretch of 10 years, 1012 years, but that 2009 2008 it was that was one of my earlier jobs working for one of this fund that was buying and you listen literally like couldn't walk out. You couldn't what can miss a saying that I'm totally botching, like you broadside of a barn was just everything was just crazy. high cap rates. You couldn't miss Yeah, I think you You said it right. So anyways.   Emil: What a time.   Tom: Take the baton from me.   Emil: The good old days,   Michael: The true good old days.   Emil: Michael, what about you, man, what's going on.   Michael: So I'm in the middle of two single family flips. So I've got one out in Kansas City that's now listed on market for sale on the MLS, which is exciting. And I got another flip out in Birmingham, Alabama, that is now been listed for lease I'm going to sell that with a tenant in place as a turnkey rental. So that should hopefully get leased up. Ideally sooner rather than later. But it sounds like they've got beginning a lot of applications which is exciting. So those are kind of the two big projects I'm working on. I sold the six unit which was great. So now I'm able to focus on one of the other 11 units that I have out there.   I need to repave that parking lot which is a bummer. I got Notice from my insurance that they're going to cancel my insurance once I get that done here very quickly. So hoping to have that wrapped up, ASAP, and then just focusing on the development project and seeing the big bills roll in. But we're almost done, we got a big hurdle, we got some new electrical service brought in. And that was something that we were waiting on for a while, both in terms of getting the part delivered, and then some work couldn't happen inside the building until that got installed. So we're seemingly over that hump, and then just a waiting on the last of the insurance settlement to see where that cookie crumbles, so to speak.   Emil: How did your insurance company find out that your parking lot needed to be paved?   Michael: So they came out and did an inspection when I initially bound insurance, and like the way it works is so stupid, like, it's so backwards. So basically, you go binded insurance, you go bind with the new insurance company, they come out and do an inspection and tell you all the things you have to do in order to keep the insurance otherwise, they're going to drop you. And it seems like if they are going to be accepting you for insurability, they should be doing that inspection on the front end and say, Hey, if you want to come on board if as you need to do a, b, and c, but after they've already g otcha. Then they say oh, by the way, you need to do ABCD, whatever. So I did a bunch of that stuff. The parking lot was really expensive.   This was last year, or maybe two years ago. And they said, hey, you've got to do this. And I said, it's just too expensive. It just can't happen. I did everything else you've asked, but this is the one thing I can't do. They said, Okay, we'll give you till next spring, which is now 2021. And then we had a quote to get it done. And so we're now we're getting it done. But that same day that we got the quote, they came back and said, Hey, you need to have this done by today. I was like, wait, what you get like, there's got to be like, you need to be a little bit more proactive and giving folks heads up. So they extended it another month.   But that's the last, the last extension I'll get so it shouldn't be a huge, huge deal. But if it's a couple grand, we got a quote to rip out the whole thing and repave it and bring all new asphalt that was like 15,000. So we're getting away with this is a great example. Repair versus replace. The repair aspect repair option seems to be a lot more beneficial. Just more cost effective right now. And it's a it's a parking lot. It's not like a you know, as a parking lot. Yeah, like it's not, it's gonna add zero noi at the end of the day. So which is a bummer. But again, it's one of the things you have to do.   Emil: Yep, just like busted pipes.   Michael: What do you got going on Emil?   Emil: For me, I got some good news. I got some good news. Recently, we, my single family home in St. Louis was up for renewal, the tenant agreed to a 2% increase in rent as a single family home, which is going to kind of play into this episode will be a good segue. So they're staying put agreed to 2% increase. So that's getting signed. And then I think I've been talking about the triplex unit for a while we've got a couple bids in. I actually have a call with my property manager right after we get off this podcast to finalize and start moving forward with that turn which should take about four weeks to get done. So a little bit longer than I was expecting but.   Michael: Nice. Do you want to save it for the episode? Do you want to tell everybody kind of what the bid looks like and what the rent increase you think you might get is?   Emil: I think we should I think we should make that its own episode. I think it'd be fun to maybe do like a post mortem. Like, here's how it all went down. I'd love your guys's feedback on like, what would you have done differently? versus like how did it go? I think that'd be a cool episode for us to do in the future.   Michael: Awesome. Love it keep everybody in suspense cliffhanger. We're gonna start calling you cliffhanger Emil.   Emil: All right. All right. All right. So what I like to do man you know I work in Marketing so you know you got to keep people on their toes got to keep them coming back.   Tom: Create the urgency!   Michael: Yeah, scarcity.   Emil: It's like there's a word for like open loop there's something it's like basically a cliffhanger where you just keep like, anyway let's get on with this episode.   Michael: Yeah. I get so many great isms.   Emil: Alright, so we're gonna be talking about basically how how did our different properties perform single family verses multifamily. Tom, you are almost all single family. Michael, you are predominantly multifamily. And I'm at this point basically split right down the middle of three single family houses and then a triplex. So three and three. So I think it'd just be fun for us to talk about, like, you know, how did things end up? Tom, you're our single family. Master why don't you kick us off. How did it go for you the last year, year and a half?   Tom: Yeah. Last 12 months have been remarkably boring. I mean, we talked about it kind of expecting this big cliff. Boring in a very good way. We expect this cliff of kind of like vacancies and not being able to pay and I'll let you guys speak to your portfolio when you speak but like, I don't know, at least within the properties I have there there was no issue. I did have one turn, but it was kind of a more or less like a scheduled turn. It wasn't like because of any like hardships, it was just because like the people were moving. I had two renewals, the other ones were on longer than one year contracts. And both of them renewed at a higher rate one of them at like a pretty significantly higher rate, it was like seven and a half percent increase or something on the rent, which is just like the best as a as a as a landlord.   So, a really ho hum, boring in the best of ways, kind of a year saw a ton of appreciation. I when I refinanced four of the properties i as i mentioned earlier in the episode and on some previous episodes, and even after doing like a pretty aggressive cash out refi I'm still like under 70% loan to value and receiving these you know notes from open doors and these I buyers of like, Hey, we want to buy your property at like above what I refinanced it at SFR has been a total home run.   Not a lot of like downside to be said. But you know, with with, as we've talked about in previous episodes, you know you have these honeypot of a year, you know and they are they're going to help cover the years where the roof needs to be replaced, or the H fac does. So it was super positive year with regards to rental appreciation, price appreciation, still being disciplined, you know, not getting too over my tips by getting too big of a cash out refi. But all in all a lovely boring ho hum year.   Michael: That's, that's awesome. And has there been one particular market in the market that you're in that you've seen has just blown the others out of the water? Are they performing fairly equivalently.   Tom: So Orlando has just been doing really well. And so is Atlanta, a smaller market that I'm in up in the Midwest in Pittsburgh, hasn't seen the type of appreciation. And I mean, there's a there's a lot to be said to, to having sort of a balanced view, and not just chasing cash flow. Because these these properties have appreciated so much more and so much faster. With these big eye buyers coming in, they're just driving the prices up. So the bigger markets have performed better on an appreciation wise, and I'd say not too big of a difference on with regards to to rent, but I mean, meaningfully, probably, you know, in the last year, they've been pre increased in price, probably 15%. Were these other properties that I have in up in Pittsburgh, you know, they've maybe they've been they've increased maybe 5%, which is still like, awesome. Like, if you can do that, you know, rinse and repeat all day. But the bigger markets have just achieved these just massive appreciation.   Michael: Yeah, that's awesome. And just to give some of our listeners a little bit of perspective, I want to put some numbers to to all of this. So when we talk about cash flow versus appreciation, we have investors that are biased one towards, you know, towards one or the other usually. And I've always argued that cash flow is great for today, you can live on it, it's tangible dollars right now, but appreciation is what generates really massive wealth. And so if you've been seeing 15% appreciation over the last year, let's just take a number and call it 150 grand. And if we take 15% of that, that's $22,500. So if we take 70% of that, which is about what you could cash out in terms of a cash out refi, that's $15,750. So you might be how you may have the ability to tap into an additional call at $16,000 at the end of one year via appreciation versus on the cash flow side of things. You might walk away on $150,000 property with I don't know two grand in cash flow.   And so while Yes, I would argue that they're both important cash flow is a great defense, cash flow is usable dollars today, being able to take an extra $16,000 out of that property and go put it into something else can be so much more impactful, long term to generate really massive wealth. So I think it's important just to keep that in mind, especially when we're talking about such unbelievable appreciation numbers when we have seen rents stay strong, but not they're not going through the roof. Like the appreciation value side is.   Tom: That's a great point. I mean, there's a saying I think I've tried to say before, it's like you know, a smart rat has multiple hole holes to run to, you know, one whole being the appreciation one whole being the cash flow on the yield. And I don't know in my experience so far like the appreciation side has been definitely out weighed where a lot of the return has come in through that, you know,   Tom: Are you referencing what we're talking about before the episode how I was saying, I look like a wet rat? Is that what reminded you? A wet rat has multiple holes to go to?   Tom: Yeah, yeah. Michael has some, some Fabio long hair. This is probably more relevant for the YouTube watch. Right. And he said he felt like a wet cat. I think it was.   Michael: A wet rat.   Tom: Yeah, but a smart rat has multiple holes to run to they you know, and the equivalent investor, you know, running towards a both appreciation or cash flow.   Michael: Yeah. Makes a lot of sense.   Emil: Tom, you might have mentioned it, but you have any vacancies over the last year and a half?   Tom: I had one. Yeah. So I had a one. As I said, it wasn't tenant. It wasn't like, you know, payment related. It was just somebody was moving. It was maybe slightly longer than I had written like in vacancy, like, in pro forma wise, I'll maybe estimate like a month of vacancy. And I think this was closer to 45 days, but it released a slight increase in the rate, in the rental amount. But there was some vacancy. But again, it wasn't necessarily pandemic related. And there ended up being a little bit of an increase in the amount of what the rent was.   Emil: Did you have any speaking on late payments? Did you have any tenants who had late payments had to catch up anything like that?   Tom: Yeah, I've got one tenant who has kind of a funny schedule. So we just more or less like move their payment schedule, like, around like, two weeks or something just because of like the timing of like, when they're getting paid. So like, if you look at the balance sheet within my portal, have my property manager it looks like they're always a little bit behind, but they always pay regularly and we just shifted on when they're paying. But no, there's no beyond that thing, which is, you know, not a problem. No real issues around cash flow and payments,   Michael: Noice!   Emil: All in all pretty solid year and a half. I mean, real estate investing, speaking obviously.   Tom: Yep.   Michael: You didn't feel like the grass was greener on the multifamily side of things this year. Hmm. Yeah,   Tom: I like to dabble in some stuff. So. I mean, I wouldn't be surprised if I go mid family, but it's like, part of me is like it is not broken. Like why fix it? Why?   Michael: Because it's a better toy.   Tom: Yeah. The other saying though, is if it's if it's not broken, you can still fix it….. There's a fox in that house. There's a cat in the Okay, anyways. I might dabble in the multifamily just because I feel like I want to exactly if I'm a dabbler. Anyways, we should we should switch it to someone else. Emil, are you the next right person? Because we're kind of transitioning to all multifamily.   Emil: I want to I want to give Michael the floor cuz he's a heavier multifamily. And then I'm a 5050 with my current portfolio mix. So yeah. Michael you go next?   Michael: Yeah, so we talked about it last year, probably around April, when things got really, really crazy. With a pandemic here in the States. And everybody was predicting, like Tom, you mentioned this wave of non payment or late payments, and all these, all these types of things. So I was bracing for the worst, I think, like so many other investors. And I was just really clenching my teeth and waiting for this tidal wave to hit and it never did, thankfully, and I'm knocking on wood here that it continues to go that way. But it's been very smooth sailing, for the most part.   So I had some really high end units that I had just finished renovating right when the pandemic hit. And so I was really nervous and having a little bit of issue getting them leased up. Because again, they were on the higher end for that particular market. And so we gave a couple of concessions, we lowered the rent a little bit, to incentivize people to move in, we were able to get them filled. And then renewals came around a couple months ago. And I said, Hey, we got to get these things closer up to market. And so we were able to get seven to 10% increases on pretty much all of those across the board, which has been really exciting. And then I've had several other multifamily properties that have had a couple vacancies. And as those tenants move out, and we turn them with relatively basic turns, we're getting another seven to 10%, pretty much across the board.   So 7% is kind of that the bottom floor of what I'm shooting for rental increases, both on new leases as well as on renewals. And thankfully, we've had a lot of folks renew, because just the rents in these markets that I'm in have gone up and so the deal that they're getting even at the rental increase is still really great.   So again, that's something to be thinking about for other landlords is the cost of getting a new tenant is often so much more expensive than people realize. So between the property management fee that you'll pay for a new tenant placement fee and the turn costs and the cleaning costs and the vacancy when you factor all of that in, even at a higher rent, you can often still be behind as opposed to just keeping the rent the same, or giving a slight increase to still stay under market rent, but above where you currently were.   And I mean, I know you and I have talked about this at length. And I know we've talked about it on other episodes, but I really encourage people, I felt like the Hawks, I really encourage, really, I would really, really, really encourage people to go through that exercise. Even if you don't have something coming up for renewal, just, you know, play that game and say, Okay, if I could get $100 a month rent increase on this $1,000 a month unit, that's a 10% increase. But what does that truly cost me if I have a month of vacancy, it turned cost here, property management placement fee here, you'll start to realize, I think that in most cases, it doesn't necessarily make sense, which is very counterintuitive. So again, go through the exercise.   But so I was I was fortunate enough that the rents have gone up, they've really kind of skyrocketed around me, which has been made it very easy to both keep folks in place as well as get rental increases at the same time. So I've been very fortunate I have not had a lot of vacancy, where I've been really getting hammered is on my multifamily renovation project, because the cost of materials have just gone through the roof. So this is one area where being in multifamily has just totally sucked, to put it bluntly.   So if you're building homes, you've probably feeling that too. But from I would argue, I would assume most single family investors are not doing new construction, they're just doing maintenance or rehabs or repairs. And on a single family, that tends to be a manageable margin for the additional cost of materials. When you're physically constructing 15 units inside of a commercial property. I mean, it just it's a bummer. So but again, overall very, very happy with the vacancy, very happy with the rental increases and very happy with the amount of rent that's been received and lack of non payment and lack of late rents.   It's funny where I did feel it is in my single families. The two single families that I own, that are long term buy and hold are in California, Southern California and an expensive market. And both of those had issues paying. And so we gave a rent reduction to one person that was the condo I owned, which I sold earlier this year. And then in the single family, the true single family, they had issues paying and so we gave them a break, and they're still quite behind. So my property managers looking at getting them put onto a payment plan. And also looking at getting them some rental assistance, because there's several programs out there, you just have to apply for them. But I had that was pretty interesting that really the folks that struggled the most were but again, I think it makes sense in that it's a very expensive market.   Emil: And California shut down a lot more than other places, right. So I'm sure people were more negatively affected by the shutdowns in California versus, you know, in the Midwest where they didn't have as strict of shutdowns. And that was it.   Michael: I think that absolutely, absolutely   Emil: Interesting. Okay, so, yeah, you already answered kinda all the questions. I was gonna ask Tom, like, did you have late payments and this and that, that's really interesting that it was on your single families and that they were the California ones.   Tom: On the construction side, too. I mean, I thought that was really interesting in that, you know, with with multifamily there oftentimes is more Rnm if the leases perhaps are shorter in and then on the other side of the matrix, if you're doing more development work versus turnkey, like there was way more pain in that just because of the supply chain and materials costs and all of that. It you know, it's it's like a matrix with all of this. It's okay, single family multifamily. Okay, more turnkey versus more development. And I think like in that quadrant, it's that the more development stuff is felt a little bit more pain from all the secondary effects that we're seeing from country going through a pandemic. very insightful. very insightful. Michael.   Michael: Pretty insightful for a wet rat, huh?   Tom: Yeah, pretty insightful. For a wet racket, the new. I'm gonna I'm gonna start giving more compliments. You know, I think that's uh, oh, that's very good questions you had earlier.   Michael: One thing I will say on kind of, because Tom, you're talking about the appreciation on the single family side of things. So on the multifamily side….   Tom: Good memory Michael, you're right!   Michael: That's too good. On the multifamily side, there has been a significant amount of appreciation as well. And when we talk about appreciation in the multifamily space, we typically would call it a cap rate compression. And so we see cap rates are either increasing or decreasing, expanding, compressing, and so when you have a cap rate compression, the cost to a new buyer increases because the equation is noi, which is net operating income. Which is simply your annual income minus your expen ses, not including your mortgage payment divided by the cap rate equals your sale price. So when we decrease the denominator and make it a smaller decimal, I know this is really math heavy episode, but the sale price increases. So play around with those numbers if you're not familiar with the concept.   But basically, I've had numerous agents reach out to me in some of the local markets and say, Hey, are you interested in selling cap rates are going crazy. And so I have a property that I purchased in 2018, it was a five unit, I bought it for a song, put a little bit of work into it. And I think I've talked about it in the past. But the thing cash flows like an absolute machine, I've got some really great long term debt on it, it's a 10 year fixed note on it amortize that 25 years. And for the commercial world, five years, 10 years is fairly common in terms of fixed, and it's at three and a quarter percent interest rate, which is really, really awesome in the commercial side of things.   And it's, it's doubled in value, basically. So over that three and a half year period. So things are very, very hot in the multifamily space as well. And part of that was just because it's in a good market. And part of that was because we did a bunch of work and manipulated the noi, and it really stabilized the building.   Tom: Is this the one that you're you're you're you're selling because of the appreciation that you got?   Michael: No. So that was a six unit. And that was one we rehabbed, we bought it as a buy and hold rehabbed it, but then just decided that it wasn't it was kind of a pain in the butt. It's kind of a headache. And so we said the market that area isn't as exciting as we thought it was. And we can just make a quick buck on this. I can pay back my cash partner, get them their money back plus profit, and I can walk with some profit too. And just spend my time, energy and focus elsewhere. Thanks, guys.   Michael: All right, Emil, the 5050 man,   Emil: So my single family has been more like Tom been pretty awesome. So I talked about it on a prior episode, I had the Indianapolis single family that I did a cash out refi we pulled out all our cash and then some. And because we lowered our rate like a point and a quarter or monthly mortgage payment only went up like 2030 bucks. So cash flow wasn't affected too much. So basically did a full cash out refi just thanks to Mr. market, which was awesome. That tenant also renewed their lease recently for a two to 3% increase. So that's been great.   The Jacksonville property that one we thought the tenant was going to leave like a couple months into the pandemic, it looked like they were moving for a job or something. Turns out they ended up staying at like a very slight bump. I think it was like a 2% rent increase as well.   And then St. Louis, which I just mentioned at the beginning of the episode, we just got a thumbs up that they renewed their lease at a 2% raise. So all the single families I've had all three of those, they've had the same tenant since I bought them so they're going on like three, four years of having same tenant which is awesome. Gotta love that about single family.   Michael: Awesome.   Emil: No issues with payment. I mean, one tenant had let like early on, I think they paid like two three weeks late on one payment and then they caught up and everything was good. So it's been ho hum in a very nice simple way on single family. On the triplex, which I bought in November, we had our tenant just leave. I think it was a probe knows may they just, we just found out when we were doing some work that the unit was vacant, like they just left in the middle of the night or whatever. They took all their stuff. They didn't trash the place but they just left without giving notice.   And it was funny I asked my property manager I was like is this is this normal? And they're like honestly, we've had this happen like two or three other times and it's been only during like the last couple months in multifamily around St. Louis so seems like more pandemic related for like smaller multifamily units that they've managed that they've seen this but again, you consider two or three times to happen. That's very, very small. Like we just got bad luck. Not the worst thing in the world. This thing is way more under market rent. I think they were renting at like 495 a month. We're going to be doing some renovation I'll tease a little bit of this future episode we're talking about I'm thinking with the renovations we're gonna do probably get it up to around 650.   Michael: So this way you didn't have to pay cash for keys.   Emil: Exactly. I mean, in in Missouri, you don't have to do that. It's a It's very simple. You can get once the tenants lease is over, you can give a 30 day notice to ask them to leave. In fact, so that same property there is a triplex one side it used to be a four Plex, they converted one side into a townhouse. So it's like a top and upstairs downstairs townhouse. That person they said they were not going to renew their lease, but they didn't give us a date on when so they've kind of just been month to month for a while and because we don't want this to drag on into winter. Where it's much harder to rent and you don't get as much rent, we're issuing just a 30 day noticing a essential month month and not planning on renewing, just asking that they leave.   So it's one of the nice things about Missouri, you know, very landlord friendly rules. It's not like we're kicking them out, we're giving them a full 30 day notice. And we extended them a renewal and they just chose not to accept it. So we've asked them to leave, which is nice, much harder. I think California, everyone knows can do that stuff.   Michael: Very different beast. Yeah. Emil: So that's, it's it hasn't been bad at all. I mean, you know, people get up and leave. It's part of it. I'm not gonna say that's just a multifamily thing. So overall, I think it's been nice. The single families like Tom said, all the appreciation has been amazing. you couple that with low interest rates, and you get to do cool things like a cash out refi and basically not change your payment, and pull out all your money. So single family had a really good, as we all know, we've talked about so yeah, I'm glad. I'm glad I have a little bit of both. I'll say that.   Michael: If you had to choose one that you were more thankful to be in is a multi or single family over the last 12 months.   Emil: Single Family for sure.   Michael: Single Family. Yeah,   Emil: I've heard of less people having issues with their single family, lot of appreciation, basically, in every single market. Whereas multifamily I've heard more people saying, you know, we've had issues with collecting payment none of us have, which has been great. But that from other investors I've talked to seems like multifamily more. So that issue if it did   Tom: Not super related, I just kind of like a weird Rnm repairs and maintenance things on one of the units. I feel like I've been very much Oh, you know, you know, blue skies and butterflies and all kinds of good stuff. I just had a, a break in on one of the units. Thankfully, everyone was okay. But it's like, Yeah, I don't know, they just sent some pictures of like, the door, like kicked in. I think it was a nobody was home, thankfully. But it was, uh, you know, that. I think everybody's okay.   But, you know, still still, even though it's, you know, you know, positive, there's still like, some costs and like bad and getting scary stuff, you know, happening on on some of the properties. I don't know, there's just, I just looked at this the other day, where they were sending someone out there to fix everything and get it all right, but I don't want to, you know, make the illusion that like, everything is always like so. So great. I know, there's things that things that happen and Yeah, I know, I just made me think of it. It was the first time I've ever seen that. And one of the units that kind of repairs and maintenance thing. Again, thankfully, yeah, everyone. Okay, but there's still, you know, stuff that stuff that comes up.   Michael: Yeah,   Emil: Great point, it ain't all rosy.   Michael: And so for that time that you reported to your insurance, you're just paying out of pocket is is lower than your deductible?   Tom: I've never reported that kind of thing to my insurance, I should because it might as well as like, put it towards my deductible, right?   Michael: So the insurance property insurance works a little bit differently, like as compared to medical insurance, so it's a per occurrence deductible. So if you have $1,000 deductible, and you have a $500 repair, they're not covering it, and they'll actually they'll put it on like your oftentimes, they'll put it on your like permanent record that, hey, this, they had a claim but didn't didn't wasn't covered because of lower than deductible. So I always check to see what the repair is going to cost. And compare that against my deductible. And if it's way lower than my deductible, or even around my deductible, I just eat the cost I don't even tell the insurance company because I don't want that to merit on my permanent record. versus if it's way higher than that deductible. And you know, it's gonna be sometimes you can't wait for a repair quote, like my younger brother just had a big pipe leak and the problem is I call the insurance is gonna be big so he you know, of course called him he got a repair person out there immediately and it was covered.   But for breaking stuff, it's normally changing the locks replacing a door, the lowest property deductible I've seen is like 500 bucks. And so that's likely going to be the repair to that is likely going to be less than your deductible. So if it were me, I probably wouldn't even report it.   Tom: Yeah, I wasn't planning on it, but I never even crossed my mind of doing that. But I like it good. Got it. Got to take away Yeah. On that got that dollar that per occurrence. structure.   Michael: Yeah, yeah.   Emil: All right, guys. anything. Anything else? Add or is this a good spot for us to wrap this one up?   Michael: Yeah, I know. This was great. I mean, it's awesome to hear that the single family has been going gangbusters. That's what we hear about in the news. And that's what we're hearing from from you all. So it's very, very exciting stuff. We'll have to do another post mortem in 12 months to see who will reign champion the next time bum bum bum!   Tom: I like it, the mid year episode mid year check in episode. I like it.   Emil: I like a good idea. Alright guys, thanks for sharing your experience love episodes like these where we just kind of dive into stuff that's been going on in our personal portfolios, was surfing with a buddy of mine and he was like so what's your what's your podcast about I was like, you know, we kind of just talk a lot about what's going on in our, our own lives and worlds and yeah, we'll you know, we'll talk about high level stuff, but it's a lot about just our own experience. And he was like, that's really cool. You don't hear a lot of podcasts like that. So yes, I don't know. I don't know what else.   Tom: You're complimenting. There we go!   Michael: It's it's that a lot of that but also like a lot of isms, you know, so if you're looking for some decent isms come check us out.   Emil: Yes, Uncle Tom's isms?   Tom: Yeah, making up isms: it's a rat in the hen house. A wet rat.   Emil: Alright, guys, ready here. Alright, so we're gonna do that future episode. And if you want to make sure you don't miss out on it, make sure you subscribe to our YouTube channel if you're listening on YouTube. Or if you're listening on your favorite podcast, make sure you subscribe there. Happy investing everybody. check you out in a future episode.

As remote real estate investors, choosing a new market can be quite the process. Today we run the thought experiment on how we would spend our time if we only had 24 hours in a potential new market to research, analyze and assess the city. --- 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, we're going to be talking about not being a remote investor temporarily and visiting the city. So the premise of this episode is going to be you have 24 hours to spend in a city that you're considering investing. What are you going to do? All right, let's do it.   Alright, so we have a fun episode today. But before we get into it, my name is Tom Schneider. And I am joined by   Emil: Emil Shour   Michael: and Michael Albaum.   Tom: This episode is a fun episode. We are remote real estate investors. But we're going to take a look, sometimes it's you know, worth the exercise to check out a market that you're evaluating. And we're going to talk about how we would spend that time if we were choosing to go jump into a market and look at things.   So we have 24 hours is the rule of this episode. And we're going to talk about how we would spend that. So let's see what Emil, why don't you go ahead and lead us off in this conversation. And again, this is 24 hours to go visit a market. What are you going to do?   Emil: Alright, so first thing I'm doing is meeting with the various people of my team, primarily property manager. So I think the premise here, Tom is I have not invested in this city before, right? So I'm a new investor, considering the city and I'm going to check it out, right? Or have I already invested here.   Tom: That's right.   Emil: And now I'm going to visit it,   Tom: I'm dealer's choice for your case, we're going to have it so you are already invested. And for Michael, he is evaluating investing. So we're going to mix it up a little bit, and I gotta be omnipotent, and get to just kind of jump in and out wherever I want. So, okay.   Emil: All right.   Michael: Like it throws zingers in there.   Tom: Exactly, yes.   Emil: All right. So I actually had plans to go visit. So I've mentioned before I invest in St. Louis, I was planning on going to visit St. Louis, and then COVID hit and that's filled all those plans still on my to do list. But here's kind of my checklist of things to do when I go there. So I have a property manager that I like out there. But I would go and obviously meet face to face with my property manager always good to do you know, so far, it's only been talking on the phone and on zoom or whatever. But I want to get to know them meet the people on their team just put a face behind all the names. So that's, that's one of the things I'm doing.   I would also honestly, probably meet with one or two other property managers just to meet them. You know, we've talked about in the past, you know,   Tom: You sneaky dog Emil!   Emil: I just I know, I know, time and I'm just kidding. That's that is smart to do. Here's the thing, I'm not there all  the time. And we've talked about in the past, things happen with property managers, sometimes things work out, sometimes they don't, I'd rather be over prepared. I'm not going to switch obviously, because I like my property manager. It's not about that. It's a matter of just going and doing some extra research and talking to people in case that scenario plays out in the future. So I'm gonna go talk to maybe one or two other property managers that were on my list. That's fallbacks. Just another thing I'm going to do…   Tom: Give them your buy box to you know, tentacles everywhere.   Emil: Totally, totally underrated strategy to find properties is talking to PMs, and they bring you deals.   I would also the other thing, I would do it well, since I invest there, I'm obviously going to go check out the neighborhood that I invest in, I'm literally just going to rent a car and just drive around streets a street and I'm I'm gonna have a notepad with me, I'm gonna write down, what are the streets that are experiencing a lot of people improving the properties or the properties that are already improved. And maybe there's maybe there's some dilapidated homes, they're right, where you could potentially buy the worst property on a nice looking block. And then I'm also going to just know down like, what streets were just bad, right? Like, you know, there's some cities you invest in where they say it's very block block, note down those blocks that you want to avoid within those sub markets that you like. So that's another thing I'm doing.   Michael: Emil, I'm curious, are you going with your agent or with your property manager literally just sneaking up and down every street in a particular area that that you're invested in?   Emil: I'm probably going by myself, if I can get them to come along with me. I would love that. But I doubt that they have six hours out of their day or whatever it may be that I'm just cruising around to like, do this kind of research. So I'm planning on it being solo, I'd love for them to come. But I just don't know if that's realistic, you know,   Tom: It's funny, there's like benefits on both sides to it, you know, like, you're just by yourself, like, you don't feel like you need to keep moving along to whatever you can kind of double click into whatever you want. But with an agent or with your PM, it's like, you know, little more insight.   Michael: I want to echo that point, because I've done both it, it's so often like you with an agent. And if you know that, well, then it's kind of easy. Maybe you're friends with them. And you can just kind of have a very flowy conversation. But I know just like in my own head, sometimes I'll be driving and I want to see something. And that's where my focus is. And in my head, I'd be like, shut up, shut up, shut up, like, I got to focus on this thing. So if there's somebody else in the car with you, or somebody else there with you, I don't want to feel like I always have to be talking, I just want to sit there in silence and focus on whatever I'm trying to focus on. So bright, that can be a really nice thing to do solo.   Emil: If I had a choice between pm and agent, I would go PM, just because they have to manage the thing, you know, like agents trying to sell you the thing. pm is trying to manage the thing. So there, they have a little bit more skin in the long term game. So I like the PMs perspective, a little bit more in that regard. And they may, you know, they may be able to take you down a couple streets and be like, yeah, we have properties here. It's great. It's not great, blah, blah, blah, things like that.   It's kind of just like, literally, I would rent a car and just drive around. I think that would be the most beneficial thing I could do. Obviously, I'm going to do a lot of research I already invest here. So I've I'm gonna assume I've done my homework, right? Like I've I've looked out where property values are an area where I'm targeting, what are the rents in that area? What is the quality of that neighborhood using things like Roofstock's, neighborhood rating are truly as crime maps, things like that to kind of hone in on a couple sub markets. And then I'm really just driving around seeing like, where cool shops and restaurants and things like that popping up and you know, near some of the areas I'm looking at that could drive rents up things like that make it desirable. So those are mine. Kind of the things I'm I'm looking to do.   Tom: I love it. That's great, Michael 24 hours in a city you're evaluating?   Michael: Yeah. So I and I have not invested there, I'm considering investing there. So I've done this numerous times, it's it can be a lot of fun if the trip goes well if you do a lot of your homework. And so first and foremost, I would say the trip begins well before you get there. And so having an agent that you've spoken to that you've selected from numerous agents you've interviewed is really important. And then having a property tours lined up in advance I think is a really good way to go about it.   And so what I did is I went out to the market in the Midwest, this is a while back. And I had one agent selected from numerous agents i'd spoken to she had properties lined up that we were going to go see from this hour to this hour. And then I also had standing meetings with different property managers that I was going to go interview in person of the ones that I had interviewed over the phone and had made a shortlist of.   So I went very similar to a meal went property to a ring instead of neighborhood to ring and looked at specific properties for several hours throughout the day. And then went and met with property managers after the fact. And then I was able to show that the properties that I had just seen and talked about the ones I liked, or disliked.   And so in addition, there's that research element when you're determining who your agents are just doing some research about some restaurants in advance, or some things that you want to see in the area, I think is really beneficial as well. And I am very, very fortunate in that my wife is the research queen, she always has his amazing itinerary set for us before we go places. And so my most recent trip out to the Midwest, she found like the top 10 best restaurants out in Cincinnati and was like, Here you go, you gotta go check them out.   So I think eating and dining at local establishments, in the words of I think it was a little mermaid that I want to be where the people are, to go see who you know, who is there, what's the what's the feel, what's the energy like? So I think that is is really, really important as well. And I talk a lot in Roofstock Academy about, you know, when you go to a market, you can't unsee an unexperienced things. And so if you have a bad experience, or get a bad taste in your mouth, that's going to affect your maybe want to invest in that market, which can almost be a detriment, because from a pure investment standpoint, it might not matter how the neighborhood makes you feel.   But on the opposite side of the coin, if you have a really great experience that could only bolster you know, your desire to want to invest in the area, which can be helpful as long as the numbers make sense too. So I think having a great experience and just learning the market being around can be very helpful and very beneficial.   And then also when you're just shooting the breeze with people, you know, in talking about different markets with different professionals or different agents, you say, Oh, you know, I love my favorite restaurant is so and so and they go oh yeah, it's right down there by whatever. You just have a better working knowledge conversationally and physically of what the market is like. So I'm meeting with my agent During properties, meeting with property managers and having a gastronomical 24 hours as well.   Tom: I love the food aspect. I'll throw a couple of notes in there as well. And at a very high level, I mean, we've we've purchased properties without visiting them. You know, I wouldn't say it's necessarily like a hard requirement to go. But if you have the opportunity, I mean, why not? You know, one thing that we didn't talk about is, this is a business trip and those type of expenses. I mean, this is not tax advice. But with these type of business expenses, flight, hotel, car rental, you know, even food, there are some potential tax opportunities to as to be able to write off, deduct all that good stuff.   So, but again, this is not tax advice. But in doing that, there is some definitely some juice to squeeze with that opportunity of those costs.   Michael: Keep track of everything.   Tom: Yeah, totally keep track of receipts of everything, for sure. The other point that I really like about Michael and I've done a bunch of market tours, just working in the real estate space for a while is to you do a lot of your work ahead of time, and having like a really thorough agenda and schedule is you're going to get that much more value out of it when you go because your time is super valuable. So you want to have it pretty lined up with a pretty tight agenda by the time you get out there. You know, from from touring, to meeting with vendors, property managers, whatnot.   The other thing that I'll add in there is Be it a market that you currently invest in, or that you're evaluating investing in, I would recommend taking time to see like range of multiple neighborhoods. So for all of these, at least specially with these, like big cities, there are some pretty big swings, like in the neighborhoods, and I would try to see a range of cities.   So like, let's say you're going to Atlanta, um, you know, perhaps you're looking up north in Alpharetta or an area and you're looking at Stone Mountain, and then you're looking at, I would try to not just do one little pocket of a neighborhood and try to get some range into the neighborhoods that you're looking at. And then I would research them and kind of like, so you can set a baseline. So okay, this is a three star neighborhood. Okay, this is what a four star neighborhood in Atlanta looks like. Okay, this is what a two star neighborhood Atlanta light looks like. That way in evaluating future properties, you have a little bit of, you know, an idea of what that range is like, the the boots on the ground.   The other one with the property manager and the agent. It's great to get on the road. And definitely, you should do that while you're there. But I would recommend busting open a map with them, like while you're there and just kind of getting your feedback on the itinerary of what you're going to look at and get their input on. Because real estate is a moving target, right? And just kind of get their insight on like, okay, lately, we've been seeing a lot of transactions here, there's been some more vacancy here, there's been prices going up or rent, whatever. So I would recommend some time in the office with them kind of one on one and going through that.   And the very last thing I'll say on the culinary pieces, I love food, too. I love traveling different regional cuisine is amazing. And, you know, there's a lot of great resources out there, Yelp, one that I really like is the eater website. So if you do like, you know, Austin eater, or SF eater, they have a blog, and I think they keep it pretty well put together of like, you know, top 10 newest restaurants and do it like every month. So like that's a fun way to find new stuff. Word vomit done.   Emil: I want to quick question for you, Michael, you know, you you mentioned, sometimes you can't unsee what you've seen when you go when you go look somewhere? Do you think that I could actually be beneficial and that like a lot of people invest? You know, like the paper, the numbers on paper look great, but they're not factoring in that, you know, sometimes a certain neighborhood could, older home, lowering whatever it is that causes a lot of things that don't show up on the spreadsheet are hard to predict. And I think like if you go and see those things you're going to be it's a lot harder to just go into it blindly. And just like, you know, trick yourself in Excel.   Michael: Yeah, totally. I think I think that's a really great point Emil. Kind of the counterpoint to that is not so much of the specifics of the property itself. But let's say you go get on a flight to St. Louis, and you arrive, an airline lost your bag, and you go to rent a car. And that person at the car rental is just a real pain in the butt really rude and they and they don't have your reservation. And so now you're getting into a crappier car than you thought you were going to get without your bag and you show up to the hotel and I lost the reservation. And you're so you're sleeping in this tiny room and you're like man, St. Louis frickin sucks. And you just have a bad taste of St. Louis your mouth but has nothing to do with the property or the market itself.   So yes, I think to your point, you can see things in reality that you're not able to ascertain from a cap rate calculation are from a listing and that absolutely can influence you and can probably save you but just the sheer fact that the experience that you personally have and then you go there you go to the restaurant you got your order wrong. And the waitress, you know, the the waitstaff is really rude. You're like, Man, I've never come back St. Louis, this place sucks. That might taint you from making a really great investment. Because the numbers still make total sense. You just happen to have a crummy vacation, or a crummy work trip.   Michael: Got it? Okay. So So I encourage people to not let the personal bias personal experiences influence the investment side of the things. But of course, don't go into it going on their numbers all work. So I don't want to look at anything else.   Something else to just be cognizant of is, you know, where you're going to these market tours, I think it is really important to have a an agenda and locale agenda, whether that's you've planned it or your agent has planned it. But I would also if you're planning it, if you're going solo, get input from from local folks in the ground about the different markets, because one of the things you do want to make sure is, hey, you're a visitor, and this is a foreign place use, you just want to make sure that you're you're being safe, and you're being aware of your surroundings. And so getting input on the places that you're heading, I think is important, just like you would do as a tourist in any in any foreign in a foreign place.   Tom: That's a great point, Michael, on the the safety aspect, and also in looking at properties if you're going to go, you know, this is kind of common sense thing, but you know, if you're, maybe it's a house that's not for sale in a neighborhood, like don't be sketchy, you know, like, don't be I don't know, just looking into people's windows or whatnot. Use use your judgment and safety first. Yeah. And great point about asking about the different neighborhoods, so like, if you're going into an area that perhaps has higher crime, like, no kind of local, whatever boundaries, like if it's safe, if you're just yeah, be informed before going into an area.   Emil: My agent would always say, these are areas I don't feel comfortable going at night. And that's probably a good good barometer to like, Alright, cool. Good to know.   Michael: It was funny, just real, real quick, prior life anecdote. So I used to work as a professional fire protection engineer. And so I was going into this property that was vacant. And it was like this old, old, old, old, old abandoned warehouse and attached to office building like two or three square office building. And dude, who I was with was like, we were same age, and we were in our early 20s, whatever. And so we were shooting the breeze, whatever. And so we're walking through his warehouse and there was like, US syringes and like a chicken head inside of like a pentagram on the ground. And I was like, this is kind of weird, but we were like chatting, whatever, like my job is to look at this kind of stuff. So I need to look at the building.   So then we went into this office building and the power was off. There were no lights all the windows were boarded up, so it's pitch black. We both had our flashlights walking through and while walking, I'm like, why like what am I doing here? This is not like okay, this is safe. And the dude I'm chatting with like, meanwhile is up a floor above me and he's like, Hello, Is anybody here? Yes, a lot of times you find people in here and this and that. I'm like, like so not okay, like let's get out of here. We don't get paid enough to do this. Let's just leave. So for whatever that's worth be aware of your surroundings and if something doesn't feel right listen to your instincts.   Tom: Safety first one of my favorite episodes that we've done is the Halloween episode where we all you know we give Yeah, yeah, yeah, of ghosts and creepy creepy things found highly recommend checking out that episode our our Halloween episode. cool guys, any so anything wrapping up our 24 hours in a city?   Michael: I think just kind of to wrap things up, you're gonna be tired, especially if you're changing time zones, jetlag is a real thing, I seem to be very prone to it. And just I would say push through the tiredness, especially if you're just traveling, like the time there is going to be well spent, you're going to look back on it. And remember all of the information you gained or contacts you made much more so than the sleep you didn't get. And so I would encourage you to push yourself and work through that. And just make the most of the time you're there because it might only be for a 24 hour 12 hour, it might be a short timeframe. So go use that because you might not get a second opportunity.   Emil: My finishing tip if this is a market you've been investing in, you go there regularly, you know, you've met with your PMs, I would on return trips, not mentioned anything to my property managers and I'd go I'd go check out my properties. See how they're, it's kind of like a check without them, you know, you tell them you're coming in, they're gonna make sure your properties are nice and clean. All the landscaping is taken care of, I would hope at least that they do that. So you know, just go visit and don't mention anything and see how your properties are doing. It could be a good way to kind of trust but verify.   Tom: Love it. My last piece I'm going to say is do a post trip like little write up, you know, our little human brain are good at forgetting things and recovering things differently later. So on my flight back I do this, you know, I make a point of doing this before taking a nap is all kind of write down. Okay, what what what did I do? What were my takeaways from each thing. And you know, I may not look back on that paper like or that whatever spreadsheet or however I'm organizing it a long time. But something about writing it down. It's almost like I'm writing it into my brain. And I just remember it better on those type of trips. So, again, before you go, maybe set some clear objectives and like an agenda of what you're trying to accomplish. And then on the way back, take the time and write down what you what you discovered. And that way you're much more likely to take action and get value from it.   Michael: There's a ton of data to support that time that writing it down is imprinting it.   Tom: We're all big, personal productivity buffs and love to layer this stuff into our day to day investing stuff.   This episode today was brought to you by Roofstock Academy. Check us out one stop shop for learning to invest coaching on demand lectures. And then plus a bunch of other benefits like a money back guarantee that lasts for five years, as well as 20 $500 in marketplace fee credits on roof stock. So check it out at roof stock academy.com. And as always, happy investing.   Emil: Happy investing.   Michael: Happy investing.

In this episode, Ryan Porter with Next Home Realty Experience tells us what we should know about investing in Jackson real estate. Learn about the particularities of the market, return metrics, the school zones, taxes, common problems, and what you need to do to win in this hot market. Ryan Porter: RyanPorterhomes@gmail.com. 601-238-6620 --- Transcript Michael: Hey everybody, welcome to another episode of the remote real estate investor. My name is Michael Albaum and today I'm joined by my colleague, Mark whittling. And we're going to be chatting with an agent out of Jackson, Mississippi. Ryan Porter. local guy knows a lot about the market and is just killing it out there. So let's jump into it with Ryan and learn a little bit more about the Jackson Mississippi market.   Alrighty, Ryan Porter out of Jackson, Mississippi, how you doing, man?   Ryan: Man doing great. So glad you guys could invite me on the show.   Michael: No, we're happy to have you and thanks for taking the time. Really appreciate it.   So let's just jump right into it. Man, you are a Jackson, Mississippi born and raised?   Ryan: Born and raised Rankin County just out of the Jackson area and lived here all my life.   Michael: Awesome. And I'm curious, how did you first get into the real estate game.   Ryan: So a friend of mine gave a book to me around Christmas Rich Dad, Poor Dad. And I'm sure a lot of people got into real estate with that book. And I bought in hook line and sinker several, several years ago. And it was one book led to another and I just never stopped. I've been scratching and calling ever since. And it's been a really, really cool, fun ride.   Michael: That's awesome. I think so many people share that similar experience. I know I did for with Rich Dad, Poor Dad. I just kind of smacked me upside the head. And I was like, Man, what have I been doing up till now?   Ryan: Right?   Michael: It takes just simple book to figure it out and explain it to me.   Ryan: They tried to tell us with monopoly, but we had to be pointed out it's   Michael: Right. Right, right. So you're an agent, you're a property manager, you're an investor. Talk to us a little bit about all the things that you're working on.   Ryan: So last year, I teamed up with a next home franchise and started a brokerage here in Brandon. We've got 22 agents. Now we teach a lot of investing class. That's a lot my background. And a lot of our agents are invested minded. We teach how to we'll do field trips on newer agents to show them how to video a house for someone that's out of town, how to work with clients, they'll never see that house.   So they'll have that special skill set to be able to point out potential problems going down the road, or a potential problem right now it says hey, this is just not a good fit for out of town, this house may need a lot of maintenance, something like that. We want to teach those agents. So we've, we've started that with next home, we've really had a lot of success, we've got a lot of really killer agents.   With our property management. I've teamed up with one of my high school friends that we've remained friends throughout our life, he's got his real estate license with us it next time we started a broker, Property Management Division. Super excited about next rental we used to build software we spent several several months doing our homework on property management, probably another year, doing our personal properties and just our local friends and acquaintances properties to where we felt comfortable. Okay, we could pretty much take anything on, we've seen so much within the last three years of running property management that it's just a really fun job for certain people.   Our employees we have, they love their relationships with the tenants, we've learned that if you can get that right tenant and teach them how to take care of a home in a way that we're not just putting them in a rental home, we want to show them how to take care of a home because one day they're gonna buy a home and we want to be there with them, potentially maybe buy that home. So that'll give a win win win to everybody, the people renting the home and the investors.   Mark: This is the story how I connected with Ryan. I saw he was an educator because one of his agents named Bo was all over whether real estate investor Facebook groups. So I reached out I said, Hey, Bo, I really like what you're working on. Who do you work for? Tell me a little bit about you. So he said, so I told him about the certified agent network. And next thing you know, we're connecting with Ryan. And Ryan is just as you can see an educator. He's the kind of guy who's got the experience so he can walk the walk talk the talk at the same time.   But we asked him to be a part of the certified agent network because we knew he had the educator approach and that's what our buyers are really looking for. So you know when they they can talk to an agent and have that ability to connect virtually and not have to you know pony up, side to side. You know, they could do it the way that they feel comfortable. So we knew is a natural fit to bring them into the certified agent network. And that's where we're going today. So Ryan's been successful and just watching him kind of grow and do his own thing has been awesome because he doesn't need training on our side, he just walked in said, I got this and got a ton of properties under contract already. Ryan: Mark, when I didn't know a whole lot about Roofstock when you came to me, but when I got the link to the university, I was just blown away how you guys had taken everything to do with investing from day one to closing day to, whatever and put it in the format that you did, where it really broke down and investor, let them know what they were getting into told them. And I just like this is how I like to do business, we want to educate our investors where they're making smart choices. That way, they will make money, and we will make money and everybody will be happy.   So I really loved the way you guys have built your format. If I was an investor just starting out or whatnot, you just can't beat the training that you guys have thought of everything on how to pick your property manager. That is such a huge, huge chapter. Because that property managers everything buying a house, that's simple. I can point you to 15 houses tomorrow and Jackson that you could get a 25% cash on cash return. But unless you've got somebody to manage that property, well, that's going to drop down to 12 really quick.   So I love how you guys have built the templates on how to ask those questions. And we're starting to see that as we're working with these investors. They are very knowledgeable they've been through they know the questions to ask. So I love working with experienced people. I love working with anybody I love teaching, like you said, but it does make it easy when these investors know what they're doing, because they've been through your portal. And they know what smart questions to ask.   Michael: As you say, as soon as we get off this call, we're gonna we're gonna go look at some of those 25% cash on cash return properties Ryan!   So, Ryan, I love that you talked about making that partnership with kind of a win win win with the education side, both for the investor owner as well as for the tenant because I think so often there's this almost adversarial relationship where owners see the tenants as the enemy and the tenancy the owner as the big bad landlord, but you're kind of breaking down those barriers. And it sounds like having a lot of success, fostering some great relationships.   And you know, it's not that hard to do. Honestly, at the end of the day, people want a nice place to stay, they wanted to be treated, right? We try to pick nice houses that we try to get those items taken care of a before they buy the houses in inspection, have a house rent ready, somebody can move into it and not really have any problems. If something pops up, just take care of it as simple as that those people are happy. it's not rocket science to have a good property management company. It is rocket science to have everything organized, where you can provide that quick response time. So you can answer when they do call. That's all they want. Is anybody wants is somebody to hear what they have to say and fix it.   Michael: I'm gonna put you on the spot here. Because I agree, I don't think it I don't think it's rocket science. But I think anybody who's been in this business long enough as an investor has come across their fair share of really poor property managers or property managers that they don't want to work with again. So what in your estimation separates the really great property managers from the less than great property managers?   Ryan: I think the biggest thing would be communication. If you can get somebody on the phone, you can usually get an answer. That's been the biggest thing that I've heard when somebody said, I can't get ahold of my property manager. It's been a week. I'm like, what I don't understand that is 2021. Everybody's glued to their phone, that person was ignoring that call. So if you're ignoring somebody call, you're usually hiding something. So that goes back. I think if you're communicating with everybody, everybody's on the same page, then there's really no confusion. And as long as somebody is just not acting a fool, what you do run into people like that you try to screen them out. things do happen, people lose their job, but there again, I tell that person, I don't care what you're going through. You text and tell me every single day if you're going to be late or whatnot, but I need to have that communication. Once that stops. That's when we'll start assuming and and that's not good. And I asked my ex girlfriends that assuming stuff is not good.   Michael: No, I love I love that. I think it makes a lot of sense because I think you're for me anyhow, that I would agree makes a really great property manager. If there's bad news, call me Tell me Don't let out about a week   Ryan: Yeah that's a house, you know, we can fix it. When it boils down to it, there's not much a house can tear. I will say that there is, but just communicate it and fix it. There's an answer to everything.   Mark: I got a quick question for you in Jackson, Mississippi. I mean, you're in the south, it's hot. But you know, here I am. in Dallas, Texas, we have foundation issues and something that not all investors really know about. What do investors need to know in Jackson that are the big, the big risks that you're always call it out and making sure buyers just know before they get into a property?   Ryan: Just know. Yep. So if a house has Foundation, or has had Foundation, and we get somebody that bids on it, I like to call that person in, I want to talk to that investor and just let them know, because I understand in Arizona, their dirt may not settle. And they don't even know what a foundation problem is probably like, I don't know what a basement flood issue would look like. I've never seen a house being a basement.   So with Mississippi, we all are in that delta type. swamp land, I guess you would say. So we've got a lot of dirt here, there's just not great. Now, as a builder, when they're building a home, they'll take all that bad dirt out, packs nice, fresh dirt in, pack it down. And they're supposed to give so many feet. But unfortunately, 20 30, 40 years ago, they didn't have those rules, it was a little bit of the Wild West. So you can have literally a neighborhood that had this builder build this house, and this joker did great work, he was proud of his work, this house would never have foundation problems, the drainage is well around the house, the water's not coming against the house, the house next door, this builder came in and threw it up didn't care about his drainage, the level of the house may be off might be the low down the block. He's probably if he's not had foundation problems he's going to so we want to avoid the house that has any drainage problems around it.   That being said, you can have a house that's had foundation problems that's been repaired, and that house be just fine, the drainage has been fixed. Whatever that builder did has been fixed, we've got nice pilings, a lifetime warranty. Still, as an investor, I'm not going to recommend any house that could even potentially give foundation problems. To me, that's the worst mistake, that's the death zone. If it's potentially gonna have a river going around it, that will just wash that dirt right out from under the slab. And that's just no good for anybody. So foundation is something that I think is where you need the boots on the ground to go view these houses to look at their past look at the neighbor's house to see if they've had foundation problems. See maybe if you can find who built that house. And that type thing.   So it's it's house to house but foundation problems are huge, huge thing that we look at when we're looking at a house and different areas are a little worse than air others. And older homes are a little worse than the newer homes. That being said some of the newer homes built in certain areas do do have some problems.   Mark Yeah, I think it's a great point to look at the neighbor's house because it may not be your drainage issue is theirs, but it becomes your problem. Right?   Ryan: That's right. And just little things like that tree overgrown and leaves falling down, getting in the way of that drainage. So trying to spot those problems. Even if I try to assume that our renters are not going to rake the yards, I just assumed the worst that the leaves will fall they'll cut them with their lawn more when it's summertime. So if there's a a French drain that needs to be raked out once a month to keep this house from having foundation problems, that's not going to be a good rental home, that's going to be a good home for a person to move into that's going to take care of that home to keep that stuff because that's his investment. So those are things with foundation. We're very very careful when we get involved with something like that.   Michael: Are there other things Ryan that are specific to Mississippi That you see as very common issues that maybe to a California or to a Texas investor might be a big deal, but they just are regularly occurring issues that you tackle no issue maybe like moisture intrusion or warping. I don't know something to that effect.   Ryan: Yeah, I think foundation would be the biggest issue. We have a little bit of mold. Sometimes I don't run across that very often. If so, it's on where the outside rooms or whatnot. air conditioners are a huge deal here. They're usually ran from March till probably sometimes in December. So almost year round, people are going to use their air conditioner. The air conditioner lifecycle is probably, if you get a new air conditioner in take care of it had it serviced once a year, you can get 10 to 13 years out of the air conditioner. Still, sometimes, you know, you'll have that's a big service call is air or air conditioners, yeah, usually, January, February or March, we're going to get a call. And when it gets really to that 105 degree days, it's hard to get a house down to 72 degrees sometimes if it's not insulated just right,  if it's an older home.   So we try to prep people as part of our move in when Bo brings a new client in utility and explain to them about the air conditioner that you know this is not a brand new home, it's probably not going to get 62 degrees if it's 100 outside and explain how to change the air filters to keep it at that lowest point. So air conditioners and foundations. I think that's our two biggest things. roofs are just pretty normal everywhere. We do have tornadoes, or hail storms a bit bit. There's just nothing you can do about that.   Michael: I love that question mark because so I bought a property a triplex up in Alaska years ago. And I used to work as a fire protection engineer. And I went up there and I was up there for work. And I was looking at the property and the agent was showing me around and he says, Oh yeah, and here's the fuel tank for the diesel fired boiler that's in the basement. I was like, What? There's no way we're having diesel fuel sitting by this property?   And he goes, No, no, like, that's what people do here. And so coming not being a local, you don't know. And so that's, I think, a really great question. And a really great talking point is you might see that and think Yep, not gonna touch it. But that's just par for the course in that market. So understanding those types of things, I think is huge.   Ryan: Absolutely.   Michael: Can you talk to us a little bit Ryan about kind of the numbers as an investor so if I'm an investor looking into the Jackson market, from a purchase perspective, on average three to you know, not the main, you know, into different neighborhoods, maybe talk to us what the purchase price map and what might some of the rents might look like as well.   Ryan: We've got two or three in the Florence areas, little suburb blocks south of Jackson, when you get out probably, I'm going to say the really good schools zones in Rankin County, you'll see anywhere from 150 to 200,000 that's kind of where I guess I like to be I think a lot investors like to be around at 150 to 200,000, 2-3 with a  garage, a nice 1015 year old home that's similar dated or this move in ready. We'd like to see anywhere from 1500 on the 150 up to around 200 like to get around 1850   Michael: Awesome so we're kind of flirting alright that 1%   Ryan: Yep, yep, absolutely. In this market you know that i think that's that's very decent. You know, a year and a half ago, we were getting a lot better numbers. Houses are just bring in maximum value right now. But also, renters are easy to get to there's not a shortage of renters went through our app out it's usually taken snatched up pretty quick.   Michael: You beat me to the punch. I was just gonna ask both on the purchase side and on the leasing side. How quickly Are you seeing things move?   Ryan: Yeah, they move quick. People are complaining people are getting beat out of leases. I got a call this morning run up, tried for leases on my own. I need help finding a rental home. He was just out applying on his own off of Zillow or whatnot. And it's not like it used to be used to you could look at your phone, dial that number and go rent that home and there wasn't a line now it's apartments are booked up. Houses are pretty booked up. It's It's hard to get a house in any fashion right now.   Mark: What I like about the Jackson market is you really have three big counties Heinz, which is really where Jackson is out east is Rankin, and up north is Madison. And they all have different personalities. And so maybe Ryan give us a little idea of what you're going to get with each of those and you know, how the schools are compared and just overall cost of living.   Ryan: So, starting in Jackson, I love I own a few. That's where I started my investing was often McDowell road. Great spot, I used to cruise up and down and when I was a kid, the numbers are great in that area. The last house I bought was around $40,000. And I've got a nice $850 renter, the area, you know it's hit or miss. As far as street to street, you may have this street, it's a little bit abandoned house abandoned house, you know, you don't want to really be around a lot of abandoned houses in any market.   So I try to go to the upcoming streets, one that I may see a couple for sale signs on that's a good sign those houses are about to probably get rehabbed. So we really try to go select right there, northeast Jackson's a little bit harder market to get into, it's a great flip area, a great way to do a BRRRRs up did a few BRRRR in that area, the numbers just match up. If you're set with a lender to get a free home may not have gotten a few of them. You get up so I like to BRRRR the Northeast Jackson area.   Rankin it's a great school zone. The public schools are great. The housing is around $200,000. You can find nice deals around 130 to 150. Sometimes, and those you want to scoop up quick because if it's in that school zone, there's demand for it. Every school zone he can in Rankin County, it seems like there's a demand for housing for rental housing in that area.   And Madison, it's a little bit higher in homes, you do get a lot better rants in that area out that county, it's a little bit stricter on their landlord policies, you have to apply for a permit different, just different loopholes that we jumped through, though and help you jump through. It's a great market, though, that you're going to see in Rankin and Madison, that's when you'll really start seeing your investment long term for when you want to sell that home, you'll get a great return, the housing really has skyrocketed.   Several the areas are just moved to USDA financing. And just that area alone when you go from FHA, VA USDA, and now that opens up for a buyer to get 100% financing. That just opens the market up to so many more people in this area. Because in Jackson, in Mississippi as a whole there are a whole lot of people with approval letters, but not a whole lot of people with 3% downpayment in their checking account. So having that USDA having a home when I'm an investor, I look at several different things. So I want to see if I can find the area that may be coming up for USDA soon, our buyers in that area, those houses are definitely going to be worth more in three years or four years, I can put a renter in it, let him pay my note for a little while, make some money, and watch that house really, really appreciate. So that's one thing we're watching for in the Madison area right now is that USDA, they're doing a few things.   Michael: What great insight, Ryan, I mean, it reminds me almost like an opportunity zone. It's these geographic areas that are now getting opened up to additional investment that wasn't there previously. I think that's awesome. I think that's awesome.   Mark: So when one thing that I want to point out, not only to the listeners, but you know, to this group, you know, Ryan's actually picking a lot of properties that are going on the Roofstock select program, which is you know, he his hand picked a good number of those and he's the one running the numbers from a rental perspective and then the rehab. And then he's pushing those through if he thinks it's a good investment property.   So maybe Ryan Give, give the listeners a little idea about what you're looking for that you feel is kind of that that opportunity that other investors maybe aren't seeing? Because you know, these are on the market MLS properties that are in our select program. So there's a lot of eyeballs on those properties. So what are you looking for That maybe you can give a little explanation to our buyers about.   Ryan: So when we're looking in MLS a, I want to see the houses that just hit I want to be the first one to get it out, well you guys can see it before right now there's going to be multiple offers usually on a reasonably priced house, and especially if it's in a very good schools zone.With that we want speed, we want to get it on as quick as possible. And we want numbers to be accurate. Also, Bo, and I like to get on our phone late at night. And we'll tag team and we'll go over each address and look at that house, we'll look through each of the pictures, we'll come up with a repair by budget based off for what we can see.   And then also we'll both check the rental rates, we want to both do our own compare at the end. And usually we can take a property from when we first start looking at it to when we hit publish, it's gonna take us 10 minutes to go through the taxes and whatnot, we're gonna we're not just going through slapping houses on we really want to be exact, because I understand as an investor, I'm a huge BiggerPockets guy, huge BiggerPockets, calculator, I'm a numbers freak, I want to see how those numbers line up. And if those numbers aren't, right, that's a big deal.   If I tell you, you can get 1500 but you get down here and can't find anybody. But for 1400 I just blew your whole plan out of whack. I don't want to be that guy. So we want to make sure that and a lot of times we undercut for that reason, I don't want to tell people that and expect more. But whenever I'm running my numbers on anything, I like to undercut you know, and overdeliver so when we put a property on there, we're very certain we can get that rent for that property. Well, we've looked into it.   And then once somebody is serious about it puts an offer we're gonna go out and look at the property do a nice video posted on YouTube, send it out to the buyer. And when we do that we're actually looking at that house just to confirm Okay, we can get this for this house we've looked at the area have looked at the neighborhood that's part of our inspection process. We're not just hiring that inspector in that first 10 days to go inspect that house we're also inspecting the house just to make sure it's a good deal for our investors.   Michael: That makes a lot of sense and that's really great background to know that it's not just getting thrown up there grab that random that there is actually investors looking at this underwriting it and saying okay, we're going to stamp of approval this Can you talk to us Ryan and all of our listeners a little bit about I think something that should be on every investor's mind if it isn't but property taxes How do those look in the greater Jackson area for the different counties you have?   Ryan: So Jackson area is definitely the highest in taxes and I hear a lot of complaints honestly I think it's right you take a Jackson's are very old city and the utilities are very old it's the water problems have made national news the pipes are just to hold there's no way around it. And if you take all those pipes under all those roads, there's just no way to go in and repipe a city it's just not feasible so they're constantly patching on it and I think that's just the way it's going to be as far.   As the sewer it's kind of the same way it's it's old so we look again at house by house we're doing that it the sewer system and water system and do the best we can on that but the taxes are high for that reason, and they're probably not going down anytime soon. They're probably gonna keep rise to keep combating and investors gonna pay 1500 ish taxes in that home. The government will give you a little bit of break on your tax. Just by living in that home. It's kind of a bi sticky to the investor his taxes will be higher. But Madison's obviously the highest property values are higher in Madison. u is not a far fetched higher than Rankin. It's not as high as Hans but it is because most of the homes are valued are a little bit higher than Rankin.   Michael: So is it fair to guesstimate around one to one and a quarter percent of the purchase price if you were just doing some real quick back of the napkin math to determine what your property taxes might be.   Ryan: There again, we like to check that and each county has different ways we can check taxes Hans County, we can see the exact rate on Madison and Rankin county you can call the tax assessor's office say this is the address Can you give me them non-homestead rate for this house, get that answer pretty quick.   Michael: I love that you said that it's something that I talk about all the time in the academy is don't use the Zillow number, don't use the Redfin number because that could be the homesteaded prior value. And if it's based on purchase price, that owner is locked in. So pick up the phone call have a conversation. How do I calculate my after sale taxes as an investor?   Ryan: That's right. That's right. Just give him a call. Those ladies are happy to help.   Mark: Yeah, a lot of our listeners want to know who Ryan Porter actually is we got your investment background, but they also want to know you're married, you have kids, you have a boat you take to the reservoir because they have a pretty awesome reservoir. What what kind of fun do you have?   Ryan: Well, actually, I do have a boat. It's parked in my backyard. I live on the reservoir. I love getting on a pontoon. I had two girls, we actually spent Sunday on the water cruising around, watch the sunset. I'm not married. Married to my work. I really stayed at my computer all the time. I love getting on the road, checking the houses out. It takes a lot of my time and I'm not disappointed. My girls are my life.   Got one that's in the banking career. She's trying to get work her way up the lending ladder with a local branch and my youngest is just going into 11th grade. I'm super proud of her. She's really been my mini-me with real estate. As I was coming up through the ranks with me and my open houses, baking cookies, we would go all out she'd have a great time.   Michael: That's great.   Mark: So she looks at you as the rich, the rich dead. she's she's listening. She's watching. She's learning. That's great. That's all possible. That's, that's important. Yeah, we want to get to know that the ryan that's, you know, behind the scenes, because, you know, we work hard but important to play hard to. So that's, that's awesome.   Michael: I love that. Ryan, if folks have additional questions for you want to reach out to you directly? What's the best way for them to do that? Get a hold of you.   Ryan: So my cell phone or email, like I said, it's 2021 it's always beside me. My cell phone 601-238-6620 text or call. If you call us leave a voicemail? Chances are I'll probably have to get back to you or email. Check it pretty much regular throughout the day at RyanPorterhomes@gmail.com.   Michael: Awesome. Awesome. Well Mark, any final questions or thoughts around for let him out of here.   Mark: I think we're good. I'm just appreciative of all the hard work because he's one of the newer certified agents that's joined us recently to broadcast these select Properties. In already in the first 30 days, they get seven properties under contract and you're feeling a lot more offers than just those 70 got under contract because it's it's a wild market. But you know, we appreciate what you're doing. And these are ways that we can always broadcast all the good things that are happening. So you know, buyers can tune in and then give you a call after this.   Michael: What are you seeing buyers do to win offers? How are they being strategic? What insights tips tricks, can you get folks that are looking to make offers in the Jackson market?   Ryan: So we actually teach a class on this once a week at our brokerage next time we get together as agents, all of us and we talk about Okay, what have you done in the last week or for last? What have you seen as listing agents that other agents are doing all four Why's the Step Up Calls is a popular one. I tell investors that if it's a hot house and has multiple offers a let's make it easy as we can be on seller as far as closing time. That's a huge deal. You tell me your parameters on when you'd like to close? Let me see when the seller would like to close and try to make it easy as possible on them. That's what they really like is easy closing dates.   As far as the finger goes. I don't try to recommend a price. But I will tell an investor to do their numbers and look at the house. And if it's a solid house getting that rent, where are you comfortable, where do your numbers line up to where you can make this much profit a month and this will make you happy. And let's go in at that number.   I'm a huge again, I'm a huge math guy I like to see my numbers work and it's something satisfying whether you're preparing to flip a home or BRRRR a home if you're just buying a straight out rental to have a plan on paper and say okay, the house is gonna cost this gonna cost this device can call CES to fix it up ran it. My property manager has been it's going to cost this at the end of the day, my checking account is going to get this much deposit in it in it each month. To have that plan come to fruition and on All those numbers actually work mass is super satisfying to me. So we want to take it from that point where I want your numbers to make sense. Don't go overboard to try to win this house, do not fall in love with the house, fall in love with your numbers on paper and stick to that.   So we want to keep them at bay. But at the same time, we want to get as many houses as possible. So we want to be flexible on our closing date. Don't ask for any closing cost, and our communicate with that other agent and really sell our investor Hey, this is what everybody wants an investor coming in and giving you top dollar from California. Man, I'm on sale you to these guys. And they're going to be excited about selling their house to this guy.   Michael: Awesome, awesome. I love that.   Mark: To me, that is the that is the value right there. The certified agent is you know, getting your foot in the door and knowing who that listing agent is and calling up and saying, Yes, give me some info, give me a little information, what's going on, you know, and just letting them talk a bit. So you can go back and make that best offer.   Ryan: That's right. That's right. And I can usually let them know, you know, hopefully what it'll take to be in that top running.   Michael: Which is so huge, which is so huge.   Mark: And that that is huge because the buyers know whether they're in the running or not. If they are not, then take the money and put that towards the next property and move on. But you know you you don't want to tie up money that doesn't have a chance.   Michael: Well, Ryan, thank you so much for coming on, man. Really appreciate you. This was a lot of fun. And like I said, I'll be definitely reaching out to you because the Jackson market sounds like it's on fire. Awesome.   Mark: Thank you, Ryan. Appreciate it. Michael. This was awesome. enjoyed it.   Michael: Everybody that was our episode a big big big thank you to Ryan for hanging out with us and giving us a walkthrough of what the Jackson Mississippi market has to offer and what investors should expect and know when going into that market both with regard to things they might be encountering, and also how they should be making their offers. If you enjoyed the episode, please feel free to leave us a rating or review or subscribe to the YouTube channel. We always look forward and welcome feedback as to additional episodes ideas, just leave us a note in the comment section.    We look forward to seeing on the next one. Happy investing

Passing a real estate portfolio to the next generation is not always straightforward, and if not planned well, it can be a painful point of contention for a family. In this episode, we discus come clever ideas on how to equip your children with the skillsets needed to responsibly manage what you leave them. --- Transcript: Emil:   Hey everyone. Welcome back for another weekend wisdom episode of the remote real estate investor. My name is Emil Shour and I got my co host with me today who are   Tom: Tom Schneider,   Michael: and Michael Albaum.   Emil: And today we're going to be talking about generational wealth. We're gonna be talking specifically about our thoughts on it, what our plans for the future what we want our legacies to look like and even how that's changed over time. So let's hop into this week's episode.   Tom sounds like he's at the motor speedway right now he's…   Tom: …got a little construction going. Like the dentist over this   Emil: Oh, let's just drilling   Michael: Are they still jacking up your house?   Tom: They finish jacking up now they're adding in plywood to strengthen the sides of the walls usually houses have plywood on the side but mine did not so it's kind of scary living in the bay area where it's like a little bit earthquake prone not being as structurally sound but…   Michael: like around just the perimeter above the ground not like the shear walls that are on the foundation.   Tom: So you have the two by fours like the framing and then yeah normally outside the framing there it's common to have plywood and mine My House did not so they're adding in like some plywood and stuff so a lot of stuff going on at the old Casa so that's the dentist noise in the background is plywood going in deck being rebuilt all this all this jazz. So kitchen being redone. Fun Fun, fun,   Michael: Rehab that work.   Tom: Rehab and live in rehab. I yeah, grind through it. Yeah, it's a first world problem. But it's uh it'd be nice to have a kitchen with running water.   Michael: So needy Tom, needing running water, electricity. Gosh, Come off it already, man.   Tom: Yeah, this toughened me up. Sounds good.   Emil: Alright, guys, so back on track. We're talking generational wealth today. This is personally for me, some I have just gone back and forth on like, what do I want to do? There's like, kind of two schools, right? There's some people, there's a lot of different variations. But I think the two main ones are, I want to leave a lot of the assets that I'm buying and owning to my family. And then there's some people who are like, No, I want my, my kids, my family, well, mainly your kids to build for themselves. And you either I don't know, donate to charity, or do something with it where you know.   So I'm curious, like, have you guys thought about the future? What does it look like, for you in terms of passing, will stick to real estate specifically by passing on your portfolio to your kids?   Tom: To be honest, I mean, I haven't really thought too much about the mechanics in a way that I want to do it. But what I what I do know is there's a good amount of lead time, hope that I that I live long, that I can, you know, I don't necessarily have to make that decision today, with real estate and I think is relevant to you know, passing on to kids, there's, there's two things you can never change with real estate, that is the location of the property and the price that you pay for it down the line, if they you know, one thing that I like so much about single family rentals that you have multiple kids, it's it's much easier to kind of break up that kind of disbursement of, versus your you know, your family owns a big apartment complex, you know, it's a little bit trickier have a thinking about passing it on to the next generation.   So that's one thing I'm thinking about with single family is it's a lot easier to slice and dice that type of wealth, you know, some questions that I've been having is, you know, how much money should I be putting in this, you could do pre tax money towards like a college fund. And part of me is like, No, just dump it into real estate, like, you know, maybe I'm losing some of that pre tax efficiency, but like, I really love this as an asset class. So I cut in front of the line to give an answer. I didn't really like the answers, just a couple of musings that I have is I don't have a very specific plan. But I do know that I want to get the assets in place and really focus on that side, you know, down the line, I can get more formal about that way of, of transitioning. So not positive. I answered your question that you had asked me, but I had a good time answering it.   Michael: Well, I've got a follow up. That's more that's more point blank. Do you plan on passing your assets to your kids when you and your wife are no longer around? Or do you have a separate plan?   Tom: Yeah, I hope so. Um, yeah, that would be the plan to do that. I mean, I think it's a buffer if, for whatever reason, like, you know, we need the money, like, I hope to set myself up in a situation where you know, you have Principle of investments be it in like properties, whatnot, and you never necessarily have to dip into it, you know, you're making money off of the yield, you're making money off of cash flow, perhaps even, you know, dipping into the some of the equity through, you know, another cash out refinance, whatever.   But at the end of the day, the end of my day, I chose source assets are able to be passed on to the next generation, I would like to do that and maybe even step it up a little bit, maybe throw a house or a couple houses in there, too. So, alright, I digress again, Michael or Emil somebody quick!   Michael: Before the potato hits the floor,   Tom: I am holding, my hands are burning. Yeah, hot potato.   Michael: Good. Similar to you, Tom. I've thought about it. In theory, only my wife and I don't have kids yet. So but they're definitely in the foreseeable future. That's part of our plan. So we'd love to be able to leave the whole portfolio to the kids, assuming they're not a couple of knuckleheads. It was something that that I was left when they had future generations passed. And it was a hugely, hugely impactful thing. Now, if my kids have no interest in real estate, no, I'm not just going to give them a portfolio of performing assets and say, well, you're not your setup. I mean, they need to express an interest in wanting to actively manage and be a part of that, from a young age. It's not just a golden ticket, here you go figure it out. So I want them to be active participants.   And if they don't want to be well, there are ways to, you know, liquidate the asset or get equity out of the assets so that they can use that cash for a better purpose or for something that they see more fit or that they are going to get more out of, because so often you hear about these, someone in the future generation passing away, the kids have the asset, whatever it is, and they squander it or squabble over it, or screw it up, and then it just gets really ugly pretty quickly.   So there's a way to avoid that, which I think if I had to play it out, and as best way I could, I'd say that they would be involved in the business during their lifetime, so that they're well equipped and well versed to take over should they choose.   Tom: I think that's responsible also, Michael, that you're talking about kind of thinking about, like concerns of potential like squabbles, I don't know if this stuff can get ugly.   Michael: It gets really ugly really fast. And I've seen it happen. I've heard about it happen with family members, that's typically who's being left this stuff. So kids or siblings, cousins, whatever, and then the relationship gets soured, because they are in a better position. Now financially, because they have this thing, which is so silly to do. It's the exact opposite of what should be happening. So if you can plan for that in advance, and there are tons of ways to do that, via trusts and making sure that kids get things at certain ages, and their estate planning is this whole sector unto itself.   But the fact that real estate is such an amazing vehicle to keep until you pass is kind of comforting.   Tom: If you got a pet, pet turtle, you know, you can you can get really creative with wills and trusts. And if it's gonna outlive you, if you have a pet, there you go.   Emil: Is that an analogy? Are you serious about pets? I have heard of it. I have heard of it. Yeah. My thoughts on this kind of flip flopped? I think, when you have kids, it puts it a little bit more in perspective, like you just think about it more. I think there's so much value in learning how to build from nothing, right? Like, okay, let my kids kind of work, earn money, help them learn how to do the things I've learned over time, but not just give it to them or give them money or whatever it is.   But I think that has changed a lot over the years. I think now I would rather I would love to help my kid not just like hand my kids over properties, but help them get their first properties, help them do their first deals, even if I'm the person giving them the cash to do the deal. Like I'm their bank, that would be the most amazing thing, because then I think they're learning and they get to kind of make those mistakes. But I'm also you know, it's it's like, you want to help your kids as much as you can give them a leg up in this world. Like, why not do that? Why not help them but still teach them those important lessons.   So like you said, my goal, they don't squander it, hopefully, their kids, you know, when they leave it to them, don't squander it, but like, trying to teach them the value of $1 and like, give them a leg up, but not just hand everything over to them. It's kind of like, how I think about it now.   Tom: I think in the the process of, you know, grooming them to take it over or whatnot. Man, there's some really practical learning spots in there in like looking at, you know, a pro forma, like breaking it down like looking at lease looking at like math and English and action. So I think in getting to that transition plan, like I can just see a lot of kind of fun ways and getting them excited about these really important concepts. stops with financial literacy, of understanding that so it's kind of a gift that you get like multiple, multiple gifts to give from one that, you know, understanding on the inside of it, and then to it at whatever point you, you know, transitions assets to them, boom, number two.   Michael: The gift that keeps on giving, it's the golden goose, the golden goose, I think it's interesting that I see. And you hear about these kids squandering it and the squabbling over it. And it's like, they never got any training. And when a kid turns 16, they can go get their driver's license, but we don't just don't give them a keys to the car, because it's their birthright or because it's their right to go get their car, they have to go through training, and they have to learn it and have to earn it and have to pass a test, same thought process should be applied to business or assets, there needs to be training involved. We can't just give the kids the proverbial mineral keys and assume that it's going to all work out. Okay.   Emil: You, you brought up a good question, Michael, that I wrote down, I want to ask us all, what do you do if your kids are just not interested in real estate? Like you try to bring them in the business, you try to keep them involved? But like, you know, there's only so much like kids, a lot of times they don't have the same interest as you no matter how hard you try. So it's very, very real scenarios. What do you do if your kids are just not interested in real estate?   Michael: Can you just go get new kids?   Emil: Trade em in!   Michael: Trade with someone who doesn't have any, swap till you drop? Isn't that what we were saying before the show for real estate?   Well, that's like Michael Zuber talked about that.   Emil: Exactly.   Michael: That his daughter was not interested. I think that you can, again, me personally, without having kids, it's, it's all theoretical. But I would plan to support them in the same ways that I would if they were involved in the business, and whatever their passion was. And that me, I love what you said, that's just not to go give them money and say, or do whatever you want, but to be as supportive and helpful and give gifts in the way that is going to benefit their lives. And further there being a good person in the world, doing things to that effect, and then deciding and having that conversation, hey, you're clearly not into real estate. You know, what's something that you're passionate about?   Maybe we can donate this to when we pass? Or maybe there's something we can do in that department? Yeah, without having a super clear answer, because I don't know yet. That's, that's what I'm thinking in my brain.   Tom: I think based on if they're not interested in continuing to build upon the portfolio and actively manage, put it in a position where you just be passive. And, you know, if they want to, like have a career that is, I guess, I don't know, net positive. And it's, it's funny, like, Who am I to, like judge that, but if they want to have a career where maybe like, the money that you make is not a lot, and this could help them out, you know, build the portfolio in a in a passive way. And it's a weird thing to say that it's like, you know, who's who's judging? Like, what's a, you know, career worth worth having. But yeah, at the end of the day, just making it like a passive position where it can help them, you know, live their life a little more comfortably. I think that's would definitely be something that I would want to do, even though they're not going to be actively involved in it. Build set up to be passive.   Emil: Yeah, that's a good one.   Michael; What about, you know, what if? What if the little one is like, yeah, Dad don't care.   Emil: I've thought about this a lot. I would, I'd hope that they'd be interested in either business or something like, let's say they have some skill, and they like, they wanted to start their own business,   Michael: Like bow staff skills?   Emil: Wxactly. Bow staff skills, nunchuck skills, you know, something where they want to start their own business, maybe we can put some money in there and help them grow their business, right? Maybe they're not interested in real estate, we can use the wealth we've created to help them start a business that they can. That's another type of asset, right?   If they have no interest in that, I don't know man, it would be tough to just be like, Alright, let's just put money in, like Tom mentioned, that was my first thought as well put in something passive, maybe some dividend stock portfolio that just helps supplement some income, I would just be kind of scared if they just have no interest in financial education, personal finance, like they're gonna squander it. So it's, I don't know, at that point, though, I'm going to find out what time is something you can do as a parent that just ensures that they're interested in this stuff that we're all interested in, I don't know.   Tom: I've got a better take. Now I've got a more established take thinking about and hearing you talk about it. It's so I'm gonna have put it it'll be in a trust, right? And they, if they're not into it, I'm going to make the decision that it's a really great wealth builder. And the trust is not going to let them touch it. It's just going to like, dribble out, you know, money for them to help them. Yeah. And it'll be just this little dribbling out. Money Money machine, that that's what I want to know.   Michael: A little ATM.   Tom: A little ATM. Yeah.   Michael: I feel like if my kid or kids are not into it, and they, they still want access to the benefits. In the fruits of my labor, I'll just like give them treasure maps that they have to go solve. And the trust dictates like, no, sorry.   Tom: Dude, the trust you can make it like you can make it do whatever you want.   Michael: Yeah, yeah, you must go to this location, you must solve this riddle.   Tom: You need your agents license in Hawaii go! Then, you become a notary in the state of Vermont.   Michael: Your mission should you choose to accept it.   Tom; Could you imagine like the, like kids faces like this, this 50 point project of like, I have to do what?   Michael: Are you serious?!   Emil: Wait, what if? What if you do that same logic, but you make them a achieve? Like they have to buy a rental property and achieve a minimum of 5% cash on cash return, so they basically have to learn real estate investing to unlock the big treasure chest.   Michael: Yeah, that's good.   Emil; So I don't know.   Michael: I mean, you might be on to something Emil.   Emil: They have to do all these things to get the millions or whatever and in doing so they've learned their financial literacy.   Tom: You got to go go to a soup kitchen. You got to go build a house!   Michael: You got to go be a good person. Yeah, totally.   Emil: With the trust you can do that. Yeah, you can do all that stuff.   Michael: So all right, I have to go Kelly after this. I gotta go update my trust.   Emil: Alright, guys, anything else to add here?   Michael: Yeah just…   Tom: No we got it!   Michael: Oh so clearly what I have to add is not essential.   Tom: Probably not. Go ahead.   Michael: There's there's something that a lot of people might not know about. And it's called this step up in basis. And that has to do basically with Tom, what you were mentioning earlier, in that the two things you can't change the location of the property and the price you paid. And so the way real estate is tax is it when you make a profit on the sale of a property when you sell from when you bought it for it's called capital gains, and you pay tax on that gain.   So let's say you bought it for 100,000, a couple years goes by it's worth 200,000. If you sold it, you would pay tax on that $100,000 you gain plus depreciation recapture. But let's not even get into that. So what a step up in basis basically says is that the day that you pass, and you give that property to someone else, or to In addition, wherever it's going their basis in the property basically becomes the fair market value at that point in time. So what that all goes to say is, let's say you same example, you bought that property for 100 grand, and you go talk to your tax professional before doing any of this, but this is just high level, how my understanding of it is, is if you bought that same property for 100 grand couple years goes by, it's now worth 200. And then you kick the bucket and you pass it on to your kid, well, your kids basis in that property is now 200 grand, because that's the fair market value.   So if they sold that property, the day after you passed, they could sell it for 200 grand, their capital gains tax would be zero, because the step the basis gets stepped up to the value at your passing. So if you sold the day before you died, you get taxed on 100 grand in capital gains, if the air sells the day after you pass after it's been stepped up, they sell for that same 200 grand their tax basis is zero.   So it's a really, really, really amazing asset to pass on to the next generation. Because what Tom mentioned is true, you can't change what you paid for it in your lifetime. The basis does change in someone else's lifetime. So it's again a really amazing asset to die with. As morbid as that is.   Emil: A good tip. Michael, I'm glad you mentioned step up and basis very important. As you're thinking about…   Michael: What do you think, Tom? Is that essential or not?   Tom: Uh Yeah.   Emil: I would say that's fair to include in the essential.   Tom: Oh, yeah. Oh, yeah. Yeah, that's definitely fair.   Michael: Yes. Awesome.   Tom: Yes, definitely. The dentist office downstairs agrees, with the pounding.   Emil: Alright guys wrapping this one up. Thank you, everybody for joining us on another weekend wisdom. We will check you guys out in the next one. Happy investing.   Michael: Happy investing.   Tom: Happy investing.

Sometimes closing on a deal is not so straightforward. Michael shares a nightmare closing scenario and we discuss how to mitigate struggles like these to stay on schedule, saving time and money. --- Transcript   Emil: Everyone, welcome back for another weekend wisdom edition of the remote real estate investor. My name is Emil Shour. And today I've got with me,   Tom: Tom Schneider,   Michael: and Michael Albaum.   Emil: And we're going to be talking about what happens when your closing goes sideways. So Michael recently had a refi on a triplex he owns and had some some challenges arise. And we're gonna just put them in the hot seat, learn what happened and learn how he deals with it. So you guys can get some tips and takeaways in case this ever happens to you down the road. So let's hop into this one.   Alright, Michael said, set the stage for us. What what happened on this refi on your triplex.   Michael: All right. Step back in time with me to December of 2020. So that's what I started this whole process. And my wife actually found this awesome lender out in the Midwest, they could land on this property that I owned inside of an LLC. And I was like, great, this is awesome. So we got the ball rolling. He got a couple different quotes. For me. He was a mortgage broker. That's what he did he so he wasn't the lender specifically. So he found a lender that was going to work. We said, Great, we got the ball rolling, we got the application process started.   And then they said, Oh, you're doing some rehab work. So they went out for the appraisal, that's when they learned learned, quote, unquote, about the rehab work. And I was like, I told you about the rehab work. And they said, Oh, well, we can't we have to go back and do another appraisal once the work is done. So keep us posted. I'm like, oh my god. So that slowed things down to start, then we were supposed to close. And they said, Oh, you filled out some paperwork wrong. Yeah.   Tom: Did you get charged for like a chip chart trip charge for the appraisal? appraisal.   Michael: So I got a second charge for the appraisal, which they didn't tell me about until the closing statement showed it. It was only a couple 100 bucks. But I was I was still a bit frustrated, because they didn't like tell me that. And I should have assumed like, of course somebody has to travel to go do these things. But also at the same time, it seems a bit frustrating that they said oh, here's the price for the appraisal when they quoted it to me. And then the final amount being taken out at the closing is different, because they charged more for the appraisal example back second time, which they should have done because they knew about the construction. So that was a bit frustrating.   Tom: Was the construction like really significant.   Michael: It was a total remodel of a unit of the biggest unit in the in the triplex so fairly.   Tom: King unit.   Michael: Yeah. Yeah. So yeah. So then they tell me Oh, by the way, I know we're pretty close to closing, but you filled out some paperwork wrong. So on my statement of information to the Secretary of State of California, I put that the LLC was member managed. But when I initially filed and made the LLC, I put that it was manager managed. So those two documents didn't align. So they said, Oh, you got it, you got to change this. And I was like, all right. We should we're done about this earlier, but whatever. So I did that and filed an amendment with the Secretary of State, it really wasn't a big deal, like 25 bucks to do to do it all online. Good to go. Great.   So now fast forward, the closing has already been delayed. They finally got through the re inspection of the property, as well. And they say, oh, by the way, this same issue happened in Alaska, where the property is, is physically. So you need to update that as well with the the secretary of state or change the operating agreement. I was like, why didn't you bring this up when you were scanning the documents that you had for California a month ago? Like a So anyway, to file an amendment, the Secretary of State of Alaska was much more difficult. It wasn't able to be that online. It was a whole process. And then I didn't get verification that it was accepted and approved. Until 18 business days later, was there a timeframe?   So I said I can't wait 18 more days to close this thing. What options do we have? And they said, Oh, we can close load in your personal name. So I say Great, let's do that. And they said, Okay, well, now because it's gonna be a person's name, you have to click claim it out of your LLC and into your personal name. I was like, You got to be kidding me. So I quick claiming that out of the LLC into my personal name. And they said, Okay, yeah, now we're clear to close. So they reached out to the title company, and the title company was unresponsive. So then I reached out to the title company, the title, the closer I reached out to their manager, and everybody was giving me the runaround. Oh, we need more documents from the lender, and the lender saying, Oh, we need we gave everything to title. It's in title's hands. So days and days, days, this Thursday went on for like a week of trying to coordinate this thing with the title company.   The person who the lender had on my case on my file was on the East Coast, but the title company was on the west coast. So there was several hour time difference. I mean, it was just like, the amount of people that got added to the emails each day grew exponentially. And I think Like the final set of emails, there were 12 people CCD on this, like it was a joke. Like they just couldn't get it. Right. So the loan finally funded this Monday, this past Monday, yesterday. And on Thursday, I think I got an email saying, Oh, we hope that this is from title, we hope that the lender wires over the money by Monday. And I wrote back and I was like you hope in a nicer house like you hope I was like, stop hoping and get this done? Who need to take responsibility for this? The lender has told me they've already sent you the money, where is it? When or when should I be expecting it? Please do not respond with you hope. I would like a plan of action going forward and someone to take responsibility, and I was nicer about it. But that was the gist of it. And that was the inner dialogue I was having in my in my head.   So somebody wrote back to me, they said, We're so sorry for this confusion. It will be in your account Monday morning. And I say, Great. Thank you for the confirmation. I look forward to seeing my account Monday morning. So Monday morning rolls around, the lender emails me and says, Hey, confirm with us when you receive the funds. I said, Great. No problem. We'll do 10 o'clock rolls around no funds. 12 o'clock rolls around no funds, but as they're…   Emil: Keep hitting refresh.   MIchael: Yeah, refresh. I was like, Hey, you told me is gonna be my account. Monday morning. I know, we're in the same time zone. There's nothing here and there's nothing pending What's going on? And they said, Oh, it should be there. And I said, well, it's not. So there's a lot of money out in cyberspace that you need to figure out where it is, and tell me when I should be expecting it. And they said, Oh, we are our servers have been slow. You know, I did it personally, it should be there.   So then finally, about two o'clock, it shows up. And I say Great. Thanks, everybody. This was ridiculous. So that was a really long winded way of basically going through what was a nightmare close, and a lot of takeaways that I had from this and other closings that have gone semi sideways, as well as that you really have to be your own advocate so much of the time, just because the lender says they're working on it doesn't necessarily mean that they are or just because the title company says they're working on this. I mean, they necessarily are. And so don't assume I feel silly saying this, but like, Don't assume that people are going to do the things they say they do. You really have to follow up with them and really be the driver, and also making sure that everybody's communicating. At no point should I have had to step in to email, both the title company and the lender on an email together and say, hey, why aren't you communicating better? Why am I the intermediary for my own loan? This is ridiculous.   Tom: Michael, not a not a big hope guy just doesn't really believe in hope, it's just kidding. I'm just kidding. That's pretty funny. I hope it funds. Okay. So yeah. Yeah, question for you here. So did you select the title company, or did the lender select the title company? You obviously selected the lender?   Michael: Here's the here's the funny part. So I wanted to use Spruce Title, who we use a lot of Roofstock. And I have a personal relationship with we had them on the podcast. They helped me do some things in Southern California to do a quitclaim deed, which was awesome. And so I said, Hey, Spruce, can you do this? And they said, you know, we really don't do a lot of business in Alaska, we would prefer to have your lender, your lenders title company, do it whoever they use, but when in a pinch, let us know we can we can try to be of some assistance. So I thought that we were lined up. I thought we were using spruce. It wasn't until push came to shove at the end of this when they told me Oh, we're using this other our title company that we use a lot. And now I'm sitting here scratching my head, looking at hindsight, being like, Are you freaking kidding me? This is the company that you chose over mine, are you insane, so it was just really frustrating. It was really frustrating.   And then I also asked him, I was like, both the lender and the title company. So you're really going to charge me full price, you're really going to give me all these fees, and everybody keeps giving me the runaround Oh, well, it's the other company that's causing the delays. So you know, our fees are set. I said, Man, this is just unbelievable. So I don't think I'm done fighting that battle yet. More so over principle than anything else. I mean, the fees were not exorbitant. I think they were, you know, reasonable for what I got. But still to make me have to jump through all these hoops at the 11th hour to make me have to do all the communication and I'm like, Am I doing your job for you at the end of the day? Come on. This is This is ridiculous.   So and then not the lack of response, I think is what really gets my go. It really grinds my gears. When people are asking for things that need to happen in a timely manner and just lack of response and I get people are busy, but some acknowledgement of Hey, we're working on it. I mean, Emil, you and I talked about this all the time you sent me an email, it's crickets. If you can't get to it, just acknowledge that hey, won't get to it'll tomorrow. Or hey, we'll get back to you in a day, whatever. Something to let me know that someone on the other end has put eyes on this or is as has a pulse at least.   Tom: Are there other little tricks you do within your emails when you're responding to them like Hey, are you the right person to contact for this like Basically like having them, like accept ownership of whatever that like specifically. I mean, that's that's brutal Michael, that you had to kind of jump in and quarterback, you know, between these these two companies, but I love it. Do you have any kind of pro tips like on writing these types of emails? I mean, one of them, I would just chime in with, you know, be direct, but don't be a jerk. But is there any other kind of like thoughts you have in being proactive with email, which I think is like the right thing to do? And you can see that it's like, getting a little bit off kilter?   Michael: I think that's a really great tip that you offered almost in your question of Hey, asking, Are you the right person?   Tom: Thanks Michael.   Michael: Yeah, absolutely.   Tom: So I threw it off the backboard and just dunked it.   Michael: We read it the Roofstock Academy book club, a book by Chris Voss called never split the difference. And he talks about if you're not getting responses to emails, a way that you can write in the email is, have you given up trying to assist me in resolving this problem, or something to that effect? It's like, a little harsh, but   Tom: That sounds a little harsh. I like it. I like it.   Michael: It is it is a little bit harsh, but also how many times you're going to bang your head against the wall with somebody who's not responding to your emails, or phone calls, or any kind of other communication? That's kind of the the question that needs to be answered. Hey, are you are you done talking to me? Are we just giving up here? And so I've only done it a couple of times, and it tends to work pretty well. I've been cc on an email where that was sent. And I was like, hey, that seems pretty harsh. Not sure that was appropriate. So I would definitely make sure it's a last ditch effort. And, you know, there are ways to word that in a more light hearted manner. But I think absolutely, oftentimes, it is justified. I didn't come to that at this. But I think that that's a really great tip of Hey, asking, Are you the right person for me to be talking to, and then also see seeing anybody and everybody that can help?   So managers, managers, managers, because so often, if the chain isn't consistent, things get lost in the email thread. And so adding people and subtracting people mid thread is difficult. So I'd say just make sure everybody is on on the train and communication with one another from the start. And that's helpful.   Tom: Yeah, I'd say one thing too, when you're adding, you know, more and more people on email, I think sometimes people could see a lot of people in email and like, think like, Oh, this isn't necessarily me. So like, within the body of the email, you know, if there is a lot of people on it, I'll do an  @ Michael album, like or @ whoever you're talking to, just because sometimes if you you're looking at an email, and there's a dozen people on you'd be like, oh, somebody else is gonna pick this up totally. So you know, use that kind of wider spray, but then use the little, you know, direct shot within the within the body of the email.   Michael: Such a great point, such a great point.   Emil: So to summarize, the big takeaway, I think, here is that the buck stops with you, you kind of have to, like you have to quarterback the whole thing, right? Is that the big takeaway, that you should own the process? As much as you can?   Michael: Yeah, well, I think you should be, you should be ready, willing and able to quarterback the process should you need to, I don't think in 90% of the instances, this doesn't happen. And things go smoothly in the title, company and lender work cohesively together. And you sometimes need to nudge people along and make sure everybody is talking and playing nice, get in the sandbox. But I absolutely do think that if you are going to play in this space, you need to be willing to be able to do this kind of stuff. Because this stuff happens clearly.   Emil: Right? I wonder if this is more of a refi thing, because I had the same thing on my Indy refi, where I had to do a lot of communicating between lender title and even like mobile notary, I had to set it all up and like coordinate with everybody so that docs were getting to the right person at the right time so that I could sign and everything. So I don't know if it's a refi thing, or maybe that's just coincidence that both of us have had this experience with refinances, but yeah, interesting.   Michael: It's so funny, you mentioned that, I mean, I totally forgot that part of the story. So at the end, at the like, the 11th hour, the title company finally gets back to me says, oh, we're gonna schedule a mobile notary. And what's your address? And we're going to hit the mobile notary and they'll come out and do sign docs. I said, great. That's awesome. This is my address. And I was actually out in Colorado at the time. So this was I don't know, like, noon or two.   And I was like, it's getting late. So if I need to go to the local notary store, let me know they said it and I will schedule mobile notary so great. This is we'll get back to you when we have something that's perfect. So, five o'clock comes and goes six o'clock comes and go seven o'clock comes and goes, I don't hear anything from anybody. So I called her love to message their offices, of course close as an emails, Hey, didn't hear from you or isn't mobile notary. Nothing happens so I was like great. And in the morning, we were headed out to Utah to the National Park making our way back to California. So I get this call at like seven o'clock. And this guy's like, Hey, I'm Have a mobile notary, are you? Are you still okay to sign? I'm like, No, dude, I'm on my way out of town driving to Utah. Like, no, he's like, I got an email last night. I didn't see it. Can I? Can I be there in 20 minutes? I'm like, Yes, fine, come in 20 minutes. So he signed all the paperwork knocked it out. I was like, Oh my god, everybody's dropping the ball.   Emil: There's a lesson there. And that and this is something I've learned recently, if you're a remote investor, which if you're listening to this show, you most likely are, you're gonna have to deal with mobile notaries all the time, you can't, you can't sign in person typically, right? Because your lenders not local or whatever it is, find a mobile notary near you and add them to your team for anytime you have closing Doc's like, I use the same person now he lives, I think five minutes away from me, I coordinate with him, him and I like know each other now, and it's so much easier to handle that stuff and make sure they're in the loop when you know the person and you use them over and over again. So that's something I recently started doing.   Michael: I was in Tahoe, Nevada, on vacation, and I had to sign something and they're like, oh, it has to be a California notary. I was like, Oh my god, are you serious? So I had to drive across the state border and then look up like a mobile notary and find them and they were like you coming to me I just broke my back like, Oh my god, what is going on?   So I think there's other takeaways just be flexible, be versatile, you know, be willing to flex a little bit because not everything is going to be the same as it was in prior closings. And especially with the remote aspect, things just are different. So be aware of that and be willing to Yeah, to just be flexible.   Emil: And things don't go smoothly. We try to hammer that point home right? You got to you got to be ready and accepting of the unexpected because that's kind of just real estate and especially with just lenders and closing and docs and all this stuff. It never goes according to plan smoothly, at least from my experience.   Tom: Be comfortable being uncomfortable.   Michael: Yeah, that's it.   Emil: Alright guys, any any final words before we wrap this one up?   Michael: Just be in constant communication with everybody who's involved?   Emil: Yep. Alright everybody. Thanks for joining us on this weekend wisdom. We will catch you all soon. Happy investing,   Tom: Happy investing.   Michael: Happy investing.

Should you invest in real estate directly or indirectly through a REIT? In this episode, we debate just that. Tom and Michael go head to head on this topic and halfway through, switch sides to give you their strongest arguments for both of them.  --- Transcript Pierre: Hey there, everyone. Welcome to the remote real estate investor. Today we're sharing an episode that we did a couple of weeks back on the pod bean finance week, you can catch all of the episodes that were a part of that at pod bean.com/podcastweek/finance or simply search pod bean finance week on your search engine. And this episode is a showdown debate like we've done in previous episodes.   This debate is between investing in real estate directly or investing in real estate indirectly through a real estate investment trust, also known as a REIT.   Tom and Michael will be debating it out with email mediating and halfway through, they'll switch sides. So I hope you enjoy the episode.   Norma-Jean And now we'll hand it off to our host of the live stream and the remote real estate investor podcast, Michael Tom and Emil, welcome.   Tom: Thank you.   Michael: Thanks so much.   Emil: We're the we're the last show today, guys. So we got to get everyone hyped up I'm sure people are kind of, you know, like ready to end their day ready to enter the weekends. We got to   Michael: It's five o'clock on Friday. Let's bring bring the energy.   Emil: Alright, so thanks, everyone, for joining us today. My name is Emil shore. And my co host here, as mentioned are Michael album and Tom Schneider. Say hi, guys. Hey, everybody. So we're gonna get into some quick intros on us in a second. But before we do that, wanting to give you all some background on the show, for those who are new listeners. So our podcast is called the remote real estate investor. And as you can imagine, there are tons of real estate investing podcasts out there, why did we decide to create a new one.   So there's this growing segment of investors who are bucking the trend of only investing in their backyard and finding ways to invest outside of their local market, either from hundreds of miles away. So think, living in Los Angeles, investing in Fresno, or investing across the country, so investing in the Midwest or the south east, or even in Michaels case, which we'll get into across the world.   So they're doing this because it's either too expensive to invest close to home. So think LA and New York, San Francisco, Seattle, any high cost of living area, or they're looking to diversify their portfolio across markets. And for anyone who's invested remotely, you know, it's a completely different ballgame with its own set of unique challenges, then if you're just investing locally, so we wanted to create this podcast and raise awareness and give our personal experience as remote investors. And we all invest that estate in different sizes of residential real estate. And we want to start this podcast again, just to educate people on on what that experience is like, and for people who are interested in potentially doing the same.   Besides us hosting a podcast where the three of us will will talk about our experiences. We also invite authors and industry experts to pick their brain as well on the show. So with all that out of the way, we'll we'll kick off some intros.   My name, again is Emil Shour. I'm a self employed marketing consultant living in the greater LA area. I started investing back in 2017. I picked up my first single family rental property in Jacksonville, Florida. I was hooked after I got my first quote unquote mailbox money, and have been growing ever since I've bought in Indianapolis, Memphis, St. Louis. And I'm up to six rental units of both single family rentals and small multifamily. Tom, you want to go next?   Tom Schneider Yeah, so my name is Tom Schneider. I am the Director of Education here at Roofstock. I've like people who have worked at startups before, I've worn a lot of different hats. I previously worked as the lead product at one of the very first publicly traded single family rental REITs. At Roofstock. I initially was on the product side building out tools to manage transactions and appraisals, all that kind of stuff. Then I led the operations team for a while.   And the last year or so, I found this really interesting kind of gap within within the company, and that there's a lot of people who want to invest in real estate who just maybe don't quite feel comfortable, especially doing it remotely. Or you have people who you know, make the plunge and buy remotely and they're like, okay, what's next. So I left my operations post and started this basically little company within the company called Roofstock Academy and I've been doing it for about a year or so with Michael leading the coaching home and Emil and Pierre as well. So really, really fun. career journey and where we're at right now is the super fun.   I am a also an active real estate investor. I invest primarily in the southeast, as well as the Midwest. I am a California real estate broker as well. And I am in I've got roughly 10 or so, investment properties and all single family rentals. Michael, with that, I'll turn it over to you.   Michael: Awesome. Thanks so much. So as I mentioned, my name is Michael Albaum. I'm the head coach with the rootstock Academy working with Tom. And so I started investing about 10 years ago, I used to work as a professional fire protection engineer in the commercial property insurance industry. And right about that time realized that that corporate job, the world wasn't going to get me where I wanted to go. So I started investing in real estate and doing all this kind of self education started with remote real estate in Southern California with a market I knew it was about six hours drive away from where I live, so some could call that local, but I call it remote.   And then I was traveling a lot for work throughout the Northwest us. And wherever I was traveling, I was constantly looking at the rental real estate market, because that's what real estate nerds do. And I found myself in a lot of really strong rental markets where the purchase prices were reasonable compared to what you could rent the properties for. So I was picking up properties all over the place and kind of left I felt like a bit of a slug leaving this trail of purchase properties in my wake. And it was a couple years ago that I got some advice that I was so spread out around the country with investments, it was pretty overwhelming.   So a good friend of mine says go get divert, go get laser focus on a particular market and go hammer it, watch what happens it'll blow your mind. And I said, Okay, that's kind of counterintuitive to everything. I thought I knew about investing in diversification. But that's what I've been doing the last couple years in the Midwest with medium sized multifamily value add properties. And so for anyone that might not be familiar with what that is, it's basically buying the junky as dirty as most beat up properties I can find for really cheap, putting a bunch of money into them, getting them repositioned, and either selling them sitting on the cash flow that they then produce or refinancing them and getting some of the equity back out as cash in my pocket. So we'll probably be talking about some of that during the episode today. But yeah, right now, I'm in the process of selling a couple units. But as it stands today, I think about 75 doors currently.   Emil: Nice. So we started with we gradually went higher in terms of experiences. So that's our thought, well, the intros.   Alright, so on our show, we like to do these things we call showdowns where we take a hotly debated topic, and we argue both sides of the aisle. So things like single family versus multifamily, using a property manager or managing by yourself using or investing in your backyard versus investing remotely, things like that. So one host will take one side, the other hosts will will take the other side and one of us will play moderator to make sure too many haymakers aren't thrown throughout the process.   So in today's showdown, we're going to cover investing in real estate directly. So think about just buying a property holding title in your name, all that fun stuff, or going down the much more passive route of investing in a real estate investment trust, which most people know as a REITs.   So Tom is going to take REITs first and Michael will make the case for investing directly. And I will play moderator. And so after that, after Tom and Michael each make their case, Tom will get the final word so we'll let Tom go first. Michael will get his follow up and then Tom gets the final word. And then we'll switch sides and Michael will go first Tom go second and Michael will wrap it up. And so guys just remember don't throw all your all your haymakers at your punches in the first round because you got to save some pros and cons that we didn't talk about, in round one and round two.   Michael: I just gotta say I feel a little it's like the underdog here. Tom,   Tom: You should feel like the underdog Michael.   Michael: Tom's worked in both the read space and the single family space. me just the single family space and multifamily space direct ownership side of things. So it'll be interesting. Tom, I hope you brought a towel to wipe, wipe yourself up.   Tom: A good one real original Michael real original.   By the way, love these questions that are coming in, we are definitely looking at this someone had just asked, you know, someone ended up using their first home as an investment property. How do you calculate cash flow? Considering all the mortgage I've been paying along with repairs and upgrades?   You know, one of the things about real estate investing is there are a lot of different metrics that you can follow. And I think for this particular example, in talking about your your first home and calculating the investment, I think thinking about opportunity costs would be important. So you know, of the money that you could take out if you were to sell it like that should you should think of that kind of as the basis as the money that you're returning on it.    So a metric that I liked a lot. And I know Michael likes a lot as well. And I think everybody likes it a lot is this metric called is called a cash on cash return. And what that is, is that's looking at the money that you put into the house using that as the denominator. And the numerator, the top of this division formula would be your net operating income. I don't want to get too far into the weeds because we got an episode going right here. But that's a really great way to think about it is what is your net operating income. So your total money you're collecting minus any expenses minus your mortgage payments for the year and dividing that by the the what you've what you've paid for the property. So I don't want to get too much down into the weeds into this. But it's a really good question. I think that's the way a lot of people get started as turning the first home they purchased into a rental property. So…   Emil: Nice. And I don't want to plug our show all the time. But there's an episode we did exactly on this it was called ignore the noise. Here's how to actually calculate projected cash flow. We walk through every single expense or line item that you should include as you're estimating cash flow. That's number 72. So if you're interested, we have an episode just on that.   Michael: And then I would just want to take one more question here as well. Someone's asking how do you get into real estate if you have no experience? Which is a great question. I think it's something that a lot of people run into, without being to promoty it here. I'd say come check out Roofstock Academy. It's a really great place and we designed it for investors who are just starting out all the way up to those investors that are looking to scale their portfolio, or get involved in new asset classes, we've got a YouTube channel as well, which is totally free information. bigger pockets is another great place to check out totally free. If you need some additional help, I think Roofstock Academy is an awesome, awesome place to come get one on one coaching, and over 50 hours of lectures. And I don't even need to get into that right now. Just check out check out the website.   Tom: I know, the questions are too much fun coming in. All right, I'm gonna just hit it real quick. So someone asked about investing from your Roth. So you can do what's called a self directed IRA. And there's several of these companies that can help facilitate them so you can invest out of your retirement fund be at your Roth or 401k. But it's a self directed IRA. And you know, there's a lot of different companies that facilitate that. I think we have a podcast episode that is specific to that. But if you search for that, like that's, it's it's really awesome, because a lot of people have a lot of money in their retirement account. And it's, it's not like your retirement account is completely limited to only investing in like equities and bonds, you can do alternative stuff, but it needs to be done through one of these Qualified Intermediary. Okay. All right. I'll take a pause on answering questions if we can get back to   Emil: I want to answer one, two, there's a Okay, jump in jump in. These are great I want to make. So Alright, last one, what's the biggest mistake people make with an out of market versus in market rental? I thought this was a great question. So I want to tackle it, yeah.   This is this is just my opinion, I think the easiest trap to fall into is when you go to another market, you fall into the quote unquote, like spreadsheet trap, where you'll find areas within a market that they the numbers look amazing, but because you maybe don't live there, and you don't know what it actually looks like, you know, maybe a rougher neighborhood, the tenant quality may be low or things like that. So you're you're, you're going in neighborhoods where the yield could be better, but you're potentially getting a lot more headaches with it. You don't, that you don't know about without that local knowledge, which is why we always like to recommend build a team locally, talk to property managers, agents, other investors in those areas to learn that market. Since you're not living there. You're not like driving by all these areas all the time. So that's, that's my one tidbit where I think a lot of people go astray.   Michael: I think, you know, all these questions are great. Please keep them coming. We will circle back and try to get to as many of them as we can throughout the episode. As we take natural pauses or if we have time at the end. We'll definitely come back. So keep them coming. These are all great.   Emil: Alright, so it's showdown time, guys, Tom, you're gonna kick off reads, Michael, you're gonna get into direct investing. Guys. I want a nice clean fight. Nothing below the belt, keep it clean. Go to your sockets.   Michael: He's talking to you, Tom.   Tom: Oh, God. Yeah. Good. Good one, Michael.   Michael: All right. All right. Let's, let's get this going.   Tom: Okay, so I'm going to be advocating for owning indirectly. So this is where you are not taking direct title or you're not setting up an LLC that you own the LLC and buying. This is like investing in a REIT. And there's a couple of different flavors of this. So it's one common way is they call it syndications where you're like investing in a fund, what we're talking about here in this argument is specifically investing in a REIT, which is, you know, a publicly traded company that owns a whole bunch of properties, I'm going to tell you why this is the route to go owning indirectly. So one, you get automatic diversification. When you're buying in a rate, you're not just buying one property, you got ownership all across the southeast, in the Midwest, Florida, Atlanta, Texas, you know, a lot of these REITs have a similar composition of geographies, that professional like Wall Street investors have selected these companies that these do these acquisitions, they have great resources, and they're curating this wonderful portfolio to you for you to buy in, to automatically get diversification across these markets.   The other pro of going this route of owning indirectly is the time requirements. If I'm buying a REIT, Holy smokes, I just have to like click a button I can buy it if you're buying real estate, directly or through an LLC heaven to Betsy, that's, that's a good little time chunk to do that. You know, there's a lot of tailwinds on why people like to do that. But just thinking of it as strictly as a time consideration, you're spending quite a bit of time versus just clicking a button and you automatically own that.   Let's see the last point that I'll make before I let Michael crawl into the ring is the liquidity aspect, right. So one of the biggest challenges with owning real estate is you park your money and it takes a little bit of effort to get it out. And there's also a lot of question marks on like, what that you know, what you're going to be able to get out of it. I mean, I think we've gotten there's a lot of great technology that can help people estimate on what their property is worth, you know, Zillow, and all that kind of stuff. But ultimately, like the market speaks with the market speaks and when you exit there, it's going to take a little bit of time. Usually if someone's buying cash, we're talking like 14 days or 30 days financing. But it's going to take time and there's going to be a lot of unclarity of what that exit price is.   So Michael, I'm gonna let you come on in and do your thing. But that is my side of the showdown for investing indirectly in real estate, remote real estate.   Michael: Tom, I really appreciate you giving me these gifts. But you know that it's not my birthday. I mean, this was really kind this really thoughtful.   Tom: Good, good one.   Michael: This is great. I love t ball. So this is great. I so appreciate these points. So I'm just going to respond to each one individually. And then I'll go on on my own rant. But so first of all talking about diversification, you have these Wall Street hedge fund managers, are they really taking your best interests at heart when they're choosing these properties? Are they looking to line their own pockets, and we get the scraps as the investors I'm not so sure that I'm not the best person to pick out hand pick and hand curate these properties for myself, based on my own personal risk tolerances and investment goals. So that's first and foremost, I would argue that I'm a better person to do that than at some Wall Street hedge fund manager.   The minimal time requirement. Yeah, I think that you're right, it is much easier to click a button. But I'm not sure how responsible that is, in the long run. And if somebody is learning wanting to learn how to invest in real estate, if they're looking at involved real estate as part of their portfolio, maybe they should learn the business inside and out. That way they can learn to feed themselves. Buying a read is like getting a fish. But investing directly is like learning how to fish. So I'm trying to eat for a lifetime man, I don't want just a one a one sushi dinner.   And then lastly, you mentioned the liquidity aspect of it. As we look at what's happening in the market today, I would argue that single family homes are becoming a much more liquid asset that are being bought, sold, valued and traded, almost like a commodity. So the fact that you see REITs buying these up by droves, almost as an indication that hey, this is now a commoditized asset class, which is pretty amazing. So I put my property on the market had to offer same day, and now I'm selling it inside of 30 days. If that's not liquid, I'm not sure what is.   But let me just kind of continue here, I want to make some additional points and give you you a chance to respond. So when I get to control every step of the process via direct ownership, when and how to purchase when to refi when to sell when to do upgrades, that is a massive, massive degree of control versus being in a read, you just get told what they did, you're getting told what the decisions were being made are and you get what you get, versus being able to be in the driver's seat.   Also, also, I think that leverage is a massive, massive piece of the pie here so I can control $100,000 worth of real estate for 20 grand in cash. How much could I get for 20 grand in cash, Tom?   Tom: Quite a bit, get quite a bit lots of got a lot of shares there Michael.   Michael: I would also say that the tax benefits of direct ownership far outperformed those of indirect ownership. So like we were saying in the beginning the episode, this is not tax advice. I'm not a tax expert, highly recommend speaking of tax professional before doing any real estate, anything real estate related, so that you understand the tax consequences. But I'm curious to know, can you do a 1031 exchange out of because when you go to sell those shares by guessing you're going to be hit with a pretty hefty tax bill versus me as a direct owner, I can take all of my proceeds and profits and roll those into another deal.   And then the last thing that I want to mention what happens Tom what a bunch of teenybopper short the REITs, like they did with game stock, but now it's called REIT stock. What are you going to do that?   Tom: Boy, okay, all right. Oh, all right.   Emil: Guys, remember we have around two So see, yeah, leave some punches for round two.   Tom: Alright, I'll throw the throw them. Are you ready for rebuttal? Michael?   Michael: Let's do it. I would love to,   Tom: You know what you're doing when you add that property, direct ownership, you're buying yourself another job. And I think we're doing this for to become passively wealthy. So in buying a rate, you know, you're getting exposure to the asset class. And at the end of the day, it's a it's passive, you know, I think that remote real estate investing directly like can be passive, but it takes a little bit overhead on the front end, that when you buy it through a reap you don't have that overhead. It's you know, it's how quickly can you like click Buy on the stock exchange. So that will be my final point is the timing aspect.   Michael: After that, nicely done.   Emil: Back to your corners back to your corners. Well done. Well done lots of good stuff. There injury caught me cut me. There's definitely a lot left around too. So Michael, you are Now we're going to get the first word.   Tom: Why don't we? Why don't we break up round two? There's a couple of questions that are kind of fun. So we have some more. Michael I think this is a good one for you.   I became an accidental landlord, twice, would you recommend creating an LLC?  You go out and go? You go out and lead the way, Michael? And again, you know, this is not there's people who have had success in both different ways. This is not legal advice. This is just our personal opinions on and on that stuff. So go ahead, Michael lead the way.   Michael: Yeah, totally. So it's a really good question. So there are really two camps. On the subject pro LLC, and no LLC, the pro LLC camp says it's great to segregate and silo your assets from everything else that no LLC camp says, Oh, just get high liability limit insurance, it'll be just as good. Who's right at the end of the day is only determined after a lawsuit. And by then it's too late. So I'm personally of the pro LLC camp. I like having things in silos and separate buckets so that people can't come after my personal assets, and vice versa.   So being a California resident, it's very expensive to have an LLC, it's $800 a year even if the LLC doesn't do anything, or own anything. So I would say, Look into what's involved with starting an LLC wherever you live, and also what's required in maintaining an LLC, since there's documents that likely have to be filed on some sort of regular frequency, and there might be some dues or taxes that are that are due. And then ultimately, you can decide at the end of the day, what makes the most sense.   I mean, you can go get an umbrella policy to sit on top of your dwelling liability limits for somewhere in the ballpark of $300 per million. So if you go get an umbrella policy for 600 bucks, that's get to 2 million in coverage that'll also sit over your homeowner's personal homeowners and your auto, you know, that might be a good solution if it's really expensive to have an LLC, where you live, it's having an LLC, where you live is practically free, you know, then it could be a good way to go. Just know that the LLC, there's some additional accounting overhead that's involved with owning an LLC. And depending on how you're going to be taxed and might be, it'll likely show up on your personal tax return. Again, depending on the type of the LLC and how you designate the taxation. So it can be a good thing. So definitely look into it, talk to a local attorney about again, what's involved with starting it and maintaining it. And then you have to decide what makes what might make the most sense for you.   Tom: Yeah, you know, other considerations, if you're out in the process of buying or getting a loan, some lenders, like will not do conventional lendings to an LLC, like they wanted in your in the owner's name. So like some of those related processes could be a little bit more challenging with an LLC. But you know, again, there isn't like a major, like tax savings and like having an LLC, in fact, it's actually going to cost you more. It's not like you're getting extra tax benefits. But again, this is not tax advice, please talk to your tax in having an LLC, so I, you know, I personally have, you know, my, my name, and that's something you know, once you get over 10, you have to start doing private lending, so you might as well like, put it in LLC. So I think in just at two, like I'd say it's pretty common for people who have just two properties to not not have it in an LLC to have it in their name. But again, it's it's a it's a liability, kind of risk tolerance, kind of question.   Emil: And also that point of lending, even if you already have loans on those properties, right. So even if you're not in the process of buying, but you actually own them, moving them into an LLC can like, have some ramifications. So you need to check with your lender before you do. Some lenders will say Oh, if it changes title, so if it goes from your name into the name of the LLC, you basically the the loan comes due and you have to pay the whole thing. So make sure if you have an existing loan in place on that property, you check with your lender before you make that move as well.   Tom: Go ahead, Michael.   Michael: I was gonna move questions, but go ahead, wrap it up.   Tom: Yeah. I was gonna move questions, but I'll let you use you breathe in as the emotion you hit the buzzer first. So go ahead.   Michael: About investing in the Roth. So from a kept we keep we keep harping on this, but not tax advice, not legal advice. So as I understand it, because of Roth is what's technically called a tax free growth account versus a tax deferred account. Any of the gains that you make inside a Roth, whether that's direct ownership and stock, bonds, real estate, any of the gains that you make, or profits that you make are tax free, so that when you go to access or make withdrawals from that fund, or from that account, they are not taxed. Same thing with real estate flipping. So I have been told and cautioned not to do this too often, because if the IRS sees you running a business inside of your Roth, I think they are frowning upon that. So plan is to do one to two a year to help boost some of the returns. But basically, I get to control the entire process. Well actually gonna take it back.   There's a lot of things that I can't do. There's a lot of red tape and specifics with regard to how the deal has to be done and what you can and can't do. Do so I physically can't do any work on the property, I can't, I can't, I don't believe I can personally manage the property. But again, it's a flip. So I'm buying a property, all cash, financing the flip all cash and then going to be selling the property hopefully for a significant gain, all of which proceeds will should and should be tax free, so that I can go do it either again, or then put those funds back into the stock market.   So in theory, it's a really, it's a really cool vehicle. I've heard a lot of people have a lot of success with it. And I'm very excited to be on this journey. So again, I'll have to keep everybody posted on how it goes assuming I end up purchasing the property that I have under contract.   Tom: Nice, nice. Alright, Emil, you ready to start round two?   Emil: Alright, so let's get start with round two. Michael, you're going to start by taking the side of reeds. Tom will get to go with direct investing. And then Michael, you get the final rebuttal.   Tom: You're in trouble. Michael, go ahead. Go ahead. Go ahead.   Michael: It's amazing that my birthday is gonna come twice in the same episode, I just, I'm really excited. So I'm gonna, I'm gonna try to not make the same points that Tom made. Because they weren't good points. Anyhow. So let me let me start by saying that I think that reads have access to capital A deals that I as an individual investor could never imagine, never have access to. And so simply, because of the economies of scale, they're getting more deals for cheaper and can also save on operational costs. So I as an individual investor, I'm likely never going to be even seeing the types of deals that they're doing. And I'm likely not going to be able to generate those kinds of returns for clicking a button for just putting my money into their deal. And sitting back and enjoying the benefits.   So in a REIT, I can also get extremely predictable returns, if you're owning a single home, and the HVAC goes out, which I promise you, if you're in this business long enough, it will, you have to replace it, that could be three to four to five years worth of cash flow on that particular house. So I personally, I really liked the regular distributions, I'll take my monthly quarter quarterly or annual distribution, check whatever the frequency is, and not lift a finger, I don't wanna have to worry about replacing roof shingles replacing the entire roof for the HVAC.   And then the other piece of this is I like the diversification that I can get with a read. If I own one house, and it becomes vacant, I'm 100% vacant. But if I own a read that owns multiple properties, if one goes vacant, I'm never even gonna know about it. So the diversification I get, I'm really able to spread the risk across multiple properties and not have to think about Oh, man, is my tenant not able to pay rent this month? What does that mean for me as the owner.   And then lastly, as an international investor, Reed's provide a much easier path to getting exposure into the real estate into the US real estate markets, I don't have to go through the process of getting a green card or getting approved for a loan or getting a bank account as a foreigner, I can just simply by the REITs and get the exposure to the markets without having to jump through all the hurdles. And being an international investor, I understand all the hurdles that one normally has to go through just to get a bank, a bank loan.   Tom, I know, I see you're kind of bloodied over there already. I'll let you let you kind of come in and just and share your piece.   Tom: Okay, so this is what I'm talking about why owning direct is, you know, I agree with my first points I made was very relevant, you know, it is a little bit of a time overhead to do it. But once you do that initial overhead of time, there is no greater wealth creator than real estate. And I'm going to talk about a couple of those reasons and why it's so specific to direct ownership.   So Michael kind of sloppily trenched you know, like a, like a, like a pig walking through some beautiful flower bed he didn't really the highlight the the numbers so the tax advantages, so I'm gonna I'm gonna let you guys all know, I got an acronym for you to stay with us. It's the three Ds of real estate direct ownership, there is deductions. So right, all these costs that you you have, so you're paying your property manager, you're fixing the H fac, guess what, that's all a deduction, you can have a paper loss with real estate, even though you're like making money. So the first D deduction.   The second one deferral, right. So in owning the property every year you can you see me depreciation, I jumped ahead depreciation every year that they own the property, you can write, you know, write off this depreciation of the property over, you know, a certain number of years, so you're just taking more paper loss in third is this deferral so I can sell my property, move those proceeds to buy another property and not pay a red cent of taxes on moving out and it's crazy. It's like my wife and my wife's a tax attorney and she like blows your mind whenever she like looks over the advantages of real estate So the three DS is something that you can do with direct ownership that you're not going to be able to do with the REIT is incredible.   The other piece, so having worked at a publicly traded REITs, I remember following the stock price, and thinking to myself, like, This is nuts, like we are performing incredibly, like our vacancy is very low, our overhead is low, all this good stuff. But guess what the price did not reflect that. And I think there's something really frustrating about, you know, a butterfly in Korea, that can chaos theory can like, affect your stock price. I'm kind of like a piglet walking around in a in a rose garden right now. So a, you know, your stock price is there's so many things that are not related to the performance of the asset, with the publicly traded REIT versus your rental property where Guess what, if they pay rent on the first of the month, good news, your value just went up, you don't have to worry about these, you know, externalities that are just out of your control. It's straight direct performance.   You know, kind of related these bigger companies, there's a lot of overhead with them, there's paying that CEO that big salary, there's, you know, all the Sarbanes Oxley public company, yada, yada, yada, there's just a lot of costs that go into that. And by owning it directly, you strip all those costs, and you put them in your back pocket.   The last thing I'll say is in owning individually, in a you know, I can see this argument going either way, you also have the publicly traded REITs, they're basically a very similar composition, they have pretty much the same leverage at like roughly 50% of these other single family REITs, they all have pretty much the same footprint of like the same cities. So in buying individually, it's like using, you know, a shotgun versus a excuse, a sniper versus a shotgun and a violent comparison. But anyways, it's being very direct with what are the markets that you believe in, and you can be way more targeted in that process. And, and honestly, like, you know, like I said, it can be a little bit more time on the upfront, but it's really rewarding down the line in that you set up these systems and the mailbox money is real, and you're paid directly on the performance of the asset versus this, you know, investing indirectly in these in these public REITs. So, all right, go ahead. Go ahead, Michael.   Michael: Tom, I think it's so comical that you think that you'll have access to better analysis tools than professional advisors.   Tom: That's why Roofstock was invented, Michael, that's why Roofstock was invented. So you know, bringing Wall Street to Main Street, go ahead. You know, what, if you said that five years ago, I'd say you're right, that is comical of me to say, but it's different now, Michael, different that.   Michael: The Times have changed. I know. I know.   Tom: Seriously?   Michael: Yeah. But I'm sticking to my guns for round two here and that and then we'll circle back and, and convene. So I think that the analysis tools that these investors have professional investors have far outweigh that of the individual investor with you, and he can Google and have access to there's just no way we can compete. So that's first and foremost. Secondly, you know, I don't want to be worrying about my neighbor not mowing their lawn or keeping trash on their lawn, which is now going to drag the value of my property down, versus the stock market. When the stocks go up, man, we are, sky's the limit, man, we are screaming up there. So you know, the individual ownership, it just you're subject to what your neighbors are doing. And I think that that's too impactful versus the aggregate of being spread across multiple markets and numerous properties, you can spread that risk out, you can peanut butter spread that risk out across multiple properties.   So I just think it's kind of a no brainer, you know, I don't want a second job. You mentioned it so nicely in the first round. I want that mailbox money. And there's no way that going through the process of getting a mortgage finding a property manager checking in on the property manager possibly having to change the property manager like Emil is in the process of doing, getting insurance quotes that you're running through right now. Filing tax returns with the CPA making, checking on his tax returns the CPA. It's just it's craziness. It's madness. You know, what kind of world do we live in? Where if someone thinks they have time for that? I'm REITs all the way man.   Emil: All right.   Tom: That's not true. That's ending with a lie of Michael a great way to end your argument only for the purposes of this show. But for the for the show for the.   Michael: Absolutely.   Emil: All right. You're done. You guys are done. I'm cutting both off. You guys can't see anymore. Your ears are swollen. Nice job, guys. There was a couple things I wrote down that I wanted to touch on that. For each side, I'll start with reads. I don't think anyone mentioned that there's less money to get started. So the reeds, you can go invest like 1000 or a couple you know, if you don't have the money to put a down payment on a single family home, or he could be a good way to get some real estate exposure for much, much cheaper.   Michael: That was gonna be by knockout blow, but you called it too quickly Tom was already down,   Emil: I want to hop in the ring too   Michael: The ref is putting on gloves.   Emil: Right? And then reads, um, I think it was kind of touched on it. But you have professional management like these people manage 1000s 10s of 1000s of homes, they know what they're doing, they have the scale to just have the most efficient, awesome processes to like to know this stuff. So I'd, I'd say they're, they're very professional. versus when you go direct, you're dealing with a property manager who maybe only has 100, or you're self managing and dealing with that nightmare.   Going back to the direct side, doing a cash out refi, you can't. So let's say your property value goes up your interest, interest rates go down, you can actually pull some of the equity out in that home, you still own the property, you're still making a profit each month, but now you just maybe got your original down payment back by doing a cash out refi. And you can go reinvest that elsewhere.   Tom: Emil, I think you might have won this fight these points you're making are really, really good. So sorry, continue just stepping on the back right now.   Emil: Thank you, Tom. Yeah. And then the last one is, is building equity. So with direct you, you get equity in a home, right? So yes, you guys mentioned the leverage benefit, right, you can buy $120,000 with a home for 25k, or whatever it may be. But then also you have a tenant. So you're making cash flow each month, hopefully, making profit each month. And then you're you're also having your tenant, pay your mortgage, and you're building equity in this home. Versus with a REIT you don't get that you kind of you, you put your money in and it's paying you a dividend out or whatever it is, each month or quarter, whatever it is. So otherwise, you guys nailed everything else.   Tom: So we got a fun question that came in. What do you get? What do you guys think about tiny houses, and I love me a tiny house. So a great strategy that some investors use. Now, this isn't a remote strategy. But a great strategy some investors use to get going is the strategy called house hacking. And that is where you buy a property and you live in it. And either in the other room or the other unit or the other little tiny house, you make that a rental.   So it's a way that you are, you know, starting you are owning property, but you're also collecting that rents to either offset your mortgage, or just have a little, you know, extra cash on the side. So the tiny house is a great, you know, way to start generating some income. I think it should be done through the same financial rigor that you would do in evaluating buying like a different property. So looking at what those costs are and what kind of rents you would get. And, you know, establishing Okay, what is that cash on cash? Or what is that cap rate, or IRR? There's there's a ton of different metrics that people use. And I mentioned we we all really like cash on cash as a metric. I think IRR is fantastic to just thinking about total return.   So to final might make my final point on the tiny houses. Yeah, yeah, I think that that that strategy can make sense. Especially if you don't maybe don't feel comfortable and want to be right on top of your investment. I think the downside is you know, if there's whatever broken toilet, whatever that person is right there. One of the things I love about remote investing is I have professional property manager where there's anything wrong going on, I'm not answering phone calls, they're managing it, you know, I pay them a percentage of the rent they collect every month, but I'm okay paying for them that because they're making it like a very passive investment for me.   Michael: I love this question two. And it's so timely, I'm actually in the midst of looking at a couple of deals to set up Tiny Homes on the property. So Bay Area, California is really expensive. And so my wife and I are looking to move. And so we're looking at property and looking at what the zoning requirements are for placing some of these tiny homes. And it's interesting because you can put them on a foundation and make them permanent, you can put them on a trailer make them non permanent Airbnb, long term rental, there's all kinds of regulations around how you have to do this. But I think that there are absolutely ways to go about doing it and make a significant profit.   There are multiple different styles of Tiny Homes to I've we just came across a company that's up in the Bay Area. That makes them out of containers, their container homes. So those are pretty cool. There's modular homes there stick built at us. So there's all different ways to slice that pie. But Tom, I think hit the nail on the head that you still want to evaluate it and see if it makes sense as a financial investment. And then also I would be looking at what the property value might jump to after the fact a lot of people like having a granny unit or additional 80 or whatever you want to call it. That could add some tremendous value to the property. So then combining a couple of these different strategies you go put in an ADU now you go get a refinance the property is worth more you can take some cash out it's kind of a combination of a burr house hack into   Tom: There's a ton of tailwinds for Tiny Homes to just I think local areas are getting more friendly, like in wanting it to be a little bit more dense. And then also with the pandemic, like having, like an extra little office or something is, you know, quite a premium of, you know, having having that I feel like it's probably, you know, this is a little bit subjective and be commenting on it. But I feel like that has greatly increased the value I, I just had a no no parallel thing with me her turn just ended in like, wow, that would have been really nice to have a little extra little unit instead of just like, right in right in the grille of the house. But anyways, it was a good experience, though. AuPair but it would have been nice with a little in law or whatever. Granny tiny home.   Michael: That's, that's a great plug for aupairs too. was great. It was great. Yeah.     Emil: I just saw so funny. This question came up, I just fell into a YouTube black hole. And it was this guy who, I don't know if he builds them baizen whatever. But he has tiny homes across the country. He manages them all himself remotely. He has 10 across the country, Airbnb ism. So all short term rentals, and he's making like 2k a month on each one, like, just, he has 10 of them, he quit his job like he has he manages himself so he gets like a cleaning crew and a local handyman, a contractor and he just has all these Tiny Homes cross country if that was pretty cool.   Tom: I just thought of a business idea. So you…   Michael: own 10 Tiny Homes across country, right?   Tom: Find like a big enough of a lot, right? And then you you do like a lease on the lot for like 30 years. You do it for free, but then they get the building after that time period. Right You follow me? So you so you you have whatever the 30 years of income you're generating there. There's got to be some clause in there at the property transfers, but I the tiny home Empire, the tiny home leasing, whatever the like, you know, whatever. How many square feet of land? Well, I think there's some, there's some   Michael: there's definitely some there's definitely something there. Yeah, there's definitely something there. We'll have to do another episode about that. The remote real estate investor Tiny Home Empire,   Tom: Tiny home Corner lot Empire.   Michael: So I think we should also touch base Tom on kind of our personal thoughts about the battle, and personal views and opinions. So you know, and ending with a live for me, which is you totally caught me. I am a big, big, big proponent of invest of direct ownership. Everything I do, for the most part is direct ownership. I don't think I own, I might own a couple shares of a couple different reads. But it's a very, very small percentage of my portfolio. I just think that I think you mentioned it really nicely. The tailwinds of direct ownership are so massive when directly compared to indirect ownership and read that for me, it becomes a no brainer.   If you have the time, if you have the will, if you have the desire to learn the real estate investing business, I think that there's no better way to do it than indirect ownership, you might start out in a read and try to understand what's going on. But to be honest, from my experience, and Tom, you'll know better than me, but you're not. The REIT folks that people who are involved in the read are not holding the hands of their investors, showing them financial statements, profit and loss reports, they can see reports understood helping them understand how the business is run. Is that fair to say?   Tom: Sure. Yeah. I mean, there's, there's good and bad ones, just like any other business, but you know, I guess you kind of continue on to it. It's like, you know, it's kind of like, it's, I think of it as like a little bit of a hobby as well, you know, of doing this type of remote investing. And yeah, there's a good quote out there you know, everyone should have three hobbies, one that makes them happy one makes them health healthy, and one that makes them rich, and like this very much fits in that kind of ladder category of hobbies to have and you know, like, like, like we've talked about, there's a little bit of work that you do upfront. And then sometimes as things come up either you're selling or whatnot. But it's it it's honestly like I it's really enjoyable. I don't know it's it's, it's fun. Yeah.   Emil: Real Estate Investing kind of covers two of them for me personally like that. The happy in the wealthy, which is nice. Until you know, you have a pipe burst, and you're like, this is why I do this. What am I doing? But then you have enough of those urges, like you know, it's a home. things break, you fix them, you move on, it's all good. Yep, the first couple that hurt, they hurt a lot.   Michael: Well, it's one of those things that unless you know what to expect it, it sucks even more. So if you go into this eyes wide open. We talked about in the academy all the time. It's so important to go get educated what you know where you do, that doesn't really matter. But just make sure that you go get educated by people that understand what they're talking about. So you go into this investment eyes wide open. Because the last thing that I want to hear and I hate hearing about it is somebody buying a single family home thinking it's like a REIT, thinking that their experience is going to be like that of a read, especially with a lot of these turnkey providers. Oh, it's so easy.   There's still stuff that has to get done. So again, go get educated. Go ask questions, go learn about what's involved with owning and operating single family rentals or rental real estate for that matter, so that you're not surprised or you're less surprised rather because, again, you're going to be surprised if you're in this business long enough. I can promise you that. So you just want to understand what are the risks? What are the pros, what are the cons? Okay, great. Let's Let's do it. I know there's going to be surprises and I was gonna be speed bumps. I'm okay with that. You know, then then direct ownership is probably for you.   Pierre Alright, everyone, that was episode. Thanks so much for listening. If you liked the podcast, make sure to subscribe and leave us a comment that helps us out a lot. And also go check out the Roofstock channel on YouTube. We post all of our episodes there along with a bunch of other content from the Roofstock team. Thanks so much for listening. Happy investing.

All-cash or debt? The answer to this depends on what return metrics you are looking for and the specifics of the property being considered. In this video, Michael shows you exactly how to analyze a property and establish what financing strategy works best for different deals. --- Transcript   Michael: Hey, everybody, welcome to the remote real estate investor. My name is Michael Albaum and today I'm joined by   Tom: Tom Schneider.   Emil: Emil Shour.   Michael: And on today's episode, we're going to be talking about some of the different ways to evaluate properties and determine whether or not it makes sense to purchase them with debt or with all cash. So let's get into it.   Alright guys, so Pierre and I were chatting last night, and we were doing some evaluation on different types of properties. And what we were noticing is that some properties are better purchased with debt, and others all cash, have you come across the same thing?   Emil: I have, when you, you actually pointed that out? When we were I think doing some type of video, like how to analyze a property, and we're looking at different properties. And that came up where I didn't even realize that that was a thing, really. But you're right, in that some properties, the cash on cash, debt won't always juice the cash on cash return.   Tom: Yeah, I mean, just the return profile can can shift quite a bit with leverage leverage. So you know, obviously, increasing your loan to value ratio is going to would be a like, more aggressive thing to do. So if there's like changes in the value of the home, you know, by having a you know, by getting as much debt as possible, there's, you know, risk of the value of the home getting to the other side, which would be like, deemed underwater.   And then on the actual yield side. You know, depending on how much cash flow you want to make in a month, if you're using all cash to buy, you're going to have much more cash flow, but it's, you know, obviously, a higher upfront costs, gosh, I don't like him using the word obviously, all the time. It's a good good feedback from from Pierre because…   Michael: It's not obvious Tom.   Tom: It's not obvious. So anyways, it's a different return profile. And it depends on your risk tolerance, and where you are in your kind of time horizon of if you're planning to, you know, need to live off the cash flow, or all that kind of good stuff. So go ahead, Michael.   Michael: Depending on your strategy for investing is often going to dictate what types of properties you want to be looking at, and then also how you want to be purchasing those properties. So for anybody listening to this podcast, we're actually going to be doing on the doing a screen share here in a minute, and showing some visuals about how I go through the property analysis section, and determine whether or not this property is best fit for an all cash purchase, or a finance purchase.   So for those of you listening at home, or listening on the road, or not watching the YouTube version of this, the list price is 75,000. The current rent on it is $975 a month. And what I'm gonna be doing is walking through just how to evaluate this property, but also how to look at some of the different ways to purchase the property.   And what I mean by that is Tom, Emil, and I could all be looking the exact same property. And depending on how we purchased it, Tom could use all debt, Emil could use 50% financing, and I could use 20, or rather 80% financing with a 20% down payment, the performance of that exact same property with the same income and expenses could look vastly different for the three of us.   And so what I'm gonna do is I'm going to scroll down the page and click on financials. And then I'm going to start playing around with some of the assumptions here. And the first thing I like to do is put the down payment up to 100%, which is significant, or rather indicative of an all cash purchase. And for those of you following just listening to this, what our metrics look like now is we have an a cap rate of 9.6, a cash on cash return of 8.6 and a monthly cash flow of $545 a month. And again, all I did was change the downpayment to be reflective of an all cash purchase again at a $75,000 purchase price with a monthly rent of 975.   So next what I'm going to do is whip the downpayment slider bar all the way down to 20%. And I'm going to kick our loan interest rate up to four and a half percent. Because based on the time of this recording, I think that's fairly reasonable for investment property for somebody with good credit. So now what we see is a cash on cash of 17.3% and a monthly cash flow of $241.   So now what I want to start doing is playing with the downpayment slider bar, as well as the loan interest rate slider bar. And based on my personal experience, what I've seen in the past is that there are loan interest rate breaks at every five percents of additional downpayment that you add, so if we slider down payments slider bar up to 25%. Let's drop our loan interest rate down to 4%.   And what we see is our cash on cash is actually down at 16.2%. But our monthly cash flow went up to 276. So what we just saw is that we lost a little bit in terms of our metric in terms of how hard each dollar is working for us. But we generated additional dollars in terms of cash flow. And that makes sense because we took on less debt because we put a bigger down payment, which means we have a smaller mortgage payment, which means we have more free and clear cash flow coming to us each and every month.   But what might seem counterintuitive, is if you're maximizing or looking to maximize your cash on cash return as a metric, here is an instance we're actually taking a higher interest rate gets us better performance.   So again, what I did is I reduced the downpayment back to its 20%, I kicked our loan interest rate up to four and a half, and our cash on cash was 17.3, monthly cash flow to 41. Then I bring our downpayment back up to 25%, I dropped our loan interest rate to 4%. And our cash on cash is 16.2, monthly cash flow of 276. So we lost a good 1.1% in terms of our cash on cash metric, and we gained about $35 a month in terms of cash flow.   Let's do that again. And kick our downpayment up to 30%. And this time, we'll drop our loan interest rate only a quarter percent down to three and three quarters. And now we're down to 15% cash on cash, but our monthly cash flow is up at $302. So again, here's another instance, where actually lowering the interest rate that we have on this loan, decreases our return metric, in terms of cash on cash.   Now, it's really, really important to understand this because it's not uniform across every single property, we can't say that, hey, if I get a lower interest rate, that'll actually hurt my cash on cash return, often that'll help us. But based on this particular property criteria, again, the purchase price, the income and expenses, which we haven't touched by the way, all we're doing is changing the structuring of the financing. That's what have what's what's having these massive impact on the property's performance.   Now, let's take another example. Let's kick our downpayment back down at 20%. Let's put our loan interest rate back up at four and a half. But let's change the purchase price of the property. And let's make it about $100,000. Now, again, I haven't changed anything else about the property haven't changed the the income haven't changed the expenses, all I've changed is the purchase price. And I want to see if I can't get this property to demonstrate kind of unique phenomenon.   So again, purchase price of 100,600, monthly rent of 975. And by the way, for anybody listening or watching that says there aren't 1% properties out there. Here's a prime example. It's listed for I think 75,000 rent at 975. That's almost like what a 1.2 1.3% property.   So let's get back to business here. So if we increase our purchase price 100 100,600 our downpayment down at 20%, our cash on cash is 9.3%, with a monthly cash flow of 174. Now if I put my downpayment up at 100%, again, signifying an all cash purchase, let's see what happens. Our cash on cash drops to 6.8%. But our monthly cash flow jumps up to 582.   So again, we're seeing a bit of that inverse relationship here, we are sacrificing in terms of the percentage cash on cash return, but we are generating additional dollars in terms of actual cash flow. So what I'm gonna do is same exercises before, I'm gonna drop my down payment all the way down to 20%, which takes us back to 9.3% cash on cash and 174 in terms of cash flow. And I'm going to incrementally ratchet up the downpayment. So now we're at 25%, and I'm going to drop our loan interest rate accordingly to 4%.   Now, our cash on cash jumps to 9.7%, and our monthly cash flow jumps up to 221. So here is actually the opposite example of the prior example, in the prior example, when it was listed at 75,000, and we dropped our interest rate down to 4%. But increase your down payment to 25%. We actually had a reduction in our cash on cash return, but an increase in monthly cash flow. Here we have both an increase in monthly cash flow and an increase in our cash on cash return.   So let's do that again. Let's kick this up to 30% in terms of our down payment, and we'll drop our loan interest rate to three and three quarters. Now our cash on cash is down at 9.5. And our monthly cash flow is up at 255. So again, this example when we increase the downpayment but decrease the loan interest rate, which we would think would help us get a better return. We are actually getting a lesser return in terms of cash on cash, we went down from 9.7 to 9.5%. But our monthly cash flow went up and again that's because we are taking on less debt, which means we have a smaller mortgage payment.   So if you were trying To optimize this property for performance with regards to cash on cash return as your metric, you would actually be better served, putting a lower down payment on the property and paying a higher interest rate, which is very counterintuitive. Oftentimes, we think, oh, lower interest rate, that's the best way to go. Not always. So again, this is to demonstrate that it's important to evaluate the property on its specific merits, and evaluate each and every property as an individual, it's really difficult to make blanket statements to say, Oh, this type of interest rate with this kind of debt is going to be better or worse than this.   So again, based on this property specific income and expenses, and based on the purchase price that we've given it 100,600, we can manipulate the down payment and interest rate in such a way to force the property to behave and to perform in a way that's in line with our buy boxes.   And by the way, if anybody listening to this are familiar with the buy boxes, we talk about it all the time in the Rooftock Academy, but it's basically a parameter or set of parameters or a framework to work within, that helps identify what makes a great investment property for you versus what just noise. And so whether you're part of the Roofstock Academy, I encourage you to make one if you're not part of the Academy, definitely encourage us to make a buy box as well, it's really important to get very clear on what your goals are.   Because, again, Tom, Emil, and I could all be looking the exact same property. And if Tom buys it with cash, Emil with 50% financing, and I use 20% down, we're gonna have vastly different performances. And thus, it could meet Tom's by box, and it could be outside of Emil, and mine, or vice versa. So again, the debt structuring is hyper critical. And this is a really great way to play around with some different scenarios and determine what's possible, what's feasible, and what might work well, for you.   Tom: Awesome. Love it.     Emil: Yeah, great. I remember you show this to me months ago, it was like a year, year and a half ago, I had no idea that like certain certain property prices and stuff like you, you can actually go negative or in the wrong direction with your cash on cash or yield by putting more debt on the property, which I always thought, you know, more debt, better yield, but not always true.   Tom: What I liked about this exercise is sometimes you have a certain amount of capital that you want to deploy, right, it seems like a lot of you are probably looking for more capital, you need more capital, but sometimes, like I have, you know, I'm just gonna make up a number I have $50,000 that I want to spend that I want to get to work. And, you know, if you if you don't need to use that extra debt, and you're still getting that same cash on cash return whatnot, this is a great exercise to you know, model out, you know, deploying exactly how much money you want to you know, at these pro forma returns.   So, I got a good one. So, complex is used to to refer to the level of components in a system. If a problem is complex, it means it has many components. Complexity does not evoke difficulty, on the other hand, complicated refers to a higher level of difficulty. So, this kind of exercise is complex, right? There's various components into it, that we're moving these variables to get the kind of return that we want. But it's not complicated. It's not, you know, brain surgery. It's not flying to the moon or something, you know. Anyways, love it. Great exercise, Michael.   Michael: Yeah. Well, the other thing to remember, too, is the complicated part. There's only two variables, it's it's down payment and interest rate. The end once you once you get to that point, you've already done the hard stuff, you've already figured out what the income and expenses look like, on that property. So now you're just figuring out well, how much money do I put down? And what kind of interest rate can I get on it?   So I love that complex versus complicated. That's, that's great. But I encourage everybody to do this exercise on any property, you're interested in investing, and even on those that you're not because what you're gonna see is the different levers that you pull and how they affect one another. So play around with different properties, different downpayment, different interest rates, see what kind of returns you're able to create. Because I think that's the big the big thing that separates Great Investors from good investors is those Great Investors are able to create and generate their own returns, independent of what others say they can or cannot do.   Alright guys, shall we'll get out of here?   Tom: Yeah this is a good one.   Emil: Yeah.   Tom: Great One.   Michael: Awesome. Well, thanks, everybody for tuning in. Whether y ou watch it or listen to it, hopefully this was helpful. If you liked the episode, feel free to give us a rating and review wherever you listen to your podcasts. Those are really, really helpful for us. And, as always, if you want to hear about something on an episode, or have a topic idea, feel free to leave us a comment and we look forward to seeing the next one. Happy investing.   Tom: Happy Investing   Emil: Happy Investing

This episode is an example of what the Roofstock Academy Mastermind sessions look like. Mastermind groups have long been a powerful tool that successful people use to support each other and advance their goals. Gathering a group of motivated individuals with a diverse range of skillsets to focus on one person at a time helps shine fresh light on challenges, uncover new solutions and provide accountability. The Mastermind group is just one of the many benefits we offer inside the Roofstock Academy. --- Transcript Tom: Greetings, and welcome to Roofstock Academy. My name is Tom Schneider. And I'm joined by Michael Albaum, Ryan Minekime and Dean West, and today we're going to be walking through a template of a mastermind group.   So this is a mastermind session that lasts about an hour. And we're going to be going through the regular activities where everyone is going to provide an update on their successes, their challenges. We're going to go into specific action items. And then we're going to put Ryan on the hot seat and talk about what he's working on. We're going to grill them, we're going to give them some feedback, all that good stuff. All right.   Dean: All right. Hi, everyone. My name is Dean West, a Roofstock Academy coach. And I have been investing in a couple markets now. Primarily Atlanta and Indianapolis. I believe I'm the the remotest real estate investor. I'm currently in Cape Town, South Africa, while investing in the US.   Ryan: Hello everyone, I'm Ryan Minekime. I'm also coach at the Roofstock Academy. I've been investing for about seven or eight years, I started out investing in California. And now I'm doing bur investing in the Indianapolis market as well. And I live in the Bay Area, California.   Tom: Hey, my name is Tom Schneider. I'm also a coach at Roofstock Academy. I have been investing for about 10 years, and I invest remotely in the southeast of the United States as well as the North East.   Michael: Hey, everybody, I'm Michael album, I'm also a coach at the Roofstock Academy. I like Ryan got my start investing in Southern California about a decade ago and do value add multifamily investing all over the country with a emphasis and focus on the Midwest on some of those Midwest markets.   Dean: Alright. So I'm really excited today to on behalf of rootstock Academy to be introducing mastermind groups. And a mastermind group is something that's actually quite near and dear to my heart. It's It's when I first started out several years back, I was in my own mastermind group with three other people. And that's the one thing that really spurred me to take action on my real estate investing and pushed me both professionally and personally.   So the mastermind group what it is, it's a accountability group of like minded people. So groups typically consist of three to five people. And there's certain roles within the group. And how it's broken down is it's broken into four major sections. And the sections talk about kind of the week overview, talking about, you know, some of the challenges and successes that you've had during the week goes then into talking about, you know, what, what your major or epic goal is that you're trying to achieve. And it doesn't just have to be in real estate, I actually I encourage people to talk about not just real estate, but also kind of personal if you're looking to lose 10 pounds or something like that, as well as invest in a property in Dallas, Texas. Great, put it out there. And I think it's something that's, that's really helpful for people to grow.   One of the big things we do in a mastermind group is what's called the hot seat, the hot seat is kind of a deep dive. So every week on a rotating basis, and the hot seat is chosen for one person and and that person talks about any challenge that they're having that they're trying to overcome. And they use the rest of the group as a sounding board, or as a way of soliciting feedback to try and overcome that challenge. And if you don't have challenges for the week, that's fine as well. You can talk about your, your kind of your roadmap to success and just see what what people have to say about, you know, the structure that you've put in place to achieve that epic goal.   And then the last section is is talking about what are you committing to? What are you committed to from next week? What are you going to achieve before the next mastermind group. And I think it's really important to to set a goal. But ultimately, if you like myself, we don't always follow through with it and mastermind groups, hey, I don't quote me on this here. But there was a study done when the University of California University is talking about how, you know, if you set a goal, that's great, but if you set a goal with in a mastermind group, you're 76% more likely to actually achieve that goal.   So I think that that resonates really well with me, just being my personal background of getting introduced to mastermind groups, and I really hope it's a success for all of you.   Michael: And I think it was something like 37% of statistics are made up on the spot, but that probably wasn't one of them.   Dean: Absolutely not. Not this one. Yeah, so I think what we're gonna do now is just give you a bit of a taste of a dry run of a mastermind group in action. So this is the first time we're meeting together as a formation of this, this mastermind group. So the first meeting is always a slightly different than the second, the third meeting, we have a template that will be going through the four roles, which I should touch on as well says the moderator, which I will be today, the moderator is typically in charge of setting up the meetings, and really just helping to facilitate the discussion move things along during the call.   The second piece is the timekeeper. So Michael will be our timekeeper for today, very important.They are the ones that are tracking minute by minute, you know that making sure we're on schedule. And if we are running off schedule, or someone's speaking a bit long, they will help gently remind them that they're going over their allotted time.   The third role is the the note taker. So Tom will be our note taker today. They will be the responsible for filling out the template, jotting down what people's commitments are epic goals, and then at the end of the mastermind group, they will, they will then share that document with the rest of the group.   And then fourth is the hot seat. So Ryan will be in our hot seat today. And that, again, is just talking about about half the time has spoken about just a challenge or a roadmap that they're trying to achieve. And they'll be walking through that.   Michael: And Dean do these positions rotate from meeting to meeting. Are they consistent throughout the life of the group?   Dean: Yeah, absolutely. So they do rotate to keep things you know, make sure everyone gets a fair a fair say throughout the sessions. So every week it typically rotates. And at the end of the meeting is typically when we decide on on the hot seat for next week who the facilitators timekeeper, etc.   Michael: Awesome.   Dean: Great. Awesome.   All right. So let's dive right in. Like I said, I'll be the moderator today. Tom, the note taker, Michael, the timekeeper, and then Ryan, the hot seat. And so kicking off is our overview section. So this in this section here, we talk about our, our challenges and successes, we typically don't want to talk for a second, I think for 5 minutes. So we only want to talk for about a minute or so about, you know, just some highlights some of the successes or the highs and lows of the week. And just to help inform the group.   Michael: Gentlemen, five minutes on the clock, start your engines.   Dean: Thank you, Michael.   So I can I can kick it off. So my my challenges and successes of the week. I guess I'll start off with my successes. I always like to start off on a high note. And is twofold. Actually, I last week, I rented out to my units that were vacant. So that is all taken care of now, which I'm very excited about. And then my second success is taxes cuz I like to cross donate and taxes. I've been pushed back a month. But that's didn't help me because I just pushed it my work back a month as well. So pretty much done to my taxes. And then one of my challenges for the week is just a personal challenge. Just the motivation to to work out on my side. Michael, you want to kick us off next?   Michael: Sure. So a high for me was I celebrated my two year wedding anniversary this past week, which was a lot of fun my wife and I did something really nice and special. My challenged that I had this week was I had a selling a six unit property that I bought as a buy and hold originally, but really turned it into a fix and flip over about a course of a year and a half. And that fill out a contract kind of went sideways due to a massive utility bill spiking and throwing off all of the valuations of the property. Because it's a multifamily commercial building, it trades based on cap rates and noi, and the noi got vastly decimated by this utility bill. So it's an estimated building, we're trying to figure out what to do with it, we're probably just going to take it off the market try to re stabilize it get the tenants in line, possibly even mass or sub meter everything or institute a rubs which is a ratio utility billing system and get the noi back in line and then bring it back on market at the end of the summer here.   Dean: Tom Do you want to go next?   Tom: I've been just dragging my feet like nobody's business on getting my insurance updated. I use the initial insurance that was provided to me and I, I knew that I wanted to change it and it's literally like years and years later. So I have officially bundled that with my personal through a big insurance broker. So kind of a big, big win for something that's just lasted way too long. And I'm also gonna I'm going to glob on to that success of getting taxes. That's something that I like to drag my feet on as well. But I have that submitted some challenges is I have a lot of balls in the air right now. With refinancing three properties, and it's a little bit ambiguous to me right now on where all of them sit, like I've been responding to emails as they come in, but I think it could be a little more proactive in reaching out to my lender. So I'd say the challenge is just being a little bit too passive in the process. Because, you know, I think there's there could be some timing considerations with, you know, making sure the loan rate lock and all that stuff. So, yeah, it's a challenge is just being a little bit more organized on some of these less organized than I should be on some of these refinances.   Michael: Is this all with the same lender, Tom or different lenders?   Tom: All the same lender.   Dean: Yeah. All right, Ryan.   Ryan: So I will start with challenges. And then we can end on a high note on my challenges. I think I've put in three offers over the past 10 days or so. And all of them got outbid by like, 40k on like, 150k purchase price. So just everything's getting taken very quickly. So that was a challenge is getting a little defeated there and putting in offers on the successes, I started looking at off market properties, which we'll jump into when I get in the hot seat. But I got two appointments that this week with potential sellers. So that was a positive note.   And then also my wife and I are said to have a baby on Thursday. And so this past weekend, we just did like everything as our last time before kids. So like we went to a brewery and we're like, Okay, this is the last time I'm going to burger for kids. We went to out to dinner, we're like this is our last date and like 18 years so. So we just, we went through and sort of did a bucket list of things we wanted to we wanted to do.   Tom: Just say Congrats. I joined the the dad club like a year and a half ago and the water's warm. It's It's It's awesome. My one my recommendation would be getting one of those giant yoga balls that you can sit on is one of the few things a dad can you know, to calm a baby like, you know, the bouncing up and down. Mom's got some special tools built right into her to help calm a baby. But yeah, I'd get one of those big yoga bouncy balls. But congratulations. That's really awesome.   Ryan: Yeah. Thank you exciting.   Dean: All right, Michael, how are we doing on time here?   Michael: We got nine seconds we crushed that guy's. Perfect,   Dean: Look at that. All right. So the next section is commitment. So we talk, this is about a 10 minute section roughly. And it's broken down to these three subsections. Again, the first one, this is our first mastermind group meeting, it will be slightly different.   But for this meeting, we'll be talking about our epic goals. Like I said, again, it doesn't just have to be real estate focus, think about you know, something in your personal life that you want to achieve, whether it be changing careers, or you know, losing weight, or whatever it is, and on top of your real estate goals as well.   So that's your your epic goal. We talked about also, it's what's called last week's commitment. Since we didn't have a commitment last week, we won't speak about it. And then if that commitment was completed, yes or no.   So I'll start off. Again, what's the timeline for the epic goals? It's it's pretty important like we talked about in restock Academy, setting your SMART goals and making sure it's realistic, timely, etc.   Ryan: What's the timeline for the epic goals?   Dean: You want to set a timeline around it, say epic goals typically, in your three to six month period is typically what you will try and shoot for. Alright, so starting off myself. So my first, it's not really an epic. I would call it more of a grand goal. And so one notch down from an epic goal. But you know, within the next three months, I do want to do a 401k Roth IRA conversion, as well as doing a cost segregation, potentially do a cost segregation study on my four Plex if the numbers make sense.   So what I'm trying to do as much as I can this year, as I'm shooting for my real estate, tax professional status, is I want to try and drive up as many expenses or deductions that I can this year in order to kind of offset my my wife's income. And number two is. So within the next three months, I also want to take over the management of my Indianapolis portfolio. And that's a couple of reasons but number one is an a bit underwhelmed with my PM at the moment, especially after doing my taxes just kind of seeing where things lie. And it also drive up my net operating income for my portfolio.   And then the third reason actually one of the more important ones is the reason I want to do this is because I need more hours for my tax professional status. I think we need 750 hours. And so I want to make sure that I reach that. My last goal and personal goal for me is that within the next three to four months, I want to be able to meditate everyday consistently for at least 15 minutes. And my mind is always on so many different places at once and I'd really like to kind of take a deep breath and kind of be able to focus. And I think meditation is a good aspect for that. So those are my epic goals, or grand goals.   Michael?   Michael: Awesome. So, by July 31, I would like to have my development projects completed, finished and started to get rented. So I've talked about this on a lot of other podcasts, a lot of other episodes, I'm redeveloping a 20,000 square foot commercial use, or mixed use building and creating 15 residential units and two commercial spaces out of that it has been a long, sweaty, bloody tear field road, that we're not quite done yet, but starting to get there. So I'm trying to get that over the finish line. By July 31. I'm going to speak that into reality.   Then I just got a flip property under contract, I'm doing a flip inside of my Roth IRA, something I wanted to try my hand at. So I just got a small property under contract, I'm looking at have that completed, that flip completed and marketed within the next 45 days, we're due to close in two weeks. So that's a pretty aggressive timeline, but I think it can be done.   And then on a more personal note, similar to Dean, I want to focus more on sleep, I've definitely noticed over time, my sleep has deteriorated, I think mostly to be me being in my own head. So many things like Tom and Dean, I've got a lot of balls up in the air and constantly thinking about that. And I need to really help separate for myself, the personal world, from the business world and the sleep world from the business world, which I find hard to do, I'm not really not good at condense or condensing is wrong word. But, boxing, if you will, different different aspects. And I'm always thinking and always switched on. So I need to really help focus on on switching off. So that's definitely a big focus of mine over the next three to six months.   Dean: Right. Awesome, Michael? Thank you, Tom?   Tom: Yeah, so in going through the reef eyes that I'm doing, I need to redeploy that capital on the cash that I'm getting back. So I'm expecting to have those funds in the bank sometime in early May. So I'd love to have it two to three properties in contract by the end of May. You know, I guess, being sequential about this, I've been an SFR guy for a long time. And I was thinking about doing a little bit of either small commercial or, or like a four Plex. I see. I see Michael, he's, he's excited about that. So I really need to sit down and kind of finalize that plan. So I might put some time on Michael's calendar and thinking through that.   So having those funds in when they hit the bank account like not, because I'm paying for that, right. But that debt is running, having a very locked in plan in place, they either continue to add a couple more SFR or go multifamily. And I think they're putting a date to that, I think by the mid May, so May 15. Like I have to have a very specific and I keep looking at you know, properties down like different strategies like looking at SFR and looking at commercial stuff. So I guess really locking that down and then executing that. So number one is going to fit Yep, building finalizing that, where I'm going to just tribute the new funds for these, this next round of acquisitions.   And my other goals that I have is just have my second vaccine coming up pretty excited about that. And just starting to reengage with some friends that I haven't seen in a while still, you know, wearing masks and doing doing all the right precautions, but after getting the second vaccine starting to, to re engage with some friends and some more outdoor stuff. So I love being specific about it. So all say having, you know, two events in a row of friends. Yes, that's gonna be my my non my my fun one. So.   Dean: That's very topical. And that's, that's Adam will go on a lot of us are dying to get out there again and re engage with the world like we used to back in the day. Right, Ryan? How about yourself?   Ryan: Yeah. So on a personal note, going back to being a dad on Thursday or sooner, just trying to be as supportive as possible in all of that was my wife. So taking care of the cooking and the cleaning and everything that I can do. Maybe some some midnight shifts, if I'm been tapped for that, but whatever, whatever it takes on that end, and then on the real estate side. So just working on getting this off market deal finding process up and running. So specifically, I want to put two properties under contract either buying holds or flips by we'll call it mid June. So get two properties under contract.   And then also I'm trying to figure out a way to monetize the leads that I don't want to keep. So what I've found is there's a lot of leads coming in that are probably good deals, but I just don't want them and so trying to figure out a way to monetize that without becoming like a wholesaler like very minimal touch way to at least break even on all my marketing spend for deals that I don't want to keep.   Dean: Awesome, you know, your, your your personal goal of cooking and waking up midnight. Now that you've said it in the mastermind group and as soon as Tom writes it down, it's a kind of set in stone. So you know, we're holding you to it, Ryan.   Ryan: Luckily, I'm not a great sleeper like all of you sounds like us some of that time and go do my midnight shift then.   Dean: Alright, excellent. So we set out epic goals. So what we can do so moving forward, once the group have set their epic goals, you typically use that as your kind of baseline that you kind of go against, and all your commitments that you commit to throughout the week should be committing to, you know, essentially a small version or a sprint goal that essentially leads to your epical eventually.   And since we didn't, like I said, do a mastermind group last week, we weren't we weren't talking about last week's commitment. And and hopefully next week, when we meet, we will say we've completed it and get together. All right, I think we're at time, Michael, how are we doing?   Michael: Yeah, we got two minutes left. So again, we did a nice job there.   Dean: Excellent. Okay. On to the deep dive the hot seat, Ryan. So again, this is just a challenge. Or if you don't have a challenge for the week, you're kind of your success or roadmap to success that you can kind of solicit feedback from from the group. So, Ryan, why don't we dive right in?   Ryan: Perfect. So like I mentioned, I'm trying to find off market deals. And I started this about a month and a half ago. And I think part of the issue right now is I'm just a little bit scattered. And so I have a cold caller that's basically cold, calling six hours a day to just find leads. And what I've found is that I'm running through my potential options pretty quickly. So again, I'm investing in Indianapolis. And my criteria is pretty narrow. It's like three bedroom, one and a half bath in certain neighborhoods. And there's only so many phone numbers that you can call. So I'm finding that I'm running through those leads pretty quickly. And I'm not finding the quality of leads that I wanted. And then now I've also started to try out direct mail campaigns as well.   And I think part of my issue is I'm just not quite focused, because I feel like I'm running out of leads in one spot or the other. So I'm just trying multiple things to see what sticks. But nothing, nothing is clicking as easily as I hoped it would or thought it would. And so I'm having a little bit of trouble there just like actually turning leads into appointments and getting the deal closed.   As I sort of mentioned in my epic goal, one of the pieces I'm trying to do is have this direct marketing source be sort of self funding. So if I can figure out a way to, if I get 10 leads, and maybe one or two look good for me, how do I get rid of the other eight without just throwing them away, like passes up someone that wants them, whether it's a relationship based thing, or actually sell them to someone. So I've been experimenting with a couple things on that end, for example, one I found someone local and IndY that can sort of track leads down. I've tested that out with a couple of them. Another one is I'm talking to the wholesaler that I normally use of actually selling him the leads, and then getting a commission on the downstream.   So those are the two approaches I've gone after. But it's just too early to tell right now if either of those will really work. So all of this, I would say I'm like early on in the game, but I don't know how people continue to do this year round and make it work because there's there just doesn't seem to be that many deals out there.   Dean: It's one of those things that inventory, not as Indianapolis I invest as well. So I noticed scarcity there, but just across the US is so scarce right now that people are going to cold calling and skip tracing, do all these other things that they can try and do to try and find some kind of deal out there. And so I can certainly empathize with your situation.   Ryan out of curiosity, what what um, what do you use for your cold calling? What's the I know, we spoke about deal machine, but I don't think it was that. What do you use right now?   Ryan: It's a company called scale and grow. And I think they're brand new, but I actually went to an investor meetup in Indianapolis last November, so and I happen to be sitting at a table with one of the guys who was just trying to kick that off the ground. And so it's very small right now. I think they have five or six school colors in the Philippines and they just sort of rotate those between they'll do the skip tracing for you and, and all that. So that's what I'm using right now. And I'm using prop stream. I mentioned I tried out one direct mailer. I'm using prop stream for that.   Michael: Ryan, I'm curious why your criteria just about your criteria that three, one and a half. Can you get into that a little bit and maybe we can try to figure out if we can't expand that a little expand the scope?   Ryan: Yeah, that's a good question. So honestly, I'm just a sucker for like three, one and a half brick building. So part of it is just personal preference. Like whenever I see those, I always jump on them.I really liked the one a half bathroom, it's more than one and a half bathroom than anything else. And so I feel like overall just attract a little bit better clientele of a renter, if I'm trying to keep that long term. And it's more attractive to sell if I want to flip it. So it's a little bit more the one and a half bathroom than anything else.   One thing I started to look at last week is expanding out to two beds, one and a half baths that are bigger in size. So 1000 square feet, so I can, if that's where you're going try and build a third bedroom on or maybe try to build a second bathroom on. But I almost feel like the building a third bedroom is probably easier than building a second half bath, just because of plumbing and everything else. But that's definitely an option or an opportunity to expand there.   Michael: That's exactly where I was going with that. And for everybody listening or watching, but Ryan's talking about is, is buying something that has enough square footage to add an additional bedroom, maybe it has a formal dining room or just a large living room that you can corner off or build some internal walls without changing the exterior footprints, because that's much easier to do is changing the interior footprint. And then adding a third or fourth or fifth bedroom, whatever size your heart desires. And that can add a tremendous amount of value both on the rental side and on the resale side of things.   So I think that's a really good way to expand the scope, I would not be shocked if your lead list doubled. As a result of that. I don't know what the housing stock looks like specifically in Indianapolis. But I said that weird Indianapolis. Indeed, but I think it could be could add a lot of names to your list.   Ryan: Yeah, just to give you a sense for the size, when I just did the three, one and a half. And I'm also doing over 25% equity. So people that aren't like leveraged up completely and would actually want to sell this at a discount. There was about 8000 people on that list. But given that 8000 people on cold calling, I actually don't even know the stats, I should notice that but a very small percent answer and then a very small percentage of that are willing to actually sell.   And so that's why I'm having trouble, like the 8000 actually run through pretty quickly with direct mail. I'm sure it lasts a little bit longer. But at least on cold calling, I'm running through that list pretty quickly.   Tom; That's a great segue into my comments, do you like so much of this business is like knowing your funnel and like what your conversion rates and like understanding what like baseline should be. Because I mean, you get to that point. And it's sort of just like an equation like, Okay, I know, if I do like, you know, a 10th of 1%, I need to put this many leads in or there's like, I think those metrics are super important to understand in this kind of a strategy, not only for like working backwards on hitting your goals, but also to monitor your partnerships that you're using, especially a newer company that's just kind of getting off the ground, I think it's really important to have kind of know what the industry baselines like of that type of either a cold call or a mailer. And then you can go back to talk to them and kind of see how they're performing against it.   Because I mean, there's so many different chains in the in the flow here, where there could be issues, where it's super important to have kind of a baseline of expectations on industry and kind of working working backwards. From there, I think that's also going to just add a lot of sanity of, of just being data driven about it instead of you know, just looking at the end of the day from the very start to the very end, but looking all those little like sub parts.   Ryan: Yeah, that's a really good point. And I think I definitely need to investigate that. I asked the company themselves, but they didn't give a good answer on baselines, probably because they're new. And they don't do it that much yet. But I think that's a really good point. And another thing I've been trying to do a little bit is sort of a b test, at least with different neighborhoods to say like, Alright, this neighborhood, I'm going to try cold calling this neighborhood, I'm going to try direct mail and see what gives a better response. So kind of testing within the two strategies that way, but I think knowing the industry benchmarks.   Tom: And the different layers of the funnel, right, so like, okay, what's the pickup rate? What's the actual like, talk about rate, you know, you know, I'm saying like getting as granular as you can there. I think that's gonna help identify, you know, where there are issues, issues in the flow, where you, you know, get as granular as possible that we might be my feedback on.   Ryan: Yeah, that's a really good plan.   Dean: And Ryan, what about So you said right now you're, you're limited to kind of your buybox to specific area of India, East nd Have you looked at other regions like this, the South, the east is obviously a lot more affordable and then the South has also kind of one of the places we talked about Greenwood. Southport, I think you have a place there, that you're gonna have some affordability even the West, I know there's some really good neighborhoods that are somewhat affordable still. And have you thought about expanding your your markets or your different neighborhoods?   Ryan: Yeah. So the 1000 I mentioned before is all of Indianapolis, including the west side, one thing I did start doing recently is expanding cells, as we talked about a little bit. So going down to Greenwood, the, the constraint I was working with in there is trying to keep it within the neighborhoods that I know my property manager manages. And so I basically reach out to them, ask them, which neighborhoods they expand to. And I've tried to stay within that just because I didn't really want to go down the headache of finding a new property manager and a new contractor and all that good stuff. So I want to try and keep it within the system. To the extent possible.   Dean: If you did find a place outside of the zone of where your pm works, would you be open to just flipping it and then kind of passing it on for profit moving on?   Ryan: Yeah, yeah, I'm not, I'm not necessarily sold on buying hold as a strategy for all these. It's more just an overall income stream. So I'm more than happy to, to flip, if I see an opportunity that comes up, or even potentially wholesale something, if it, if it works out, I'm trying to keep it sort of my overall goal is to not spend a lot of effort on this sort of keep systematize it as much as possible so I can sort of stay out of it, but just have extra leads coming in to myself as sort of a lead flow more than anything else.   Michael: This might be a bit of a naive question. But as someone who's never worked with cold callers, or hired a company like that, how much of this deal flow conversion rate do you think is a result of the physical person on the other end of that phone? Who's calling the lead?   Ryan: I'm sure it's a lot of it. Because I personally get cold callers, like calling me every day. And some of those almost all of them, I hang up immediately, but like some of them just something about, I mean, are you just like, Alright, well, what would you offer me and like, you just go a little bit further with them. And it's something about the person on the other side. So I think that's probably a big piece of it. And I think that back to Tom's point of like, knowing the industry benchmarks would probably add a lot of value there just to know if like, if this company is coming in at half the rate or if they're actually on par, and it's just a small funnel that you have to work with?   Dean: And what about the other thing, that from a personal experience, like yourself, I have to be hanging up on the cold callers and always get that call interested in selling my property? What about text messaging, you know, that's, that's less, it's a bit more formal, but it's, it's the only messages I've ever responded to on text. And that's definitely I don't like to speak to people, you know, potentially a precious situation of trying to sell my home. But if done via text, it's a bit more informal, that more relaxed, the seller could be the more relaxed by giving out information and being a bit more willing to speak to you.   Ryan: Yeah, I think that that's another good point. I actually have a friend who has sort of a text message business for a different industry. And so I was picking his brain a little bit on like how this might work for real estate, I just, I need to talk to him to see what the options are. I know, there are some legal things recently about texting that kind of made it a little bit tougher than it used to be.   But I definitely need to talk to him and talk to someone about this. I think overall, I should just talk to someone who does direct marketing, because I haven't necessarily done that. Like, I've watched a lot of YouTube videos, and I've read a lot of things about it. But I haven't talked to someone who's actually good at it that can probably like, help me skip over like two or three of the like learning steps that I'm going through and probably wasting money on right now.   Tom: I think that's a great like segue that kind of into like, another piece of advice is like, what, what parts of this do you want to be good at? And which parts do you want to outsource? You know, I think naturally like we're inclined to like to be sort of a jack of all trades and do everything but you know, this could be a good spot for you, right? And you don't want to spend too much time on it. Just find people that are already doing this, that already good at it. If the ultimate goal is deal flow, you know, let somebody else work, you know that you can vet and trust, like manage the sausage factory, where you just kind of be on the other side. Now, sure, you'll probably end up paying a little bit more for this, but I'd say for your time, it's probably worth it.   Ryan: Yeah. 100%. And the the piece that I'm trying to stay out of is like getting on the phone with potential sellers everyday like I have no business being in that I'm not good at it. And I don't want to be good at it. And so I've been trying to find someone that is willing to do sort of that piece of it. But it's just it's hard to find that when you don't have a track record of closing deals yet. You're like, hey, do you want to jump on the phone and talk to a bunch of random people that may or may not sell their house? And then maybe I'll give you a cut of it. So I think figuring out what that piece looks like and finding someone that I trust is definitely a big step in it.   And I've been trying to do that a little bit. I've talked to probably three or four people that are like local Indianapolis investors that are willing to jump on the phone and talk to people. But I think finalizing that piece of it is definitely worthwhile and definitely good plan.   Michael: Is this how wholesalers find their deals?   Ryan: It's basically wholesaling. But I'm trying not to do the work of wholesaling for like, I'm not trying to take it to fruition and actually sell the deal on the other side. Just take the lead and keep it for myself.   Michael: Right. Right. Well, so my guess is that the wholesaler that you buy from locally in India is probably not going to want to chat with you about how they source their deals. What about or do you think that they would? Would that be a good a good source to chat with?   Ryan: Well, so they're definitely not going to give me tips on how to get better at it. But what I think I mentioned this at the beginning, but one of the things I'm doing now is actually passing the lease that I don't want off to them, because I know they'll pretty much buy anything. And so we've actually worked out a deal, where they'll give me a cut on the back end of a deal that I've passed to them, and then they end up selling, which is a very low touch way to hopefully at least break even on this thing. But it's just too early to tell how many of those they're going to close.   Michael: So you're wholesaling to your wholesalers.   Ryan: Yeah, selling leads to my wholesaler. And then potentially buying it from them on the back end of   Michael: Full circle. Yeah, I I've got to imagine that there are wholesalers because I know that they're, you know, professional wholesalers in other markets, maybe on bigger pockets that you could try reaching out to just to see, kind of like Tom, the analogy, Tom uses the sausage factory, what components are they using, and they're a sausage factory, I've got imagine it's relatively homogeneous throughout the country, what that process looks like, I'm sure you're going to tailor it to slightly towards individuals and to different markets. But I think at the high level, just that the deal flow and the lead acquisition process, I would guess is is relatively done. And so trying to rather than trying to reinvent the wheel or build your own wheel, there's there have got to be folks out there that you can get on the phone to chat with.   Ryan: I think 100% I can and I read like a wholesaling book, which kind of got me there. But it's definitely more tailored to like how do you double close and all that kind of stuff? And so I think just the beginning of the process like that lead gen funnel, definitely worth talking to someone. And yes, that is exactly what they're doing. So I think that would probably be a good place to start. Probably someone not in Indianapolis, but I don't think I'm trying to steal their business.   Michael: Poach their deals. Yeah.   Ryan: Yeah, exactly.   Michael: And just people who don't know, Ryan, what's a double close?   Ryan: So the way I understand it on wholesaling, there's sort of two ways you can do it, you can either get the deal under contract and then assign it to someone else and have an assignment fee on there where it's very clear on the transaction that you are making 5k or 10k on this deal, or there's a double close where you technically close on the house, and then you immediately sell it to the end buyer. But you still don't need to bring any money to the table because they're sort of using the funds from the third transaction to from the first transaction. So there's sort of two ways to close on that from a wholesaling perspective.   Michael: Awesome.   Dean: This is a bit I kind of outside the box but I just remember listened to a podcast and I forgotten the name of the gentleman who does the study is quite an ingenious way you always have people flooding you with you know sell your house like speak to me like there's always people soliciting your business in the way do you want to stick out from the crowd right? You don't want to be just another one of the people asking do you want to sell your house and this one guy he used to send mail mail letter with often you know I want to buy your house etc. But he also left like a little Rubik's cube with it. And his tagline was, let's figure this out together. And I thought that was quite brilliant that they stuck out in his head and maybe like it they went into right now but when they are interested they will probably go back to that guy or left to like a weird little puzzle piece with their mail and just kind of makes you stick out from the crowd.   So I wouldn't say necessarily go down that route of mating off Rubik's Cubes or chess pieces but you know something similar can help you in the long term. Stick out from the from the card like that.   Ryan: Yeah, that's a great idea. My wife actually had a similar idea this weekend. She's like what if you just mail everyone cookies? I'm like I don't think we want to mail 8000 cookies to the city of Indianapolis.   Dean: Or candy!   Tom: Carmel, wrapped Carmel get like you know   Ryan: But yeah, no, I think something like that. So you're not just one other mailer and the 10 mailers they got this week is definitely, definitely a good idea.   Tom: I've got a sweet deal for you!   Dean: I know you're probably in Indianapolis. Aren't you heading to Indianapolis soon? Meet the buyer, at some point.   Ryan: Oh, I have an appointment set up. Yeah, but someone else is my product during the appointment.   Dean: Okay, I think the other thing is it's been more manual, but you know, highs, I'm driving for dollars, you know, driving past places where, you know, there's overgrown bushes, or you know, the grass is too long. And you can kind of see it, you know, just people who, you know, aren't picking off the place that may be on the verge of foreclosure, that you could potentially help them alleviate from a sticky situation.   So you could do a very targeted marketing that way as well, just to kind of another option.   Ryan: Yeah, I think there's a bunch of ways to do it. And it's just finding the right figuring out which one works for me. And then just sticking with that.   Michael: Wouldn't that be awesome if the grass front lawn grass link was public record, and you could search that?   Dean: I think it sounds like we have a few action items that you can work with. And then try and utilize to see what might be the best cold calling method or kind of wholesaling to wholesalers type of method that you can utilize for your for your investing.   Ryan: Yeah, yeah, absolutely. I think I'm gonna try and talk to a wholesaler gonna try and figure out what some of those industry benchmarks are. And just try to narrow in on some of the details, at least give myself some sanity on whether I'm actually just spinning here. Or if this is just the normal process.   Michael: With the industry benchmarking, I would push that company a little bit more on it, because I've got to imagine the whole reason they got into business in the first place was because they were trying to accomplish some goal, or they saw a niche in the marketplace that they could add value. So there's no way that they don't know what the industry benchmarks are like that just seems pretty naive to start a company and have no idea or not be able to give your clients a pretty straightforward answer of what's reasonable for the for the market.   Ryan: Yeah, that's a good point.   Dean: All right. Well, Ryan, you were speaking about some your your goals or what you plan to do. That segues well into our next topic, which is this coming week's commitment. So we'll kind of go around again in the same order. But working looking at your epic or grand goal, my case, you know, what you're committing to every week should be essentially biting away at the goal that you're trying to achieve eventually. So what you're trying to set for yourself, your commitments should kind of align with those, those epic goals.   So for my, for my commitments, I talked about my epic goals of doing the 401k, Roth IRA conversion and doing a cost seg. And I think, what I want to do next week, well, this coming week is run the numbers to see if cost segregation for my four plex would be worth spending the money to get it done. And so that's what I want to do this week to help achieve that goal.   And the second one is I want to read this is my second goal was to take over management about my portfolio is to read the first 30 pages of the book on managing rental properties. And so I have that collecting dust somewhere around here. And that I want to pick up and read.   The third one. I'm one meditate, set a commitment to meditating at least twice this week. And that's what I plan to do. And in terms of the next pieces is talking about your actionable next steps. So it's great to kind of set these these small goals. But let's go even further like how what do you need to do to achieve that commitment this week?   So like, what's that bite size or your most important next step to achieving that goal, or that commitment for next week. So kind of an auto just went down for my actionable next steps. Michael sent me a contact for a one of his people that helped him with the cost segregation study. And so I'm going to my actionable next step is to reach out to that contact, send them an email and introduce myself and kind of tell them what I'm trying to do the next actionable next step or most important next step about reading my book is to find the book. It's a crucial, crucial step in achieving that goal.   I just moved. Yes, I have boxes and boxes full of stuff I'm going to try find that book. And then my third one about meditating. I'm gonna set an alarm on my phone for two times this week to, to make sure I'm going to be meditating at that at that time so that I can't kind of back up. So that is my next week's commitment and my actionable next steps.   Michael?   Michael: Are you using any kind of assistance for to meditate any kind of app or book or music?   Dean: Yeah, yeah, I, I use an app. Right now. Actually, I download I used headspace last year, I tried to get into it. I wasn't really feeling it as much. So I downloaded Comm. app. It's another one of those very popular apps out there. And I part of my meditation rituals, I kind of set a little candle in front of me and just kind of focus on the breathing and look at the candle kind of zone out.   Tom: Love it and that when   Dean: I will livestream it as I'm meditating defeats the purpose. But anyway. Yeah. All right, Michael, what is your commitment this week?   Michael: So commitment this week is to make additional headway on the redevelopment projects going to push the contractor to make additional progress. And I'll talk about how to do that in my here in a minute. I want to get additional legwork done on the flip as well. And I'll talk about that in just a minute and then going to commit to watching some there's a TED talk or I think some YouTube videos on things you can do when you're having trouble sleeping. So I'm going to be watching some of those this week and trying to implement those.   So what I'm going to be doing stepwise actionable stepwise to get the contractor moving along. This whole time we've been on time and materials, he's been building me time and materials, which is basically how much time his crew spends, and whatever the materials cost. That's what he builds me, I'm gonna be moving to lump sum payments going forward. Because the longer they take, the more money they make, versus now when it's a lump sum, they are now incentivized to finish the project as quickly as possible, because that's when they get paid.   So for this whole time, there was just a lot of unknowns. So they said, Hey, we can't give you a lump sum number, we got to do TNM. So I said, Okay, and now we're past all of the major hurdles, knock on wood. So we should be able to, he should be able to give me a number. And that's really what I need.   Then I'm going to be getting a scope of work for the flip from the project manager out there, who's also the property manager and the agent. And so I said, Okay, I need you to commit to a number. Again, this is if it goes over, you're paying the bill. So I'm not playing these games anymore with these flips. So Ryan, off the chat with you offline about how the best way that you've done that with your burrs is and then yeah, I just watched those TED talks and YouTube videos on on things I can do to implement sleep, better sleep and then utilizing them throughout the week as needed.   Dean: Great. Thanks, Michael. Appreciate you walking us through that. Tom. How about you? What are you committing to this week?   Tom: I was just lastly on sleep. My goal, like I like breaking a sweat can be kind of helpful, like in the evening, like, like, sometimes I'll do like a night run. And I don't know, I find it helps a little bit. I don't know. Anyways.   Michael: Meditation is right.   Tom: Yeah. Meditation is a big is a big part of my spiel.   Michael: You can meditate in the sauna and do both for the price of one.   Tom: Oooh, meditate in the sauna, while running on a treadmill. Just defeat the purpose.   Dean: Yeah, but highly, highly interesting.   Tom: Alright, committing to this week, so I am committing to getting uber organized on my refinances that are going on right now. So like, I'm going to be able to say like exactly what the close date is set for. For those different and you know, they're all occupied units. So it's, you know, making sure that the right appraiser is is in contact is there just a clear date on closing, so getting very organized with my refinancing on knowing that capital is going to hit into the bank.   And the other I think kind of social one, right was like, scheduling a little, you know, safe little friendly outdoor thing with some friends. So I'm gonna get a little text, get set of dates. For my little outdoor, I'm typing my notes as well, outdoor, outdoor Hangout. So the specific actions I'm going to do to fulfill these next commitments is I'm going to call my lender and just walk through every single property and make sure that they have everything and that the, the appraisal has been scheduled.   And then for my actual step for a little social thing is I'm going to get a text thread going with my, my group of people, they're going to do a little, I don't know, either like wine tasting or some random outdoor thing. So get my get a text message thrown. So that'll be my text, spread text thread going with those friends. So, okay, done.   Dean: That's awesome, Tom. Now I have one of those things. And it's it's breaking down those bite sized chunks makes it so much more achievable as whenever you set a goal for yourself, even if it's small, you know, just taking that first step allows one to just be a bit more committed to kind of fulfilling it, you're a lot more likely. What do we say? 37%? More likely, if I'm making a random statistic now to be fulfilling that small goal.   Have you been vaccinated on that you have you gotten your vaccines yet?   Tom: I got my next one coming in the very beginning of May. I will say putting in the, you know, commitments to doing like fun things is pretty fun. I like that.   Dean: It's important as well. I mean, we totally we get sometimes it's not it's not just about work and try to get as much money as possible. It's, it's also about you know, what, you know, what your personal life is, and trying to kind of focus on taking a step back and focus on that as well. So that you feel that way.   Ryan? How about yourself?   Ryan: Yeah. So on my personal goal of becoming a father, I don't think there's really anything I need to do that's actionable to make that happen. Yeah, go to the hospital, pack the bags. On the on the real estate one, I think my goal is to talk to two leads and schedule one appointment in the next week. And then also just understand some of the benchmarks and everything a little bit more. And so I think my actionable steps are, I'm going to network with at least one wholesaler, or someone who's done lead generation through cold calling. So I'm going to just network with one person that's done that.   And then on the benchmark side, Michael, I'm just going to follow up and ask him again and say like, how do you not know this, like you should know this. So reach out to the company directly, as well as figure out, find another way to get industry benchmarks for that. So that I can compare it against something.   Tom: I might have a contact for you on on some industry benchmarks I went to, there was another mastermind I went to last year and actually just reached out randomly about being on the on the podcast. So I've got another contact for you who I'm sure has a pretty good handle on wholesaling benchmarks.   Ryan: That'd be awesome.   Dean: Real time feedback. This is one of the benefits of mastermind groups.   Ryan: That'd be awesome, Tom, thanks.   Dean: All right. So I think my problem better we're ahead of schedule. We're on time, right?   Michael: Yep. Still on time.   Dean: Excellent. So the last, the last thing we like to do is the last minute or two is just to talk about setting the next meeting date and time, I would typically recommend you sticking just to one, like weekly occurrence at at a specific time. Because if everyone's like, oh, let me check my calendar and try and figure it out, then it's not going to get done. We're all busy. And it's the way to getting this done and without fizzling out is setting a specific weekly, date and time every week. And then the other thing we do in this section is speak about who's going to be the next week's rolls. So I typically just kind of rotate it based on the attendee order.   And so we can, we can do that now. And for so for next week. We can commit to the same date and time. And then Ryan barring any kind of hospital occurrence at that time, but for the roles. Let's let's do Michael as the as the moderator, Tom, let's put you in the hot seat. Ryan, you can be the timekeeper. And I'll be the note keeper. Note Taker.   Michael: Perfect. Sounds good.   Dean: That's it. That is how you run a mastermind group session.   Tom: Beautiful.   Ryan: Great.   Dean: And I was just gonna say mastermind like I said it's it kind of resonates personally for me just because this was one thing that really pushed me to be more specific. I literally committed to booking a flight to Dallas, Texas, to check out real estate in that area when I was touring that back in the day and I pulled theTrigger because I had my meeting coming up, and I'm like, Alright, I better commit to this, I'm going to do it. And I booked my ticket and met a couple real estate agents there and did all the stuff. And so that's kind of my first step I took towards real estate investing with mastermind group.   So to me, it kind of resonates Well, it's, it's, I think it's a really important way to, to challenge yourself and to be held accountable to those challenges.   Michael: Absolutely. I think I've never participated in a formal mastermind, I have a couple of accountability buddies that I have calls with standing calls on a weekly basis. And if somebody misses a call, they got to pay the person 10 bucks. And we just talked about what the goals are for the week and what you know whether or not we accomplish them and why we didn't, did or did not accomplish them.   So just to piggyback off your point, the and I think that the localization of what your goals are, I think that there's a lot of science behind that just speaking them to yourself, but then even more, so speaking them to somebody else. Now, I'm not just letting myself down. I'm letting down my accountabilibuddy, who is holding me to an expectation so i think it's it's huge.   Dean: I like that, uh, that the accountabilibuddy, that's a very catchy.   Michael: That's great. It's great. Ryan, I'm curious, just doing like a live quick post mortem. On the session? Was that feedback helpful? Was that were those things that you hadn't thought of? On your own yet?   Ryan: Yeah, um, some of them. So there were things that I hadn't thought of. And then there were other things that I had thought of, but I kind of like wrote off in my mind, I was like, ads, probably not gonna go anywhere. But like hearing you guys say him again. I was like, Okay, I probably should go investigate that. I probably should, like industry benchmarks. I was like, I should know that. But like, whatever. If it's working at the end of the day, it's working, but like just understanding that knowing that, so I think it was really helpful. Yeah.   Dean: Don't forget that Rubik's Cube, you know, fundamental.   Ryan: Yeah. Got your sweet deal.   Dean: That's right. That's right. And one of the important things as well, mastermind groups just being able to people showing up in time, being held accountable to just speak in that time, and then it kind of ending on time as well. I think it's also it's one of the things that's really important. You know, one of the toughest things with mastermind group is just keeping people going and making sure people that doesn't fizzle out and the by kind of cutting the chit chatter a bit or just kind of sticking to the script or the the the template really helps keep people focused and keeps people coming back.   And so yeah, that is a first session. Thank you very much, gentlemen. Appreciate your time.   Michael: Alrighty, everybody, that was our episode, a big thank you to coach Ryan, Tom and Dean, that was a lot a lot of fun. I know I got a lot of value out of it sounds like Ryan did as well. We're going to be hopefully doing these continuously going forward. probably not going to be recording them, but we're still gonna be participating in the mastermind groups. Again, at this summit. You're interested in being a part of come check us out at rootstock. academy.com and we look forward to seeing you in the next one. Happy investing.

As an investor, it's important to remove emotions from the deal-making process. Knowing when to walk away from a deal is an important skill to have to be able to scale your portfolio effectively. In this episode, we give you 3 reasons to stop negotiations to save yourself from future headaches - even if it means absorbing sunk costs.  --- Transcripts   Emil: Hey everybody, welcome back to another episode of The Remote Real Estate Investor. My name is Emil Shour and my co hosts today are,   Tom: Tom Schneider   Michael: and Michael Albaum.   Emil: And in today's episode we're going to be talking about deals that we've walked away from. So we've gotten into contract on a property but something came up during inspections or during escrow and we decided to walk away from the deal so we're gonna review what happened, the lessons learned and some insights that you can take away and use in your deals. So let's get into this episode.   Alright guys what's going on anything new in your personal real estate investing careers?   Tom: Yeah, I'll go first. So not a lot on the investing front just quite a bit of home renovation stuff so working on the homestead but you know, still using some of the fun mechanics or fun tools of the real estate investing trade like pulling money with a HELOC, but right now more just investing in myself investing in my personal house working on a kitchen remodel and some structural foundation stuff and busy on that front not a lot of the remote investing side right now.   Michael: What are you doing on the structural foundation stuff that sounds heavy?   Tom; Yeah, right. This is like one of my like, pieces of advice I give to people in the academy is like you know, stay away from foundation stuff, you know, it's a big red flag. Well fortunately, I am family friends with a concrete contractor, really reputable guy in the local area that I live in. So I just one of the corners of the houses started sinking a little bit I live in the hills, suburbs around San Francisco and one of the corner of the house dropped like two inches down. So when I'm like kicking a soccer ball with my son, you know, the ball just starts running down to the corner of the house and it's kind of thinking this is kind of an issue and we're planning to stay here for a little bit longer. So let's address that stuff.   So it's crazy they did these like 1415 foot holes in the ground to get to the bedrock and they fill it with concrete jack the house up a little bit left the house up a little bit and they are in the process of pouring the concrete into these gigantic holes that are the new piers that will be supporting the house.   Emil: I've never seen this process and this videos   Tom: Yeah, I mean just like you think of like piers you know, we're like going over a lake like these long metal you know, whatever piers it's like the same thing with the house they did they just jacket right into the bedrock like I was thinking they were gonna have to do all these like retaining walls and stuff like that along the side of the hill, but nope, just piers, giant holes in the ground, filling them up and jacking the house up. Yeah, I'll share some some videos in the show notes.   Michael: You should put a time capsule into the concrete so that way, when in 150 years, when it's to race, someone will find it.   Tom: That's a great idea. There's probably some time right now.   Michael: Yeah. So my friends were remodeling their bathroom and they took out down to the studs, and they found a beer can from 19 like 52. With that someone had put in the stud in the wall. I was like, Oh, you guys gotta leave something from 2020 now.   Tom: Yeah. I love it. Love it. Love it. Love it. So that's what I'm doing not real estate related, or investment related. I'm going to pass the hot potato off Emil. Go ahead. What's going on?   Emil: What is going on with me, I think I've been talking about property management changes. Luckily, those are both done. So in the property, new property manager as of last week, same with St. Louis. So very happy to have those behind us now. And in terms of acquisition, as you guys know, I recently started a business. So I'm on hiatus for buying right now just trying to save money and get on stable footing with the business before I go out and buy new stuff. So right now I'm on pause, just trying to get the business going.   Tom: Keeping me on the hot seat. So in starting a new business as a sole proprietor, very cool. Your ability to get traditional loans has probably changed a little bit or the requirements and what they're asking for Why don't you talk us through a little bit about that you're kind of plan coming, coming out of a W two job into this sole proprietorship and getting to the other side. So I'd love to hear your your thoughts on going through the process.   Emil: Yeah, it was actually the timing was good, because I had a cash out refi that I needed to finish before. Like, if anything happens, like changes in your employment during a refi, it can basically cancel the refi. So for anyone listening, if you're thinking about making a major, either switching jobs, going self employed, whatever it is, like, Wait till you do your refi or whatever to make that move. Just quick note.   So for me, I knew that yes, going out on my own, basically, conventional lending, they want two years of employment or two years of business history, so or business income. So right now, if I go out and try to get a conventional loan, they're basically not going to give me one because I just started a business, I have one month of income, not enough to show they want to see two years of, of tax returns under whatever you're doing either employment or self employment. So conventional financing has gone out the door, my wife might be able to do it instead of me.   So I've been getting all my loans in my name, maybe we can transfer it to my wife. But it actually segues fine, because I've been wanting to move into buying commercial multifamily. So five plus units where you don't get conventional lending anyway. So I don't think it should be too big of an issue, since they're looking at the property more than myself.   Tom: Yeah, makes sense.   Michael: It just makes it tough to buy non performing properties with commercial lending, right? Because if it's not performing, they're not gonna want a loan on it. So doing any kind of value add is is tough from that position   Emil: Really?   Michael: Well. Yeah. Because they're gonna underwrite the property's value based on its performance. And so if you want to add value to it, you know, it might be tough to do, you can buy it for whatever, the bank will lend on it. But then you've got to have the cash in reserve to go do that value add,   Emil: Right. That is a good point. I mean, when you say like non performing, it could be you have a let's call an eight unit building, and it's under market rent, but it's still cash flows, but you just know that you can improve and make a cash flow better, which is probably what I'd be going after anyway. Not like a vacant eight unit building.   Michael: Exactly. Yep. Yep. Yeah.   Emil: Okay, cool.   Tom: Completely unrelated. We've been playing around with different recording software for this episode. And I just had this pop up that just said, the recording looks and sounds so much better than what you see live. What? Do you think we look and sound bad?!   Random pop up that goldfish distracted.   Michael: That's a great.   Tom: Cool Emil. Very exciting stuff. And, yeah, dovetails Well, with that strategy change and the type of financing requirements.   Emil: Michael, you're sharing what's going on?   Michael: I still got that six unit under contract, they got to inspect it and found a couple issues that they want to correct it, they went and got bids for them. And they came out, like astronomically high. So I said, let me go get bids for this. And maybe I'll repair it myself. And they came in way cheaper, like many, many, many times cheaper than what they got bids for. So I'm going to take care of that work myself. And then we're going to get this seller, excuse me, the insurance company and lender to sign off it says, Hey, once this work is done, that will you'll basically lend on this thing and insure the building at that point in time. So once we get that we're gonna have the work done, and then we should be off to the races. That's super exciting. I'm going to get a Southern California condo that I own listed live on the market here this weekend, which would be very exciting. And then I'm also looking at doing some flipping inside of my Roth IRA. So I transferred some money over to a custodian couple weeks ago, and now I'm making offers on properties out in the Midwest to do some flipping. So keep Your fingers crossed for me Oh, see how it goes.     Emil: Alright, guys. So today's topic, shout out jack Crone in front of the podcast for this idea, which was a deal that you've walked away from. So I'm sure all of us have walked away from a deal. In fact, we've talked about it and we have what else this episode wouldn't be very good. So we've all walked away from a deal. And I'm sure for different reasons. And I think it'd be fun to just go over some stories. So who wants to kick us off?   Tom: Michael lead the way.   Emil: Michael?   Michael: Yeah, sure. I've walked away from numerous deals, I think everybody, if you're in this business long enough, and you haven't walked away from a deal, you likely have bought some bad deals. Because a lot of times you need to fire Ready, aim kind of approach and make an offer and then go do all your due diligence. On the back end, once you have something in contract, especially in hot markets, which I'm hearing a lot of people talk about, kind of we find ourselves in today is that, hey, by the time I get all my questions answered, the deal is gone. And so sometimes you got to offer first and then figure out all the stuff.   So for me, I offered on a property, it was actually going to be my primary residence, as I was looking to moving down to the central coast, I offered on it, and again, went and got our inspections done after the fact. And we were looking for something that we could rent out an additional space. So it was going to be kind of a house hack. And so it had kind of a separate on suite wing, if you will, that could have been closed off. And we said awesome, this looks great. Because it was more than we wanted to spend just for our living expenses. So better under contract, got an inspection done, and it had multiple offers on it. So we had to come in fairly strong. And the agent I was working with became friendly with the other agent. So they said, Okay, let's make this happen.   So got the inspection done. And there was a foundation issue, the floor was a little bit uneven. And we knew that going into it, but we didn't know how bad it was. So we paid for the inspection. And we paid for a foundation inspection and got the foundation contractor out as well to give us a bid and the bid to fix it was like $115,000. And keep in mind that that can't be financed, or we were not able to finance that. So if we were to pursue the deal, we would have had to bring that out of pocket in cash on to the deal itself.   And we just said you know, that doesn't make any sense based on the all in cost at that point in time. And based on the value of the property we didn't think it was it was worthwhile. So we cancelled the contract walked away. But it was funny because we actually ended up assigning the contract to my agents. He and I are really good friends. His name is also Mike.   He ended up wanting to buy the deal the property for his daughter who's in college to live in and with some of our roommates. So he bought it as a rental for his daughter and has been really enjoying it is slowly doing work. So it was something that needed to be addressed immediately. And that made sense for him. So I basically assigned the deal to him almost like a wholesale I didn't charge him anything cuz we're good friends, but he was super excited to get his hands on that deal. Because he was really excited about the property.   So walked away from it. He ended up paying me for the inspection because he's like, Yeah, I would have had what to go on anyhow, so ended up walking away for really no money out of pocket. But if I had to have walked away from the inspection cost 800 bucks, 1000 bucks, whatever it was, it's not a big deal to avoid $115,000 mistake or repair cost. So I think a lot of times people get concerned with how much money they've already put into the deal whether that's an appraisal or title and escrow fees or a loan application fee, and then they'd have throwing good money after bad and if the deal is bad. Don't be afraid to walk away. I'm not going to say in in totality, but in many instances, you will not have spent enough money to commit you to that deal.   I mean, even losing your earnest money deposit, I would like to talk about that another deal, but I walked away from my earnest money, a couple $1,000 because of an unforeseen issue that came up and we had to walk away from the deal. We just weren't comfortable proceeding. So just keep that in mind as you're looking at deals. And as you're thinking about the results of the inspections, and the results of your due diligence, think about if it's worth it to throw in the extra purchase costs of the property above and beyond what you've already spent.   Emil: Nice. So what was the big takeaway for you from that? One   Michael: Big takeaway is, I think, just do as many inspections as you need to feel comfortable with a lot of people I feel like it myself included, we don't want to uncover the scary stuff. Like if I don't see it, and no one can see me right now. But I'm holding on my hands or my eyes like a like an ostrich. If I stick my head in the ground, and I don't see it, it's not a problem.   That's not true. It absolutely you know, you need to face facts and face reality and uncover as much of the gross stuff as you can and don't fall in love with the deal. Because the more hair a deal has, as I say, in the industry, the harder it becomes to do. And the easier it should be to walk away because there's more hair on it. But oftentimes, we fall in love with deals and think, Oh, well, it'll be okay because and we make excuses for ourselves or for the property. When really we need to think more objectively.   And that's really hard to do, especially when it's your primary residence when you're going to be living there there's a little bit more emotion tied to it. And so for this primary residence we ultimately did buy I tried to remove emotion from the equation a bit more. And that has worked out for us much better.   Emil: It's so hard when you're buying for yourself though cuz like, you know, as an investment, it's just it's numbers in Excel totally. versus when you're living there. You're like, oh, man, but we're so close to this I gotta be happy here, the yard it's impossible even like us as you know, investors who are supposed to be so objective, like when we walked into our home, I immediately just think about kid running around and our dog running around the backyard and stuff. It's It's so hard with a personal residence.   Michael: Yeah, it really really is.   Tom: Yeah, psychology, like they give you like, you could run to a situation where you just don't ever pull the trigger on your own occupied one. And if you don't give yourself a little bit more leeway than you would normally have the discipline on investing. So yeah, so true that psychology of the different owner occupied versus investment.   Emil: Totally.   Tom: Emil, do you want to go ahead on a deal that you walked away from?   Emil: Yeah, so I think the most recent one was September - October of last year before we ended up buying that triplex It was another triplex and this one had been listed on market for a while I think it was like two to three months I even think it was went under contract and then back on the market. And it had like two pictures It was like a picture of the front picture of the site and the owner refused to allow anyone to go in until they had a signed offer.   I think the property was 120k I think we offered 110 they accepted and then my agent went through walk the property sent me a bunch of videos of the walkthrough and you know I knew that this person is not posting pictures there's probably a reason like it's probably not going to be beautiful on the inside but man there were like so many issues. Like when issues come up my first thought isn't I need to run away it's like how can I now make this work if I like the area of I think you know there's still potential and I don't think it's like a massive massive headache right like yeah, those plaster coming off the off the brick which is not awesome, but it's very fixable. And just a couple other I think it was like a plate like taped to this a hole in the plaster it was you know, it was ugly in there.   Michael: Like a dinner plate?   Emil: like a paper plate over a hole in the plaster.   Tom: Was it a commemorative plate? It wasn't like a racecar driver or something.   Emil: It was a straight of white plate that you see at every picnic you go to so one of those.   Michael: Well at least they were using paper not plastic they're trying to be eco friendly.   Emil: That's right and at least you know it matched the white plaster wasn't like a red plate. So you know I ran the numbers again and I was like really conservative and we made a count like said look we can't do this deal unless I think I dropped it like 30 40k in price I was like look there's just tons of stuff we have to do here you know I have to account for whatever things we're gonna find in inspections and the seller refused which was funny because this property has been sitting on the market for a long time for very obvious reasons and so we decided to walk away it was just too many unknowns property just terrible in the on the inside and the seller was not willing to go lower to like make concessions for how much work was going to need to be done so walked away.   Michael: Isn't it funny when sellers like won't let you inside it and post pictures like dude do like not think we're gonna get inside the building and see this like it's just such a waste of everybody's time.   Emil: It's such a waste I made sure my agent could go in there and take video and send it to me before we paid for inspections and stuff. This is like you know you have to as remote investors obviously you want to go love to go check out every property but sometimes it's like alright, you know you have your person you boots on the ground who go look at for you send you videos, all that stuff. So   Tom: Do you guys stock the properties after after you watch away, like, you know, follow it and see what it does sell like most like stocking on whatever Facebook, someone that you?   Emil: I watched that one and it the listing just ended up expiring. Like I think I was probably the second or third person where it had fallen out of contract. So   Michael: I don't put a whole lot of attention on it. But if it drops significantly, you know, maybe there's still an opportunity there, like in Emil's case, and the seller said, Oh, they dropped the price 20 grand on the listing, you could circle back and say, Hey, you know, offer you taking us to 10,000 off and we can talk about this deal by feels much less of a sting for the seller, oh, they only got to drop their price 10 grand from where they are currently versus 40 or 50. From where they were previously.   Emil: Yep, I knew when I made the counteroffer, they were gonna say no, but I think is like the flip side. And I think we should talk about it later. But like, issues come up in most deals, and you shouldn't look to immediately walk like a lot of especially newbie investors, something will come up in the inspection or something will come up during escrow. And your first thought is like, Oh, we gotta walk away can't do this. And I think that's that's the wrong attitude to have, especially if you've done a couple it's, you know, that can work in your favor. Now you may get a better price, you may get concessions from the seller, and you find something busted, you ask the seller to fix it. And now you're discussing brand new, so it's not like you should walk away from every issue that comes up in escrow. So anyway, some for us.   Michael; I love it. Like you said, Emil, is you said how can I make this work? Right? And if you approach it with that lens, you can't lose? And you offer based on what makes sense for you and your investment goals. Yeah, and if the number doesn't work, okay, well, then on to the next one, and no harm no foul.   Emil: Right. It's not you should just be locked in on the deal and take no matter what and find ways to make it. But like something comes out, find another number that works and then negotiate like, don't just look to immediately walk away if something comes up. Yeah, especially the better the deal, the more problems there's probably going to be. So you have to you have to consider that. Tom, what about you, man?   Tom: I've gotten pretty deep into the negotiations, but I haven't crossed into earnest money paid walked away territory, you know, just within the upfront negotiation. So like, I've done some acquisitions earlier on on the MLS, and they were fairly smooth. And then in doing acquisitions, as well as dispositions on roofstock, it's been extra smooth, just because a lot of the diligence is already completed upfront with the listing price.   So when you listed there's already an inspection report in there, both on the sell side and the buy side, it's just been way pretty smooth. And I don't know, not a lot of risk in here. And I'd say with my strategy, I am not looking for these properties that have, you know, a lot of construction risk, that's just like not within my profile as an investor of doing a lot of value added stuff, I haven't I don't have a lot of experience of walking the way mid deal. And like I said, you know, there's some properties were going back and negotiation before we have, you know, ink on paper, and then you know, setting my hard number and then not getting to it are within a reasonable amount to budge up or down.   So I'd say I've been, you know, the closest I've been is it was a property where the roof was a little bit older, I knew that going in, there was a little bit of a discount on what the value was. And then when the appraisal came back, it ended up being like a much bigger discount relative to what it appraised that to what the purchase price was. So I was okay, you know, moving forward with that, and I did end up needing to replace the roof A year later, but it was, you know, within budget and expectation so I'd say you know, kind of based on the strategy that I have there's been less risk of stuff coming up you know, within the the diligence period as it relates to to the house.   Michael: You could just say Tom you don't put crappy deals under contract, we get it message received.   Tom: I don't deal with trash guys. I'm totally jinxing myself really badly for the next several transactions that I go through.   Michael; One person's trash is another person's treasure me and Emil are trash pandas over here.   Emil: Yeah that's right, we're looking for the garbage.   Tom: I liked it guys, I like it. Lots of good stuff in there.   You know, the fun to talk about a little bit is being on the other side with with buyers trying to walk when you're selling now I had a friend who bought a property, and then he was selling it for whatever reason just to kind of reallocate, and a buyer was negotiating with him, you know, based on the inspection report saying, Oh, this roof, you know, has, you know, less than two years I want, you know, a $20,000 discount or something like that was kind of outrageous. And he just like accepted it. And I like Wish I could have like talked to him and like coached up a little bit before because he caved so quickly on these buyer demands.   So for those of you in the sell position, like know, the value of your house, and like the one who wins and these types of negotiations is the one who has the most information. So like, if you have a good idea on how much something costs to fix, like you should really anchor to that when you're on the buy side or on the sell side and making these type of negotiations because I saw my friend probably just like light $10,000 on fire because he wasn't like disciplined in seeing this request from the buyer, you know, to change the price and he just went with it right away and it like makes me sad to think about it's like man, why did you do that? Like we work so hard in this game and it's like on the sell. It's like he just kind of gave Get away. It was a bummer.   Michael; It reminds me so much of a guy I know that paid way too much and continually pays way too much for insurance and it's just constantly on fire and talk you through it.   Emil: And the episode comes full circle. I like it. I like it. I like it, your emails gonna ping you because there's a calendar up to date.   Michael: It is. Okay, good. It's funny, too, I think to just piggyback on that Tom, the person who wins the negotiation has the most information, but also coupled with the person who cares least Yeah. And so if your friend really didn't have to sell their property could be like, No, I'll just keep waiting. And so being in a position both on the buy side and the sales side to be able to come at it from a position of strength and not needing that deal. Either to sell it or to buy it gives you a lot more negotiation power in that you can just sit and wait for the next one. Both on again on the buy and the sell side.   Tom: Totally. I'm literally pulling up my calendar right now. Awesome. And Okay. All right. invites sent.   Michael: Perfect. And don't worry, I'm gonna accept.     Tom: I can't take this abuse anymore.   Emil: How many episodes we got to grill you on Tom? Come on.   Michael: I think it's three or four.   Tom: At least you guys are my accountability buddies. Accountability buddies. Michael, I love your strategy of the IRA flip fund.   Michael: Yeah, I think it's gonna be cool. So we'll have to see how it goes. I mean, everything sounds great on paper and in theory until you get punched in the face. So I'll have to Oh, yeah. I'll keep you guys posted the whole time.   Emil: Cool, guys. I think there's a good spot for us and this episode. Thank you guys for sharing your stories. Anyone who has questions by the way, we love answering you know, whatever topics you guys have on your mind. So reach out to Michael Tom and myself. Let us know what you want to hear. We're always happy to dive into our personal stories. With that we will catch you all on the next episode. Happy investing. Happy investing. Happy investing.

There are tons of videos floating around about getting rich quickly with real estate. But let's be real, real estate is a long game. In this episode, we use a model from the Roofstock Academy Playbook to project exactly how long it would take you to get to $100K per year in passive income based on 3 different sets of assumptions. This episode shows how you can set realistic, time-bound goals for your financial freedom.  --- Transcript Tom: Greetings, and welcome to the Remote Real Estate Investor. My name is Tom Schneider. And I'm joined today by   Emil: Emil Shour   Michael: and Michael Albaum.   Tom: And today we've got a fun episode. So there's lots of content out there that talks about how to become a millionaire and you know how to become rich with real estate and in today's episode, we're going to go through some specifics year by year to meeting some specific goals. So both Emil, Michael and myself, I guess all three of us are going to come up with some scenarios. And we're going to use this tool from Roofstock Academy to see how long it takes to meet our goals. All right, let's do it.   Emil and Michael, what is going on?   Emil: Hey guys,   Michael: Not too much. I'm just getting ready to take off in my van again, we had some solar issues around the road for a week so we came back to home base to get those squared away. So got brand new solar installed brand new batteries, did some plumbing customisations and ready to rip and roar in the next couple days. So we're stoked.   Tom: Very cool, Emil What's going on?   Emil: You know following Michael really sucks because I'm just a guy living in his home just doing normal boring stuff every week. So Michael I'm just gonna vicariously live through you in your van now everything's good. Nothing crazy going on. Yeah, just happy. It's it's summer the waters warming up. So it's been it's been more fun to go surfing in the morning. Don't have to wear booties, feet don't get cold. So that's been nice.   Tom: Nice. Nice. Nice.   Michael: What about you Tom, how comes the construction on the house and the refinances?   Tom: It's coming. Oh, closing on the refi is on Thursday, which is exciting.   Michael: Awesome.   Emil: Nooice!   Tom: Some ammunition for some acquisitions. But yeah, yeah. And the construction is cruising along, almost done. It's like stop and go, you know, like there's like certain dependencies on certain parts of the project and takes a while to get done. And then a bunch of stuff gets done. And then it kind of goes back to a little bit of a halt. But Fingers crossed, we're moving some things back into the kitchen. over the holiday weekend that is coming up. So fingers crossed.   Awesome, guys. So we got a fun episode. This is also going to be on YouTube,I encourage you to check our YouTube station out, just search Roofstock.   What we have here is we have this tool that was built within Roofstock Academy, it's not an over complicated model that just goes year by year. And what it does is, you take some baseline assumptions of your investment, kind of by box right on what type of returns you're getting, what is the cost, and then you extrapolate that over years. And what the model does is it assumes that you're reinvesting all of the cash flow that you're collecting into your acquisitions into the following year. So that way, you know, when you're buying into year two, you're using the income from year one, when you're into year three, using the income from year 2. The model accounts for a little bit of rental appreciation. What the model does not account for which is a benefit in real life, and perhaps we'll work this into the model at some point is doing 1031 exchanges or cash out refi. So, you know, there is ability to move a little bit faster when you're having some appreciation. Emil, Michael, before we get into the specific examples, go ahead.   Michael: I was gonna say I just wanted to take a moment to pause here and highlight and talk about one of the benefits of real estate that totally took me, I had an aha moment when I realized it. So you just said that the income from year one is going to go into acquisitions from year two. So what that actually means is that you're getting paid every single year for the work that you did previously. So if you have a W two job or self employed, are you going to get paid next year for the work you do this year? Probably not. Real Estate totally doesn't work that way.   So all the work and hard, you know, grit that you're putting in right now is going to pay you year after year after year. And you should actually increase over time. So you get to give yourself raises, hopefully every single year for work that you did today or yesterday, or you're going to do this year. So stop and let that sink in for a minute. It totally blew my mind when it it kind of slapped me upside the head.   Tom: Yeah. And your cost basis is like pretty much effectively flat. I mean, there might be some increases in property taxes.   Alright guys. So before we jump into our specific examples that we're going to come up with, to determine how long it takes to reach our goals. I'd love to hear both you guys just a little bit of input on the model and thoughts, all that good stuff. So Michael, why don't you go ahead and go first?   Michael: Yeah, so I think it's really important to model out and forecast what your portfolio might look like going down the road based on your current day assumptions and goals. And working backwards is so important, I think in real estate because it dictates and helps us to find what makes an ideal investment for you or for me or for for yourself as an individual investor, so the three of us might have very different investing end goals. And so that is then going to determine that we are likely going to be purchasing different types of properties along the way to our end goal.   So this is a tool that allows you to do that. And really reverse engineer Okay, what types of returns should I be targeting? Where should my cash flow assumptions and targets be such so that I can get to my goal at a desired timeframe. And again, putting a goal that's timed bound I think is really important. We talk a lot about in the academy, using the acronym smart, and the T and smart stands for timely or time bound. And so being able to measure that and see how you're doing against your goal, and from a time perspective, I think is really, really critical.   Tom: Love it. Emil?   Emil: Totally agree with what Michael said, I will be blatantly honest, I have actually never gone through this exercise. But I love it. I think it's a good way to kind of just see like, what are you in for right is your goal, let's say I know so many real estate investors who are looking for cash flow, a lot of the goalpost is how do we get to 100k per year basically, like, how does your your passive income, replace your job, take care of all your expenses, things like that.   So it's, it's, I think it's cool to at least have a goalpost and be like, Alright, if I invest this amount per year, it'll take me 12 years. Well, what if I accelerate that? What if I go earn more? What if I am able to save more generate more cash flow? What if instead of a 7% return, what if I can generate a 10% return on all the properties I buy? How does that change all these assumptions? So I've never done this, but I think it is such an insanely valuable exercise to do. I'm hoping that us just doing a right here is gonna give me a much better picture of what my goalpost will look like.     Tom: Awesome.   Michael: Goal posts!   Tom: Alright, so let's jump into it. So I'm going to go ahead and go first. And since I'm going first, I'll define the rules for myself. So my goal in this little game, this little model is to get to $100,000 of passive income, the rules are, in the first five years, I cannot exceed adding an additional $25,000 a year. And practically speaking, that means basically, throughout the year, I can save roughly 25,000 bucks a year to go to, to buying real estate. And in this model, I'm also going to use the cash from my rental from previous year to do and add new acquisitions. What I'm going to do to increase my buying power is in year five, I'm going to increase that to not exceed $50,000 a year. It's it's a bigger jump. But I am just kind of curious to model that out.   So okay, so I'm looking at the sheet right now, which on YouTube, you can see it here. I have my acquisitions that I cannot exceed 25, the first year. So I'm starting with 15 was, you know, let's Yeah, well, let's make it 25. We'll start with 25, just to be consistent with this exercise in year five. So that's five single acquisitions at with a down five of them 25% down of $100,000 for the first five years, first five years. That's one house each year for five years. And that gets me to a cash flow of $15,000. So still quite a bit of way to get there.   Starting in year five, I'm going to increase my cash that I can put in, which is this red number here, up to $50,000. So this example, I'm going to move this up to two, two, by year six. I'm up to 31,000 exceeded it.   Emil: Tom, can you highlight where you're looking at your cash flow yearly number?   Tom: Yep. So my cash flow year not yearly number is down here, which is portfolio levered income. And my new acquisitions for that year is this row, row 22. That's going across. And my acquisition cost is this row 23. But the down payment is this row 24 is this red number and this red numbers is taking off taking out your cash flow from the previous year to be applied to your new acquisitions.   So year five I'm bought now buying two houses a year with a cash flow of 18,000. Let's see in by year seven. But not quite yet. A year seven I thought I could move up to three houses a year or three units. This also could be used for multifamily. But it actually be year eight I can move up to three houses per year and by year 10. I'm at 60,000, just just below 60,000 of passive income at three houses, three houses or three units, and then year 11. That takes me to four.     Emil: So the red Tom, just to clarify, that is the amount out of pocket you're putting. So you're using some cash flow, and then the red amount is how much am I coming out of additional savings from work or whatever to be able to buy the number of additional homes you have there?   Tom: Exactly. And so here we are, based on these constraints in year 14, is where I hit that my magic number of $100,000 of passive income a year based on these assumptions up here. So that's 37 total units. That is a total sum of assets owned a little bit under $4 million. And that would make for $113,000 a year. So those are my assumptions. My I ended up in year 14. So who wants to go next.   Michael: I'll go next.   Emil: Tom, a couple more questions. For you For you take over Michael, couple questions here. What, uh, what is your assumption for a cash flow? Can you fill in our viewers on that one?   Tom: Yep, you got it. So cash flow, you know, there's a lot of cash flow is, is basically you know, what you're walking away of profit at the end of the day after you collect rent and pay all your expenses. And we use just a blanket number for cash flow, a $250 per month, at the end of the day, so you know, there's a lot of variables that are not implicit within the model, like, what the rent is, what the repairs and maintenance are, what the property management costs.   But within this model, what it does is it just, it just comes out on the other side of what that number that a heart that actual number is, it's sort of peanut, peanut butter spreads your portfolio. So if I wanted to be, you know, more conservative, I could take this down to $200 a year. And you know, and that takes for just below a 10% yield of cash on cash, which I feel comfortable in being able to achieve. So yeah, it's just a straight number that you're plugging in at a monthly basis on what that cash flow is going to be.   Emil; Can you go back to 200? I'm curious how the how your model changes, if you do a 10%, just under 10% cash on cash return assumption versus the 12. So it only takes pushes it out a year, an additional year?   Tom: Yeah. Yeah.   Emil: Yep. So I'm just good to see.   Tom: Well, actually, no, I think it pushes it out and might push it up two years. So you're 16. Now is, is that year, so pushes it out two years, by changing that assumption, I think it's better and generally speaking to be more conservative with those assumptions. But what I did there is, since I changed the, these, you know, key assumptions at the top, it changed all the cash flow that runs through each year. So each year, there's less, you know, income. And what when I moved it down, there wasn't enough income from the previous year, or one of the years I had to, I missed an acquisition. And that kind of cascaded down year, year year, which pushed me out, I think, to two additional years to get that $100,000 goal to year 16 here.   Emil: Nice. It's, it's at least interesting to see, like a two and a half percent swing in cash on cash. Like it doesn't have an insanely dramatic change on getting to your 100k mark.   Tom: Yeah. Yeah. And, you know, as we said, like this model, like, you know, it doesn't include cash out refinance, it doesn't include, like 1031 exchanges, it also doesn't include the the tax benefits that you're having here. So there's anything it's really helpful and kind of directionally and thinking about acquisitions that you need to make based on some return assumptions on where you want to go. But it is, there are some benefits that this doesn't even necessarily account for.   Michael: Yeah, great point. So Tom, why don't we walk through a scenario where maybe somebody is starting from a stronger position with a bit more capital, and they're actually able to make all cash purchases. So let's just assume that somebody's got a, you know, a very high paying job or is able to start from a really strong capital position, and they're gonna make one purchase a year.   Let's just say one purchase a year, how many years does it take to hit your cash flow goal of $100,000. So if we change this model, we wonder out the first couple of years, and let's just see for $100,000 purchases at a 7.8% return from a cash on cash perspective. How many Here's his take the hit $100,000.   So it looks like in your five, we're almost at 40,000. No, let's actually let's one it out, let's just say if you made one purchase every single year independent of cash flow from the years prior, yeah. How long does it take you…   Tom: On it.   Michael: And so it looks like we crossed the $100,000 threshold that year 13 with 13 properties, which is?   Tom: Yeah, I mean, that makes sense. And then the following year, that single purchase is, is being made on its own by the $100,000. That is in place. Yeah. So 13 years,   Michael: 13 years, 13 houses to $100,000 at an average purchase price of 100 grand at an average return of 7.8%. So another way to piece this together.   Tom: That's cool. I yeah, I've never done them this model this this way. And I'm 13 years kind of goes back on a quick I mean that that's that's a tremendous amount to pay each year, you know, in buying an all cash. But..   Emil: Let's do one more scenario then here. Let's do I like Michael's, you have a little bit more cash to work with, right? You have a high paying job, maybe you have a side business, or you have a full time business, whatever you're able to just generate, basically 100k out of pocket every year. But what if instead of you're doing all cash, what if we go back to the 25% down model, but you have more money here? Let's see how quickly we can get there.   Tom: Alright, so I'm going to change this to 250. And the cash down 25, Cash on cash of 12%.   Emil: Let's, let's go 200. Let's go a little more conservative than 12% cash on cash.   Tom: I like it Emil just under 10%. Okay, so how much money do we have each year to spend?   Emil: We have 100k to spend out of pocket.   Tom: Love it.   Michael: Cuz maybe someone right is thinking about selling off some equities because they've done really well in this in this run up market. And now they're wanting to transition it over to real estate.   Tom: Yep. So by year five, you're already at 53,000 in your first three years, or at four houses or units and an extra five, and then it gets to a point where every year you're adding Yeah, we hit it. Or a year six, you can just start adding. Yeah, it's just 7,8,9.     Emil: Yes, you hit it by basically by year 8 you're at 99,914.   Okay, what about what Let's do this again, but you only have 50k. Right? So you're you're in the middle of our first example, and the most recent example, you can put 50k out of pocket. How long will that take?   Tom: So we're in year five we're at? We're still doing two acquisitions per year. I'm gonna give us a little bit of your six an extra 700 bucks. Yeah, there you go. Yeah. Yeah. So you're eight, you're still at? Let's see, by year 10, you're up to four acquisitions per year. And then your 13. Five.   Emil: At year 12. You could squeeze in another?   Tom: Yeah. Oh, year 12?   Emil: We'll try your 12. Yeah, year 13 year 14?   Tom: That's kind of a magic number and doing this exercise, it's hit your 13 twice now.   Emil: Interesting, Why would it be the same amount of time is your first? Is it because I took a lower cash flow per House of 200 verse 250.   Tom: Possibly, I mean, you're putting a lot less money forward. Right. So like, you're no, it's like in this example. You know, they're both are your 13. But this one, you're only spending $50,000 a year?   Michael: Yeah, I think your total your total   Emil: In yourexample you were doing 25k or less?   Michael: Yeah. So like in the in the all cash model. At this point in time, we had spent 1.3 million in cash to generate $100,000 in income and a meal in this example, you spent 533 533,000. And you're generating $100,000 until I don't remember Tom, what was what was your years must have been less because you're getting a better return.   Tom: Right? Yeah. Michael: So I mean…   Emil: I think it's what I was wondering, why was Tom able to hit the same amount in year 13? I guess it was because that extra 50 bucks, 12% cash on cash versus a 9.6. Right, exactly.   Michael: And so this is like a perfect example of how this model works based on all the different assumptions and inputs. And I think it's so cool that we are finding, you know, fairly similar conclusions based on the different ways to get there.   And so building this out for yourself or, you know, checking out the Roofstock Academy and using this model, exactly. We'll give you an idea of, Okay, how do I get there, what's the most efficient way to get there, and what's going to work for me, because again, depending on where you're starting from and where you're trying to go, You're gonna have a very different path. And then somebody else who's maybe has the same end goal, but starting from a different point.   Tom: Definitely. Yeah, it's, it's, it's flexible. I mean, everyone's path is unique. And it could be a bumper year for whatever reason, you have some extra money. And instead of having that limitation of 20,000, or 10,000, or whatever that number of how much extra cash you put in, perhaps that year, you could have 100,000. And like, if you do that, it plays a major difference of being able to hit that goal, your earlier.   Emil: Plus every year that you're gaining, you're acquiring more properties, you have more deductions, you have more depreciation, you can take meaning more money in your pocket at the end of the year, a couple years ago, the switch finally happened where instead of paying taxes in the year, I started getting refunds because of all the awesome depreciation we were taking. So that also puts more money in your pocket that you can keep steamroll and into acquisitions.   Michael: Yeah, that's a great point. I mean, this model only takes into account the appreciation side of things in terms of value. And then also the cash flow side of things. When in reality, real estate generates wealth in four different capacities. One is the cash flow. One is the appreciation. The other is via loan pay down or leverage because you're actually buying equity every single month in the property, or rather, your tenants are buying equity in the property every single month.   And the last is tax benefits. And tax benefits are just really squirrely to nail down because based on what tax bracket you're in, and where you live, and how much income you earned versus Active Passive mean, all these things can change how the tax benefits are going to likely help your tax situation.   So definitely check with a tax professional about looking to nail that number down to get an idea of how they might help you as an individual. But also keep in mind that Hey there, the return goes beyond the cash flow and the expected appreciation. There are all these other things that to add on and incorporate into that return as you're calculating it. So you're in you know, 9.6% cash on cash is likely going to be a whole lot better when you factor in those other those other factors. Factor those other factors. Don't use the word in the definition. But then also, I think this is a great depiction of real estate is not a get rich quick scheme.   Tom: Sorry, guys, I need to step out for a minute.   Michael; Yeah. Real estate is not a get rich quick scheme. It's not an overnight success scheme. This is a 13 year plan to generating $100,000 in passive income. And so a lot of people might be hearing that or seeing this and thinking all 13 years, that's way too long. But do you have a 13 year plan? Do you have a plan that'll make you $100,000 passively in sooner than that? If so awesome, like run with that. But also make sure that it's a legitimate plan.   I think real estate is one of those things, it's a slow burn. And then as you go further and further down in time, you see those returns start to take off semi exponentially. And so just be thinking about that and be long term greedy like Tom always says,   Emil: That's right. Get Rich, slow!   Michael: Get Rich, slow!   Thanks, everybody for listening for watching. If you're on YouTube, hope this was helpful. Again, this is available at the RooFstock Academy. For those members that are enrolling, come check us out at Roofstock Academy comm if that's not a good fit for you, definitely I'd recommend either looking up a model that exists or making your own model because again, these are really really powerful tools to help you forecast and reverse engineer what type of properties you need to be purchasing or looking to purchase. So with that, let's get out of here. And we look forward to seeing you on the next one. Happy investing.   Emil: Happy investing

Dana Dunford from Hemlane Property Management joins us again with some practical tips to ensure the best outcomes with your rental properties.  --- Transcript Michael: Hey everybody. Welcome to another episode of the real estate investor. My name is Michael Albaum and today I'm joined by my co host,   Tom: Tom Schneider.   Michael: And we have a very special guest with us. Dana Dunford, CEO of Hemlane is going to be joining us again for another episode. And she's going to be talking to us today about some of the tips and considerations we need to be cognizant of and thinking about if we're going to be remote landlording. So let's get into it.   Michael: Hey, Dana Dunford, welcome back to the show. Real pleasure to have you back on.   Dana: Great. Thanks for having me, Michael. Thanks, Tom.   Michael: Absolutely. So Tom doesn't get any credit!   So today, Dana, you're going to be talking to us today about a couple different rules that landlords should be mindful of, if they want to get into remote landlording. So I am just going to kick it off to you to start out. And if you could start with rule number one walking us through what people need to know about before they become a remote landlord?   Dana: Yeah, so a lot of people just so you know, the background is a lot of people do self manage their properties, right? 73% do. And many of those are remote. And so a lot of people ask us, you know, how do I manage my property from a distance, there are a couple of key rules that you have to set up.   And very first one is setting yourself up as a professional and as a property management operation. And not considering yourself just a landlord of a single individual working with the tenants, your local service professionals, a leasing agent, really making sure that you're set up professionally from an operations perspective.   So Mike, if you want, I'm happy to go through some of those details. And some examples,   Michael: That'd be great. I'm just curious, you say that 73% of remote landlords self manage?   Dana: 73% of landlords in general self manage their properties. And so the Census Bureau did a study on…   Michael: Wow, I didn't realize that was so high.   Dana: Yeah, majority do self manage majority do not use full service property manager. And and you have to think about it, Mike, when you're buying a physical asset, right? It's a lot different than stocks that are very passive, where it's not a physical asset, or a REIT where you put money into something to real estate, but you never see it. It does become emotional. You know, if you think about it, you go on roofstock, you see this property? And you're like, Oh, I would change those carpets and put hardwood floors and at some time, Oh, those sinks, I need to change those, right? That's a real estate investor. When it's physical, like   Michael: That paint color!   Dana: Yeah, the paint color, why would they choose that horrible green color? You know, I want to change it from puke green to gray or whatever, you know, off white color that real estate investors want these days. But yeah, so it does become much more of something where you take a little bit more ownership. But that doesn't mean that real estate investors want to do everything. Like they don't want to do the showings, they don't want to go and fix the toilet. You know, all of that stuff they don't want to do but they definitely want to be more hands on. And so that's why I do see a lot of investors come up with much more creative ways to manage their properties. And then how they tap into that is is what we're here to discuss today.   Michael: Awesome.   Tom: Yeah. And I guess to that point, you know, that statistic around 70 some odd percent, I bet you historically, a lot of landlords have come into landlording. More like accidentally, I think probably the vast, vast majority of our listeners are more kind of on offense of building not letting rental properties come to them. So anyways, I love point number one show that you are professionals. Let's let's jump into some of the examples on that.   Dana: So the biggest thing to talk about when you first get a rental property is are you going to set up an entity, right, and that's either saying I'm going to set it up under an LLC, right to protect your personal assets, or you can also get a landlord insurance for it. A lot of folks with 1-2-3 rental properties will put it in their personal name. Of course, I think you guys are on the same side as me of, Hey, you're looking to build passive income through real estate investing. It's better to set it up in a legal entity and LLC. Get that out all out of the way. And then there are strategic ways you can work with a real estate attorney with your accounting team to make sure that the reporting is easy as you add more properties series LLC is all of that.   But it really the the first part is setting up that entity. why I say that so important is two things. The first reason it's so important to set up an LLC is because you will then suddenly take out that personal emotional aspect of property management off your plane.   When you're a managing member, so let's take a tom let's take as an example here, if it's Tom with Great Rift Valley, LLC, you're just a managing member who's signing on behalf of the LLC. But you know, you're, you're not making the decisions, right? It's the LLC making the decisions, you have the property under that entity. It's much better than, you know, Tom saying, I own this property, my tenant comes to me and says that they wanted, you know, a garbage disposal. And you, Tom, as the landlord have said, no, that suddenly becomes emotional of Tom versus his tenants. So if you are going to remotely manage your property, still, obviously, with local support, but if you are going to it, it is really important to think about that, and how that will set you up for success of having that LLC, because now suddenly, you're a managing member of the LLC. And that emotion of me against anyone else on it, it's not that it's, here's how the LLC is structured. Here's what we have set up as the rules and the lease contract. And it makes it actually for both the tenants and for you a much more professional experience. Because they get it it's it's a professional LLC running the property.   Just so you guys know, just some stats there. 72% of landlords have properties in their own name, and 20% in LLC or trust, then obviously, there's other types of vehicles that people use, but majority don't have properties and LLCs. And really, if you're going to set up yourself for success, I definitely recommend going the LLC route and being ahead of the game from that perspective.   Mihcael: Dana that's super interesting statistic. So for me personally, when I first bought, my very first rental property was in Southern California, and there was just not enough cash flow generated from the property to justify having an LLC. So what I opted to do is just get high liability insurance limits on the policy itself, and then go for an umbrella. But there are so many different options out there. Like you mentioned, your LLC S corp series, LLC, is how should folks be thinking about what type of entity is going to be a good fit for them? And then also, where should they be setting up these entities? And at what point in their investing journey should they be setting up these entities? But there's just seems like so many unknowns? Can you speak to that a little bit?   Dana: There's different ways you can structure but two things. One, California your first year, it's free, they waive that $800? Just so you know, the other thing is people do set up those entities and other states. And that's why I recommend talking to a real estate attorney of am I going to do it in Montana or Delaware or whatever? And how can I structure this based on where the property is? And where I'm located? How can I structure this to make it beneficial from that perspective?   And you are right, there are certain cases where a real estate attorney will say and also your plan, how many properties are you planning to purchase on Roofstock? Right? What is your plan? Are you purchasing three this year? Are you purchasing two? Are you going to do a series LLC, you know, there's some school of thought from Real Estate Attorneys that there's not enough case law on series LLC is and maybe you shouldn't do it. And so getting those opinions are super important. But I think a lot of it depends on where your property is located, where you're located, how many additional properties are you're acquiring and what that structure should be. Because you might also be told to put it into a trust instead, right?   It will become personal exactly what is best for you. But having that those introductory calls, to understand what your options are, and putting them all on paper is definitely beneficial. And you're right, I don't recommend just doing a free resource and going online and setting up a California entity and say, Oh, you Well, my first year is, is free. And that $800 is wave two, because to your point, Mike, the second year is going to get expensive. And if you have one property and you're cash flowing it but you know, your cash every single month is, you know, maybe it's 250 $300, whatever it is, depending on where the property is, suddenly that does eat into your cash flow. And so something definitely for you to consider.   Michael: So something that I've ran into Dana is that I've got a California entity registered in California. I mean, it doesn't own property in California and Ohio and Kentucky properties. So I had to register it. And it was formulated or formed in Ohio. But I had registered in California as a foreign entity just because of the fact that I live in California, and I'm the sole member of the LLC. So what's your structure look like?   Dana: As a foreign entity? Yes. So we have a structure, I can talk to my husband about it as well. We have a structure where and we're managing co managing members with folks in Idaho, on the property so we semi get around it for our entities and just ours in general, like personally, we've gotten around it that way. And so that's why there are some creative things that you can do from that perspective. We have actually a pretty good real estate attorney who's in Idaho who helps us with all of that. However, there's other ones like Scott Smith down in I'm sure you've heard of him down in Texas. A lot of people use on the real estate and a lot of our California residents, I know use ham, so I'd be curious to see what he sets up. And if there's a way around.   Tom: It be a good person to talk to future episode.   Dana: Yeah, yeah, he would be great for you.   Tom: So I was just going through the exercise of getting my documents in a row for property taxes, and you go to the county and you pull up and I have a bunch of properties in my own name, when you look at those tax records, because it has all your information. So I definitely understand the value of having that sort of buffer by just putting in an entity and not having your like home address on your property. Anyways, yeah, that makes a lot of sense. Makes a lot of sense.   Dana: Yeah. I mean, Mike had Great Rift Valley. And hey, let me get back to you on this, whether or not we're going to do that, or maybe we'll upgrade it in, you know, six months during your next lease renewal should you decide to renew with us, all of that, if it's Mike with Great Rift Valley, LLC, it suddenly sounds a lot better than it's just you making that decision. Um, so definitely sets it up. At the same time, I think email addresses and phone numbers are also super important. So I've seen ones where, you know, people come on to Hemlane, and it's Jake's mom@gmail.com. Or like, you know, even just so bad is like, you know, sexymom@gmail.com, birdguide24, it's like we were talking about, we need to get this changed, right. And so setting up a Gmail, I mean, there's free, you can set it up there anything doesn't necessarily have to be Gmail, but you can route that email to your main email account, or you know, any phone will allow you to have multiple emails on it, but essentially setting it up where that's the email they use.   And so if we take that same example, it's Great Rift Valley, llc@gmail.com. It's not your name, surfer mike@gmail.com. So I think that's really important. And also to Tom's point about mailing addresses, write them having your address, having someone look up your address, it's not like you're going to get in a bad situation, like in most cases, at least what we deal with tenants are very great, you know, you treat them really well and follow the lease terms and do repairs with five star service, and they love you, right.   But it's never to say that there won't come a day where you have someone who's a little bit more difficult, or, you know, just had a bad tenant that a lemon that you accidentally selected and did something wrong in that selection process. And in that case, you'll be really lucky to have that stuff set up because suddenly that emotion goes away of are they going to knock on my door or put my number out there, or my name or address, you know, all of that is is taken out of the equation.   And so the same thing comes with a Google Voice number. The reason I say Google Voice is you don't really want to go and set up a whole new phone bill, but a Google Voice can route to your phone, also free. And something like that, where you have a personalized voicemail of this is Great Rift Valley, LLC, our hours of operation are eight to five for emergencies or maintenance requests, please call this number. Otherwise, leave a message and we'll get back to you within business hours, that just suddenly makes it where you don't feel like you have your phone on you. 24 seven, right, you don't want to have your phone on you. 24 seven, of course, you need someone available, whether it's us at home lane or another team available 24 seven to take your emergency repair calls, you definitely need that. But you yourself don't want to be 24 hours of the day.   And so I think it's really helpful when you're setting up your process that this stuff is definitely part of the checklist. And you have to have it from setting up standard hours of when you'll hear from us back all the way to having an email that's not your personal one I'm really separating business from personal is, is crucial.   And even if you don't have an LLC, which totally get some real estate investors don't as long as you have an email, that's the propertyaddress@gmail.com even something like that helps make it where it's like, oh, this is professional, they actually have an email for this. Right rather than I'm messaging the landlord from that perspective. So the emotion I think when people first purchase their properties, right, majority of people either own under four properties or over eight properties, it's very difficult to find someone in the middle. And I think it's because of that leap. If you set up all of this kind of stuff, you're setting yourself up, whether you're using a full service manager and they're you know, talking to your LLC or not, you're setting yourself up to get an eight plus rental or households by setting up all these processes that make it feel much more like a business.   Tom: Love it so any other aspects within rule number one we're gonna touch on we talked about entity address and phone numbers just setting yourself up to be professional in that way?   Dana: Yeah, I think once you have that you take the emotion suddenly out of the property management right and some things I'm thinking of a tenant comes to you and says hey, I want to get a pitbull for my property right and it most likely landlord insurance won't cover that. So it's It has nothing to do with you personally not liking pixels, it has to do with, hey, here's suddenly a financial liability, where if anything goes wrong, my insurance won't cover it. And I personally am going to have to cover it or my LLC, right.   And so from that perspective, when you're thinking about it, it's much easier to respond and say, Hey, Tom, with Great Rift Valley, LLC, I'd love for you to have a pit bull. But like the insurance for the LLC doesn't cover it. And so I'm so sorry, you can't get one because of that, and they're not going to approve it, the LLC just won't approve. And suddenly, it takes that emotional part out of it. Same thing with you know, rent increases chargebacks, on repairs, any kind of difficult conversation, obviously, you address those upfront, by making sure that people understand when chargebacks happen or policies with rent increases, that it's actually preferable for them to stay versus move, because you've given a reduction for market rate.   But no matter what, with it all, it does help with that emotional part. And that's where, you know, we really want everyone to go from eight plus properties, right, and really have that passive cash flow. And the only way to do it is one, obviously, save your money and invest in more properties on Roofstock. And then second, obviously, on the management side, being really prudent that you aren't emotional with the management and it doesn't get difficult, because if you are trying to self manage your properties, or do certain aspects of it, if you don't set yourself up for success, you'll you'll fail, and you'll never get past those eight properties.   Tom: It's not Tom, this is a wolf cola policy, where we do not allow this certain type of dog, we have a rent increase. So the kind of parallels that you know, in setting up this sort of like business entity, you know, you have that liability reduction, and then you have that kind of personal like, you know, separation. So love it very good.   All right, time for Rule number two?   Dana: Great Rule number two is you must always stay on top of it with your operations. If you are someone who just cannot project manage things, I don't recommend ever trying to remotely manage your properties, I actually recommend just getting a full service manager. And the reason for that is you're going to leave money on the table if you're not on top of things.   And so it starts with education. It starts with understanding what are the key things I need to know in the rental lifecycle, it doesn't take that long, you can figure it out in five hours with the right resources, but having the education in place and some examples of that is like understanding fair housing. Right? I mean, here in California, you can't right? No, section eight on your rental properties, right? So understanding Hey, what is legal what is not legal with the tenant selection process, making sure you know how to objectively qualify tenants, what is a good tenant, what is a bad tenant? Do I have all the data to accurately figure out whether or not I should accept this tenant? Those are certainly examples of it.   And really where I see things go wrong is during the process of I just need to speed things up and get things done. So I'm not going to follow the right process or educate myself on it, I'm just going to select this tenant because it's been on the market for 30 days, that's really going to hurt yourself.   So you do need to stay on top of it. It's not time people always ask me they say does it take a lot of time to do this? It's like no, if you have the right tools in place, if you have the right processes in place, it's actually pretty quick. But you do need to make sure that you know what you're doing. And one example with that is lease renewals. And that's one where I see people mess up so frequently, where they say, Oh, well, the property down the street is renting for 1600 a month, and my rent is at 1500 a month. So I'm going to raise the tenants rent directly to the $1600 a month and tell them it's a year long renewal at 1600, you have a risk that that tenant might move out. And you'll lose way more in monthly rent by having turnover costs of vacancy, using a leasing agent to flip your property, all of that.   And so an example like that is where if you educated yourself and you knew you could give two options a month to month versus an annual, the annual is a little bit lower to incentivize them to do an annual contract. And it shows that you're trying to give them a reduced rate suddenly that that makes it look a lot better for them.   So I do definitely think if you are going to manage your properties, you do need to stay on top of those things. It doesn't mean you have to be 24 seven, it just means you know, once a week, you need to look in there and make sure you have everything done and then obviously have a 24-7 team for emergency support. But otherwise, make sure you have those processes in there.   Michael: That makes so much sense. I'm curious to get your thoughts around lease renewal or tenant renewal and you know, you let the tenant go month to month or do you change them try to get the renewal as soon as possible. Can you speak a little bit about that?   Dana: If you suddenly say the month to month option is much higher significantly higher. They feel like they're getting a great deal when they lock into another annual lease right on but a lot of property managers don't do that. It's actually more so landlords don't do that. And they leave some money on the table by either having too much turnover, or they leave money on the table by not raising it as much as they could, because they're worried what the tenant will say versus putting it into perspective, what's a month month?   Tom: All right, Dana. So on point number two on being on top of it, I know for myself, and it's probably similar for a lot of investors is you could try to boil the ocean in monitoring metrics around your portfolio. I'd love to hear I don't want you. So the point is not to boil the ocean, what would you say top, I don't know, five or four metrics that you would categorize as being important to being on top of it within Rule number two?   Dana: I break it down into two different categories, Tom, the first one is leasing. And the second one is management. And I treat them differently. However, when you build a large enough portfolio, they probably get combined together, because you're looking at the total portfolio. Well, let's say you only own three or four homes, you're just starting out, right? The first one on the on the leasing side is days on market, that's the number one you should never have anything on market that is over 30 days, if you have something on market, over 30 days, you have a problem, or you have a luxury property you probably should have never invested in is something you know, outside the norm.   But as far as that is concerned, days on market is crucial. So if and there's a secondary with that, to understand if that days on market is going to hit 30 days, and that is right, when you advertise the property, how many leads are you getting? Right?   If you're getting, let's say 10 leads a day, Tom. And so 10 inquiries of common of tenants who are interested in seeing your place, and you're not getting any showings, right, like no one signed up for showing there's something wrong with your leasing agent, right, they're not responding fast enough, or maybe they're responding and every tenant is not qualified. And so they're not showing the place and you need to put those qualifications of no evictions, you must have a 580 credit score, whatever your criteria are for your investment property.   But that's number one, his days on market, if you can watch that, and look at the leads, and how far those leads convert, that is going to help you crucially. So I mean, the main metric there is days on market, how do you shorten that and get a tenant in there faster? And a more qualified tenant, right? Because I mean, everyone knows, I would rather not have two days on market. With a tenant with that's had four evictions, I'd rather have it on market for 20 days, and get a stellar tenant that's going to be in there for 10 years type thing, right? That's much, much better situation, much better outcome that's always paying rent on time. And so that's the first thing.   And then the devils in the details. So always, when you're looking at numbers, always look at that, like number one metric you're looking for, and then drill into the details. If you say, Oh, it's getting close to that, then it's why is it a problem with the quality of the inquiries? Is it a problem with my agent, and they're not converting it? And like, I have to say, I've been on calls where I sit there and a leasing agent that I've had I asked them I say, you know, I've had you've shown the property to 20 people, why haven't any of them converted?   If the agent can't tell you? It's because the bedrooms were too small. Or and maybe we consider one in office, right? Or if they say you know that none of them are converting because your criteria is too high. No one has the qualifications for that, or whatever it may be, are you too strict, you don't allow pets and everyone who come in has pets. And if they can't tell you a reason, then that's a problem with your operational process. But again, you can use that metric of days on market to understand it. And that coupled with number of inquiries will help you get to that first step to make sure that you can shorten that period of time.   Tom: So like let's say you have it up for one day, and you get like 30 inquiries. 40. Do you ever, like change the rent? Or is it like, Oh, I missed out? You know, I'm saying like, you clearly put the rent at too low. I'd love it. I don't know, do you guys ever have those? I'm kind of digressing from my original question. But I'm always so interested to hear your feedback. So have you ever had that type of a situation where you listed you get just a wild amount of interest? And it's like, we missed the rental amount?   Dana: Yeah, definitely. I mean, we've definitely seen that come up. Remember, it's only the legally binding contract that counts right that someone can bring to court. And so from that perspective, I've have seen people increase that and usually you want to be with how you're increasing it. You want to make sure that you are very transparent and it doesn't look like you are sketchy by any means of increasing it.   What you know from that perspective, if you have 30 people and one comes to Tom and says, you listed the property for 1600 in monthly rent, I'm offering 1800 and my rent, you might then from a marketing perspective, it's much better not to just raise it to 1800 and a tenant be like, wait, it was just at 1600? Are you gonna raise it to 2000? It's much better to tell the other folks who have inquired all other 29 people, just as a heads up, we have an offer for 1800. We want to be fair across the board, because these people have not put in an application, we want to follow fair housing first application in first one qualified, so we're raising it to 1800 for everyone, but we want to let you know that we want to be fair across the board that we do have this offer on the table and we want to give everyone a fair shot.   That is fine. What's not okay is your lease contract says something like you know that you offer a washer and dryer and suddenly you don't right, but that's legally binding contract on the marketing side. It's more of making sure you're communicating and making sure tenants understand why you're doing things the way you are.   Tom: Okay, so we covered the leasing metrics days on market being number one being the indicator, the canary in the coal mine leading to the extra why's what other metrics are we looking at leasing or into after leasing into occupancy?   Dana; Yeah, so I think if you've done the leasing correctly, you've reduced the days on market and you have a qualified tenant. And why I say that's important is you have evictions, then you have a problem with qualifications and leasing. And that's a metric. And then the biggest thing is looking at your cash return, that is the most important metric, in my opinion to look at. And that's really making sure you're tracking all of your financials and how is my property doing.   You have to be patient with it right. And so expenses, say your first month, you have a repair cost, or some sort of capital expense that you're depreciating over three years, or the lifespan or whatever, you do have to be patient, you have to look at it over time, not just within one month, but after a year, you should be looking at that cash on cash return and checking to see how is this investment doing?   A lot of that also goes back to your original real estate pro forma that you put together. You want to make sure you're really good investor, right? Like if you're going to buy a I always get worried when I hear investors who are like, I just bought 10 properties, and it's my first time going into real estate investing, I get a little bit nervous because how do they know that their processes working with anything like you try something? You see it starts working, and then you just keep pouring money into it. Right? And so for me, it's you check their cash on cash return, you check, how am I doing? Great, this is working for me, let me put more properties in it.   Or you might say, hey, this area is not working. We've seen investors sell properties, 1031 them and go toss that into a different area. So being able to check what's working, and what's not working is really helpful. And real estate investing is not a get rich, quick scheme. Despite some people thinking that building the passive income through years, it takes time, and it takes patience. But as long as you're looking at those numbers, you're checking to make sure that you've set your operations up for success, then you can really look at those numbers and say this property is performing better than this one. Let me go ahead and go purchase another investment right in that area, because that one is performing much better than the others. Or a property that's like that property because I see that one's performing better.   And so that's what I would say you always the devils in the details, right? And so if something isn't working, or you are seeing your numbers low drill down into why what was the expense that threw you off? Or you're not receiving income? For some reason on the property? What could you have done better? Is this a fault of yours? Or is this just something to do with the property and you need to get rid of it and go invest in another property.   So that's where I think it is really helpful to look at that. I know you guys also have some great numbers online as well. And it's good for, like with cap rates and return on investment. And there's so many different numbers you can pull kind of looking at, Hey, what happened when I purchased the property, what was I expecting What am I actually getting, comparing it to other properties in your portfolio, as well as comparing it to what was the scenario when I purchased the property and staying honest to that?   Michael: I think it's such a good point in doing, you know, an annual post-mortem, so to speak on, Hey, how are we actually performing as compared to how I thought I was going to be doing just like you mentioned, is so important. And it doesn't take a forensic accountant to do this kind of math or do this kind of accounting to figure out okay, how did I perform as compared to how did I think I was going to perform? And I know a lot of investors are just scared. They're scared of the answer because they feel like they had a bad year and they have to face the music that hey, maybe this year wasn't that great of a year.   But like you mentioned, it's not a get rich quick scheme. So if we can forecast out 5,10,15 years, yeah, you're gonna have up years, you're gonna have down years. So we might just be looking at the one down here. But it is so important to track them each and every year, I would argue so you know, where you stand I can benchmark against Are you improving? Or are you doing worse than you were previously?   Dana: Yep. And that's also where I think the education comes in to, because if you know of other investors in the area, or you've networked with other investors on Roofstock, who have purchased properties in that area are doing better. Maybe you can find out why maybe it's like, oh, well, they charge pet rent of $35 per pet. And there's two paths in the property. And you didn't do that, right? or whatever it may be like, it could be on the income side, it could be on the expense side. But you can compare what they're doing. And then look at those numbers. Oh, wow, all of it had to do with leasing my property was on market for over 60 days, that's not going to happen again, I'm going to make sure that doesn't happen, then you're right, you can forecast that out for your 10 years, Mike and make sure that you are getting the numbers you wanted.   Michael: Yeah. And then the other piece of that is maybe they just bought it wrong. Maybe they paid too much. Maybe they financed it wrong. Because as we talk a lot about in the academy, how you buy something can have a massive impact on the performance of it. So if you buy all cash, Tom uses 50%. Leverage is 20%. Leverage will have the exact same income and expenses, but vastly different performances and cash from cash returns. So we need to face facts and really do a post mortem again and make sure okay, well, does the financing even work on this day? Do we need to dump the thing? Maybe we bought a lemon and didn't even know it?   Dana: Yep, exactly. And also think from that perspective with that, doing the research in the area, right, and really getting to understand as much as you can. I always love the macro trends within an area. And I know Roofstock already does this for you. But it's always good as an investor to like, do it as well, where you're like, Is this where I'm buying a property? Is the population growing? Right? If it's not growing, don't invest in that place. Right?   Okay, great. What about job growth? Okay, great. Is it all in one industry? Or is it multiple industries? I don't want it all in one industry. Because if that industry like oil collapses, I'm screwed. Or maybe I do want it all in that one industry knowing that if it does collapse, I'm going to lose, right? It's it's a risk.   So really understanding I think the macro trends and that upfront, what you're getting into is really going to be helpful.   Tom: Awesome. So the last little bit of time that we have you here for today, just kind of rounding out our second rule on being on top of it. We talked about education, education, project management skills, any other aspects to kind of round up being on top of it?   Dana: Yeah. So I think the biggest thing is setting guidelines upfront, right? Again, property management actually doesn't take that long, you'd actually be surprised with it as long as you set things up upfront, because usually when there's property management when it comes up, it's usually because something went wrong, and you're cleaning up, right, it's like a reactive instead of a proactive approach.   They didn't pay rent, I need to chase down the tenant, well, that's reactive, maybe we should have qualified them upfront to reduce that risk, right. And so there's a couple of things you do want to get set up. First is things that simple as a moving guide. Hey, where do they set up their utilities with single family homes, like the great part is the tenant pays the landscaping, the tenant pays the utilities like all this stuff, right? You don't have to manage. And so setting that up and making it easy for them.   Here's the moving guide, here's who used to do the landscaping, you're responsible for it for the lease agreement, we highly recommend you know, this company, but you could use someone else if you want to. Inspections letting the tenants know we do inspections every six months, every year. This is when we're gonna do it and follow up with you on it. What's an emergency, a tenant thinks everything's an emergency, right? They think a faucet dripping is an emergency. But if you tell them here are the emergencies, this is when to call for an emergency. All of these other things are not emergencies. It's going to make sure that they know what those expectations are.   What are your hours, what hours do you work? When should they hear back from you? Will they hear back from you on Sunday at 9pm? Nope, our Great Rift Valley LLC office is closed at that time, right? And then also maintenance on systems. So on the repair side, people always ask about capital expenses and stuff like that. Have a plan in place just like you do for your primary residence. Hey, when is my roof gonna have to be replaced? How old's the water heater? When am I expecting to replace that as long as you have all of that stuff set up, you're going to reduce that risk of having surprises. You're also going to be able to forecast better and then you're also going to make sure that your management the time spent on it is reduced.   Michael: Such great tips.   Tom: That's great, playing offense not playing defense setting up systems. It's love it love it. Love it. Awesome. Michael, do you have any other questions?   Michael: No, this was awesome. And I've been a remote landlord for almost a decade, but I was never managing my any my own properties. But I'm definitely going to be implementing some of these for the one property I do self manage. And then for pushing a lot of this stuff onto my property managers, because there's a lot of really great things that can be done here, and none of which are overly complicated. So I think it's, it's simplistic, it's easy, just got to do it.   Dana: One thing I was gonna say is that even if you have a property manager, you're still managing, right? Like you're either managing the tenant in the property or you're managing the property manager. So these numbers we mentioned about cash on cash return days on market, even if you have a property manager, you're going to want to look at these. And if something looks off, or you think the numbers could be better, you're going to jump on a call with them and drill down into those same details that you would drill down even if you were remotely managing.   Michael: No makes total sense. makes total sense, Tom, and I've got some homework cut out for us.   Tom: Love it. Awesome. Well, Dana, thank you so much for jumping on and we're looking forward to our next segment.   Dana: Great. Thanks so much for having me.   Michael: Take care Dana.   Alrighty, everybody that was our episode a big big, big thank you to Dana for coming on. Again. Always a pleasure to have her on and we look forward to doing our next segment on the show where we have her back on. As always, if you liked this episode, please please please feel free to leave us a rating or review wherever it is using your podcasts. And as always, if you have topic suggestions, ideas, something you want to hear about an episode. Leave us a note in the comment section. We look forward to seeing in the next one. Happy investing

We have all had a bad experience with a property manager. But when is the right time to let one go? Alternatively, when is it the right time to fire yourself as a property manager and hire someone else? These are the questions we address in this video while pulling from our own personal experiences for real-life examples. --- Transcript   Emil: Everyone, welcome back for another episode of The Remote Real Estate Investor. My name is Emil Shour and my co hosts are,   Tom: Tom Schneider   Michael: and Michael album.   Emil: And on today's episode, it's going to be a little bit less rosy. But we're going to be talking about what happens when you have a property manager that isn't working out. Essentially, how do you break up with your property manager? All of us have gone through this experience and so we're going to try to impart some knowledge on you guys. So let's hop into this one.   Alright guys, before we get into this episode, I want to give another listener shout out. So this is from longtime first time in a car who left us a review on Apple podcasts said love this pod found this by following Michael on Twitter, and love listening and learning a lot. The hosts are also very friendly and engaging on Twitter answering questions, and suggesting pod episodes for subjects. Great guys and just overall helpful for learning about real estate investing. So this is a shout out to us specifically, Michael well done. Michael. What's your handle?   Michael: Thank you. Thank you. It's really complicated. Remember, it's @albummichael.   Tom: Oh a reverse one nice   Michael: Yeah, but I think it just got assigned to me. I don't like I don't know a meal got me hooked on Twitter.   Emil: You probably picked it I don't think they assigned it or maybe I don't know maybe when you put your name and…   Michael: If I had picked it would have been like cool surfer Guy 23   Emil: They probably just making a suggestion for you so that it's like really easy when you sign up right? So it's not the thing too much. And you can check it very well. Michael: That could very well be. But I was pretty overwhelmed with the whole thing to begin with. So I was like, whatever just basic is fine.   Tom: Emil, you're pretty active on Twitter as well. Right? What's your handle? I'm at a meal. Sure. I used to be a lot more active. I used to post regularly I go on from time to time Twitter can be a fantastic place to meet people It can also be a wormhole place that just sucks you in for hours and you're like where the time go. So I tried to moderate I deleted off my phone now I just have it on desktop. Use it a little bit less. But yeah, I'm on there.   Michael: Tom. Aren't you on there too lurker lurker 27?   Tom: I'm a lurker. Exactly. Yeah. wallflower white noise22. No, TSchneido is mine. But yeah, not not super active, more just lurker.   Michael: I had a call with someone from Twitter the other day, and it's a pretty amazing place to network. Like you're saying Emil. I've had conversations with some really amazing people have been able to network pretty amazingly, for lack of a better adjective when used properly. I think it's it serves a really cool purpose.   Emil: Totally. And we even had one of those virtual meetups. I think it was in like November, December with a couple of us on Twitter. Yeah, that was fun, too.   Michael: Super fun.   Emil: Totally. All depends on how you use it. You can, you know,   Michael: Use it for good or evil.   Emil: Exactly. Anyway, just want to encourage people leaving us reviews, ratings, comments, whatever. We'll give you guys a shout out on future episodes. So wherever you listen your podcasts, leave us a comment or review. And we'll give you a shout out future episode.   Nice. Alright, guys, this is a topic a little near and dear to my heart, because I'm going through the process right now. But you know, when you hope that it never comes to it. But before we even hit record I asked you guys has have all of you gone through the experience of having to fire a property manager and go to a new one you said yes.   So I think it's just part of the journey of being a real estate investor doesn't always work out on the first try. You gotta keep trying. That's been your experience as well huh guys?   Michael: Yeah, I think it's kind of like, people liken it to dating. But I think that's probably the wrong wrong analogy, because there's a lot more business venture tied into, you know, dating around different property managers as opposed to a spouse. But yeah, I mean, it doesn't always go according to plan. And there are people that are bait and switch, and you evolve and change as an individual as an investor. And so if your property manager can't do that with you, then sometimes you just have to part ways as friends for no reason other than you outgrew them or not working anymore, or whatever.   So I think people think it's really this bad thing, and you don't want to do it, and you don't hurt anybody's feelings. And at the end of the day, nobody's going to look out for you as well as you are. And so you've got to make sure that you're taking care of and so doing, of course, not stepping over people not taking advantage of people doing things in an ethical way, but also ensuring that the people you're working with are also treating you ethically the way that you would be treating them.   Tom, your thoughts on breaking up property managers in general?   Tom: Yeah, you know, nothing. What's fun about this type of business is there's not a ton written in stone. So you know, if you need to iterate if it's not working out, like it's, it's not a big deal to switch them but within this episode, we're going to cover a lot of important ways to think about it ways to go about it. As you know, one thing is, you know, the grass isn't always necessarily greener on the other side. So like in leaving a property manager, you need to know you got to have a strategy on what is next in place, depending on whatever cycle your property is in, be it occupied or vacant or whatever, you know, you need to unless you're self managing it which is something that I know we are not into as remote real estate investors, there needs to be operational ability in between that transition and a clear path ahead.   Michael: So but Tom, you bring up a good point that I think it should be given a lot of consideration. If you're self managing, there's definitely a point where you might want to fire yourself and go hire a property manager, you just because if you're flipping it around yet that there's something that's not working out, you could totally fire yourself.   Tom: Good point, Michael, you could be self managing. And the process of moving to a professional property manager is firing yourself for a new property manager. So I have a friend who is about to fire himself as a property manager. So he bought a property kind of at the trough of in the Bay Area, lived in it a couple years at now has two kids moved further into the suburbs. So he has this other house over in Berkeley. And he's been managing himself and he's like him, his wife, or like, I'm over this, I want to fire myself as the property manager, we're busy doing other stuff.   And some advice that I gave him is to time it out on the leasing. Like, if he doesn't mind doing one more round of leasing, he could save a ton of money because property managers they make a lot of their money on the leasing because they'll you know, collect like a full month's rent. And we're talking about Berkeley in this like this, like single family house, I don't know the exact rent it is, but I would imagine it's probably like 4000 5000 bucks like and that's a massive saving, if you don't mind doing that one lease and then handing it off to a property manager, that could be a great money saver on your way out the door of bringing on a new professional property manager could tip there,   Michael: He should also look into Hemlane friend of the podcast friend to roofstock as a maybe interim solution, because if property manager starts in 10% of rent collect, that's 500 bucks.   Tom: Some real dough, the leasing costs. So if you are finding yourself as a property manager, think about what cycle you are, it's already occupied. And there's not really much of a difference. Like I wouldn't recommend you the direction. But if it's vacant and right rent ready and like about to be leased, like you, you might as well put that extra little bit of effort in and just complete this leasing cycle. But no shame. If you don't want to do it, you'll want to just pay someone else to do it. So that would be my 10 cents to fill to make to this episode. Good luck.   Michael: Nice.   Tom: Alright, Emil pot on your head right now.   Emil: Coming back, come back bringing it back. We've all had to fire somebody. I'm curious, do you think it was that you didn't properly vet them up front? I've talked about this on the podcast a lot. property managers do this all day. They get like inquiries from owners all the time. They know how to they get the same questions over and over, they learn how to answer them. This is what I believe has been the problem. It's very hard to figure out on the front end, if they're going to be good. Yes, you get references, you talk to people, but a lot of the time it's you kind of just test them out and see how it goes. And so I'm curious, do you think it was you didn't properly vet upfront? Or what do you think led to you not choosing the right property manager?   Tom: Go ahead, Michael Albaum.   Michael: For me, I did a lot of vetting on the front end with this particular property manager, I asked around for references, recommendations, because I just couldn't find any good property managers on my own. And this person actually came recommended from several different sources, none that I knew personally. But just through networking, they came up and they were a member of NARPM, which is the National Association of property managers, I think is the acronym for that.   And then talking to him, he was great. He had a business setup and you manage properties. And it was very great to talk to. So I did like I went through all the checkboxes and steps that I would recommend anybody go through then once I closed on the property, that's when things started to get super fishy. And I should have known sooner rather than later that like this wasn't gonna be a good fit. But it wasn't until like I had literally closing the property that day. And they were going to go collect keys from my agent that things started to go kind of sideways. And I was like, oh, like, I don't really have a good backup plan. At this moment. I'm like, I better see this thing through.   Like my agent called, I put my agent and the property manager in touch and like, Okay, cool. We're gonna do a key handoff closings happened, this is what we're gonna do. And property managers like, Oh, can you meet me in like the parking lot of a grocery store? And we'll do a key handoff. He was like, What? No, like, I'll come to your office. And they were like, Oh, no, like, just meet us over here. And like, no, why can't we meet you at your office or come to my office will do this, like in a safe, secure location. And it was like No, and nobody likes talking and returning his phone calls. I'm like, What is going on?   So my agent held on to the keys he didn't give them give us just gonna give them to these people. And so I did some research. And it turned out that this management company didn't even have an office in the town in which they were managing these rentals, they were doing it from a distance, and I'm like, I'm doing the remote thing. Like I'm paying you to be on site, that that's not how this is gonna work. So just a bunch of things went sideways after that, but that was like the first indication that I should have been listening to my gut that hey, this is probably not going to work out. I can get into some of the other details about why they ultimately got fired.   But I think people have pretty good intuition, especially when it comes to other people. And I think you got to listen to that little voice inside you that's like, hey, something just isn't quite right here.   Emil: I've been laughing the whole time because this is exactly what happened in my most recent situation that you know, I'm going to be talking about in this episode. It was right when we closed all these like question marks started coming you know, they're saying all the right things and then we close and all this funny stuff starts happening and same thing it was like gut feeling like oh no, what am I getting into? You know, you kind of got you're like, Alright, I've done all this betting let me just see it out and see if it works out and like probably nine times out of 10 it's not gonna work out if it's bad from the get go.   Tom: Have you had bad feelings intuition, and it like ended up being okay before? Emil: No. That's what I'm saying like nine times out of 10.   Michael: I'm pretty sure with a meal kind of with regard to contractors and property managers accurate, either I've been accurate or my wife's been accurate. I mean, she's got a really good feel for this kind of stuff, too. So she often overhears a lot of conversations like Michael had, like that doesn't I don't have a good feeling about this. I'm like, No, no, it's fine. It's fine. It's fine. And then it ends up being horrible. Like, Oh, my God, like so stupid.   Tom: Yeah. Was there anything specifically you would have done in the vetting process that you would have done different?   Michael: Maybe would have called more of their references, but like, I did that, and I spoke to some people so tough to say maybe maybe would have had my property, my agent, go meet them face to face and say, Hey, you know, we got to do a while I'm having my agent screen for property managers. Let's Let's, you know, get them involved.   Tom: My agent needs to smell you.   Michael: Yeah. Right. Right. So make sure you shower.   Emil: Physically smell you, the tough thing about references is like, they're telling you people that they obviously have a good relationship with, you know what I mean? So it's like, I get references, and you should check them. But I don't know, man, his references are tough, they can just send it to somebody that, you know, is really buddy buddy with them. And you're not going to get an honest assessment.   Michael: Yeah, I mean, these people even had good Google reviews, like, good ratings and stuff. And I was like, that checks out. So you know, yeah, Tom, to your question. I don't know if I would have done anything differently.   Tom: So for my breakup story, I definitely would have done something differently. I feel like like, this is where we should okay. And now go into commercial, you know?   Michael: And stay tuned to hear about tava differently.   Tom: Yeah, exactly. None. Okay, so what Tom would have done differently. So in my scenario, this is a property that was in Jacksonville, Florida, I went to the exercise, talk to the property manager got their operating metrics got there, talk to them about their standard operating procedures, got references. And I find out after post ownership that my property is in a satellite office that they like, just launched, they had one person totally overwhelmed, and didn't do a good job managing the property. And what I mean by that, I guess, this is my story. So I'll just just continue to   Michael: Everybody else Shut up.   Tom: This is my story, stop talking. I'll just continue,   Emil: No one is talking.   Michael: It's all in your head.   Tom: So I have my property that's in Jacksonville, their main offices in Orlando, they have a single person working that totally overwhelmed. So one day, I get an email from the satellite office property manager asking me how do they want to deal with the security deposit that needs to be returned? I'm like, What the heck are you talking about? Why would a security deposit need to be returned. So as it turns out, the tenant was having all these issues with the property managers, I never knew about it until the tenant moved out, and then the tenant moved out. And now my only understanding is that they've already moved out, and I need to pay them back their security deposit, like just an absolute mess, absolute mess.   So anyways, I what I would have done very differently is, Hey, is this office in a satellite office? And how long has the satellite office been running? And I think another way to get to this is to look at the property that I want them to manage, give doing, like, kind of a portfolio overlay of like, what are the properties in their inventory? Do they have a lot of like, kind, you know, similar single families, similar Bed Bath count, similar, all that kind of stuff? And then perhaps some, you know, operational metrics around that, like, okay, what's your occupancy, like, in that area?   And you might feel like you're being like, over the top and asking these questions, but Tell you what, it is so much easier to do, like be a little bit annoying, upfront and asking a lot of questions than having to deal with, you know, changing property managers, just as that's, you know, better to, you know, measure twice, cut once. Yeah, that's, that's the order you want to do it in, by kind of going over the top. So that's my little story about how I learned about the property manager being bad. And then firing the property manager. So anyways, I would have done that differently.   Michael: So yeah, no, I was gonna ask the one person in that satellite office where they doing the leasing and the management and accounting, but they kind of a one person operation.   Tom: I'm not totally sure. I don't totally I know, I know that they had like staff departments, like in their main office that was in Orlando, or they had different people, but I think they were just starting that new market and they they didn't have like the market launch done. Like, you know, it was building the train as it's going down the tracks and like I get it, like that's important for businesses to do that to grow. But it's like, I don't want to be on that train. While it's going down the drags.   Emil: You want somebody else to be the guinea pig.   Tom: Exactly. I want somebody else on the train. Well, yeah, it's doing that.   Michael: That's a great analogy. Yeah. So how did you end up firing them?   Tom: I found out that this was happening and I'm like, I was really confused. So then I talked to my original like, account salesperson that I talked to who's like probably like their, whatever, Director of Sales or whatnot, and like, Hey, this is this is not working out. You know, I just found this out and they totally got they're like, okay, yeah, Tom, that makes sense. You know, let us know you know what you want as kind of the next steps. And I did this via email. And we could talk a little bit more about different, you know, methods of having this communication.   But I found another property manager that I had for another few years, I ended up selling the property and doing a 1031, which was awesome. But I transition to the new property manager. And the last little kind of kick in the pants learning experience on this is they had a freakin breakup fee where I had to pay them money to cancel the property management agreement early like I think it was like in the contract, which I didn't read through enough which now I do, it stated that the contract was like supposed to be for like, I believe, like, two years or four years or something. And it was like $1,000 to break up so is like the biggest like insult to injury. And it's like, wow, I do not support your business at all, like you are just all around that bad. Bad.   Emil: That's a big tip read those agreements, it like you got to read them line by line. And if you have any, like issues with things, call them out. Like I've negotiated certain line items with property managers, like make sure you call them out, read that thing. Top to bottom. So important.   Tom: Yeah. And don't feel like it's just some tips in reading the property management agreement. They're pretty well organized legal documents. So find the sections related to what's relevant. So like breakup, like fees, like all this, you know, there's going to be some details around like, some stuff that isn't probably as important, their longish documents, but find the specific sections in the documents and read through a fine tooth comb those sections. Yeah, that anything that has to do with you know, your relationship with that person.   Emil: And fees in general, right. Like, I remember one property manager, they would I just seen this multiple times now, where if you sell the property, while it's under their management, they charge you like, 1% of the sales price or something like that. So anything, anything related to fees or costs,   Tom: It's garbage.   Emil: So you should really yeah, like focus in on those and and make sure you ask questions around those.   Tom: That's what you want to bring out the fine tooth? Go ahead, Michael.   Tom: Yeah, just kind of a tip on that, too, is like Camille, you were saying so much of this is negotiable. So don't feel like Oh, man, this property manager has something in their contract. I don't like I'm going to go find a new property manager. No, you should talk about it. Ask questions. Something that I asked for in all of my property management agreements is a property manager guarantee. So if they have to evict somebody in the first six months of their lease, they place a new tenant for free, and don't charge me a placement fee. So that way they put their money where their mouth is they're not just getting people in there churning and burning. And they're like, yeah, we're happy to do that. Because we're going to, you know, work a management company.   So I think that there are things you can ask for. And you don't know, unless you ask, I know, there was a student, the academy I was chatting with. And he's like, oh, the management fee is too high doesn't make the numbers work. And I said, asked for a lower fee. And he said, Okay, and then he did. And then they said, okay, and he's like, cool. The numbers work. And I love the manager. It's all great. So you don't know what to ask him. The worst they can say is No.   Tom: Is it a Wayne Gretzky, Michael Jordan, you make zero the shots you don't try?   Michael: You miss 100% of the shots you don't take. It was Gretzky?   Tom: That's right. It's great. So yeah, take shots.   Michael: We should have him on the pod.   Tom: Yeah.   Emil: You think he'd come on? He'd be good.   Michael: He'd be talking about mindset.   Emil: Yeah.   Tom: Emil, so I talked about my breakup. Why don't you go into a little more detail on? What is a fresh experience? wound everyone to put it fresh wound?   Emil: Yeah. Yeah. All right, I can kind of give the story and I'll paint the full picture for you guys. So I had a property, man,   Michael: We want names now.   Emil: Just Hey, I wish we could drop names, I want to say spare people who are looking in the same market as me. Okay, so I have a property manager in St. Louis, who I just transitioned over. And so for me, like I mentioned, when I chatted with the owner, things are great Yelp reviews, Google reviews. And usually property managers have terrible Yelp and Google reviews because, you know, tenants get upset about one thing, and they go leave reviews on these platforms. So the fact that they had great Google reviews, great Yelp reviews, I was like, oh, man, this must be a great sign. Like, no property managers ever had that. So everything was good, I had a good rapport with the owner. And then we took over, and all of a sudden, it was like, communication became terrible with their team, like, once it got from owner to the team, everything just sucked after that point.   That's kind of where I've found the issue is like, I'll talk to the owner. They're sharp, they're on it, but their team just can't deliver on all the things that they kind of promise. And so like, poor communication, I have to follow up, there was one thing one small thing, I had a follow up like four times via email. And for me, that is like one of my giant red flags is like, if I have to follow up with the property manager multiple times to like, get information or whatever that is just long term, that's not gonna work for me, I like don't want to micromanage. It's not my goal. It's just in the beginning, I need to develop a little trust with you, right, I need to know like, if I, if we talk about something, you say you're gonna do it, I can trust that you're gonna follow through.   So in the beginning, I'm going to be on it just to make sure that it's happening. And so like, it wasn't happening. And then I started getting my monthly statements. And they were nickel and diming me for silly things like talking to the tenant for 15 minutes on the phone, like they were charging me for that. And I was like, No, this is 0%, the kind of company I'm gonna be working with. And so those were the two big red flags for me. And I love for you guys to chat about yours, but like nickel and diming, right. So like, yeah, they have their property management fee and there's nowhere in the agreement that tells you they're gonna nickle and dime you, you just see it on your statement, right? That they're charging you for like everything, which is ridiculous and just poor communication and not being able to trust that like when I send something or they say they're going to do something that it gets done. So those are the big red flags that came up for me.   Tom: Emil, how did you broach the breakup conversation? What was your?   Emil: Yeah, so for me, it was like, I think it was like a month and a half, two months in, I had tried to remedy it. Like I had a conversation with the owner, right? He tried to like make it better. And it was just the same stuff, poor communication. And I just like, just felt like, again, you know, we talked about the beginning episode, like once trust is broken. Once you have a bad feeling in your gut, it's very rare that the ship turns around. So think was like two months in I just mentioned, like, hey, I've identified another property manager, like, I just don't think there's a good fit for either of us, you know what I mean? And I'd like to transfer service, you know, just really basic, I didn't like grilla mercy, you get, you know, I wasn't harsh, or just like, hey, this isn't really the right fit for me, I'd like to transfer over.   Emil; There was a three month minimum as part of my contract, so I had to stay with them for three months. So we finished out another month, and then they transition to the new property manager, you have to give them 30 day notice most property managers require a 30 day notice. And this one required a minimum of three months service. So once that was up, we transferred over to a new property manager, which was the end of February. So now it's under new property.   Tom: Was this new property manager? Did they come out of the blue? Or were they part of your original vetting?   Emil: They were they like, you know, the bridesmaid. They were they were part of my original vetting. And it was like, to me, the person who was next in line, right? It wasn't the person who I was interested in working with, after the one I had gone with, but didn't like I saw these like nickel and dime charges. And so like, I wrote an email to the other property manager and just asked them, like, hey, how much would you charge me for this, this and that. And he was like, we would never charge you for this this. I was like, Okay, fantastic. And so we I just picked up the conversation with him, we had to negotiate some some stuff. But I really liked that he's much more involved, they're a little bit smaller of a property management shop. And I go directly through him for a lot of things. So like that relationship that I've developed with the owner, I get to maintain that for now.   So that is part of the reason I liked this property manager and wanted to test them out next,   Tom: It's a funny psychology thing where you probably, you know, went to the other one because they like, you know, we're bigger and appeared to have like a bigger footprint. But it's like, interesting psychology thing. I don't know, I fall into that trap before too.   Emil; It could go the other way too, though, right? If you're a bigger shop, you may have better processes in place and operations and all that. But smaller, you may get more of that, like personal touch, like being able to call the owner and so I'm trying it out. We'll see how it goes. And hopefully I'll have some good news report in a couple months.   Michael: Good.   Emil: That's my story.   Michael: Well, I want to come back something that you said a meal in that you said the communication was so poor. And if we asked the property manager how their communication was with you, they might have said, Oh, it was great. It was super onpoint. And so I think expectation setting is so huge on the front end, because you might think one thing is good. And they might think something entirely different is good. And so asking, Hey, if I send you a text, email, voicemail, how long should I expect before someone returns that, and if they say, three days and you're thinking it should be two hours, there's a big misalignment there. And so you want to make sure that everyone's on the same page to begin with. And again, just lessons learned from things going south quickly.   And so asking those questions, we put together that that property management questionnaire as part of the restock Academy and talking through Hey, what are your expectations of me? And what are my expectations of you? Let's have this out on the front end. So that way we're nobody is having unmet expectations.   Emil: Yeah, that was the follow up conversation I had with a property manager that I mentioned, but it's it was bad,   Michael: It didn't go anywhere.   Emil: They're not going to change their nickel and diamond. You know what I mean? Like the way they charge their owners, so I was like this isn't gonna work for me.   Michael: Yeah, makes sense.   Tom: Especially once it's already the ship has left the dock and you're already like you know, you might you might feel like you have a little bit more negotiation power up front you know in talking about before but once you're totally cool Michael do elaborate a little more on on your your experience.   Michael: Yeah, I'd be happy to I just I love the transportation analogies you know that building a plane in the air the trend of the track ship ship leaving the docks to all these trains and automobiles, man.   Tom: Dogs!   Michael: Yeah, dogs!   Tom: You know, Michael, everybody, everybody has different learning styles. So you just got to like blast out. You know, a lot of just in analogies.   Michael: Pepper, spray, pepper, spray everything!   Tom: Now using weapon analogies?   Michael: I definitely did me to say pepper spray. The expression is definitely pepper. But for stuff in there.   Tom: You're getting it. You're getting it. Go ahead Michael shoot from the hip. Michael: Like I was saying so things started going being weird with this property manager day one at close. When I called him before I hired the property management company. It was always great. He was always happy to hear from me. We had great conversations. He was a sharp guy. And then like as soon as I hired him, it felt like every time I picked up the phone and call him and he answered he was like, What? Like, oh my god like just him talking to me was so exasperating, and it just he just like didn't want to be on the phone with me. And whether that was because I'm a bit like Emil on that, before I let somebody run with a property, I'm gonna make sure that they're doing what they say they're doing. And so I'm gonna over communicate and probably be overbearing, but that's what I'm paying them for.   And so I want to make sure that things are getting done, they haven't earned the right to, to run freely yet. So I was being very overly communicative. And I was trying to make sure things and repairs were getting done in a timely manner, but on the account making sure that things were checking out. And so it just got to a point where he was just like, so fed up with me that he basically handed me off to his wife We also worked with, and I was only communicating with her. And she was lovely. She was wonderful to work with. And she never made me feel like I was a pain in the butt by calling them and so she was very communicative. So that was better. But then I just started seeing these bills, kind of like Emil like nickel and dime bills, and they were adding an overage on to the utility bills that they were paying for me. And I was like, Where is this in your contract? And they were like, Oh, yeah, it's not we'll refund that can't just start charging people for something because you feel like it all of a sudden on a whim. And so they're like, Oh, yeah, okay. And then they couldn't get the rehabs done that I needed. And they were just fumbling all over the place. And they kept losing keys and had to go put it in a new lockbox.   And it was just like, so many things that were really odd in and of themselves, but then compiling them onto each other, just made for a really bad fit. So just like Emil, I called him and I was like, Hey, man, I just don't think this is like working out. Like this just isn't a good fit. So they're like, yeah, we agree. I was like, Okay, I thought you might, so I was able to go to a new one. And actually, I was the whole time doing research to find a plan B, to find a backup because I had a feeling it wasn't gonna work out long term. And I couldn't find anything. So I was just constantly complaining to my agent actually ended up convincing him to start a property management of his business.   So I just took all my units that he had sold me and moved them right over to him. And he knew them fairly intimately, because he sold them to me. So that was a really great fit. And so that was a really lucky scenario when I was able to transition fairly quickly and relatively seamlessly, because he was already aware of the situation. But yeah, it was funny when I was like, yeah, it's not a good fit. Like, yeah, we agree. It's like cool. The feeling's mutual.   Then Tom, like to your point, the final kick in the pants, things were going great. I transitioned, I was done. I was gone. Literally like 12 to 13 months later, they emailed me and they're like, Hey, you still owe us some money. We were going through our accounting and found this so I was like, You got to be kidding me. I was like, You know what, let's just call it even. I'm sure you owe me some money, too. Let's just call it like, Okay, that sounds good. Like, who are you, like such nerves? Are you serious? Yeah. It was ridiculous.   Tom: So the phone calls? I think for some people, there could be a little bit of anxiety and having that type of a call. Did you do anything to kind of like pump yourself up for it? Or, like just kind of general psychology on going to those..   Michael: I had my brother slapped me in the face.   Tom: Yeah. Throw water in your face there.   Michael: No, I think I sent an email prior just like hey, kind of prefacing, I wanted to have this conversation. So it wasn't so out of the blue kind of a thing. So that that helped a bit like sticking to your guns and knowing like the facts and knowing why it is or isn't working. And kind of like Emil said just not nitpicking them. Like you did this you did that. Just saying like, hey, it's not working out. It's not a good fit. How do we make this transition smoothly work for everybody?   Because the last thing you want to do is burn bridges or make trouble for them. So that make trouble for you. It just, you know, try to make it a cleaner break as possible.   Emil: Yeah, I had the exact same reaction when I sent the emails to the owner. He's like, totally, you know, we're not a good fit for everyone. And vice versa. It's not as hard as you think it's gonna be like, sometimes if, you know, you're having a hard time with them. They're having a hard time with you.   Tom: Yeah, I remember the first time like, needing to, like, let an employee go, it was like, he was like, not surprised. I was like, yep, makes sense. All right, I'll see you later. Like, I'm like, kind of like, building up like, oh, man, this sucks so bad. But it's like, you know, I think like with with property managers and whatnot, like any types of those kind of situations, it's like, it's not a surprise and feel like it's a it's like a known, you know, yeah, known things.   Michael: That says a lot of positive things about the relationship up to that point, versus if somebody is totally surprised and totally caught off guard. That means that you as an individual didn't do a good job communicating.   Emil: Yep.   Michael: They shouldn't be caught off guard. And so I think that that's an important takeaway, too, is to not let it get to a point where you're like, oh, pulling out your hair. Oh my god, I have to end this if you haven't done anything to try to mitigate it up to that point.   So having conversations asking questions doing you know, trying to be proactive about it trying to solve those issues before you have to fire someone is a good use of time versus them making one slip up and saying oh, they're fired not even trying to correct it. I think there could be some middle ground there.   Tom: Really lovely flow on this episode where it's like circling back to like, you know, I don't know you like kind of mapped out the discussion points, just, you know, try and doing everything you can to prevent it before it needs to Sorry, just commenting on my appreciation of the the flow of the episode.   Michael: That's good flow. It's good flow.   Tom: Yeah, I mean, just like continuing that good flow that I broke up a little bit. Yeah, doing what you can upfront to save the relationship. The grass isn't always greener. I had a friend who was didn't get responses like immediate responses on communications, and we've talked about this before, like some property management businesses. Like the expectations might need to be a little bit adjusted, like if you're expecting to get responses like on the hour, or even like, within the same day, like sometimes depending on the type of communication, you need to be okay with a little bit of a delay. And when I say that, I mean, like, you know, like a day or two, like business days.   But if it's something that's minor, like, don't get yourself, like overly worked up on communications, it's just a little bit longer than you might expect in your like, normal day to day job.   Michael: I think it's just around expectation setting.   Tom: Yeah.   Michael: And so asking the question, hey, if I email you, when should I expect your response? And that way, if they say 24 hours, and you don't hear from them in 48, okay, well, now you can start to get a little bit frustrated and do some follow up. But if they say 48 hours, and you're wanting a response, and 24, maybe that's more of a conversation about well, how you work versus how they work and how you can both work effectively together. And then also asking them how they prefer to communicate text, email, voice, you know, call, and then reconciling that with how you best communicate and seeing if there's some harmony there. Because if you're expecting all the email communication, they're only expecting to call the phone, again, that that's misaligned expectations. And that creates a lot of friction. So just having the honest conversation upfront and not feeling bad, when you say, Oh, it's not going to be a good fit, like you said, Tom, not every company is going to be a good fit. And so don't worry about I don't wanna hurt their feelings or that kind of thing, you need to make sure that it's going to work for you and eight to make sure it's gonna work for them, they have no problem dropping you as a client, so don't feel bad about dropping them as a client.   Emil: Solid. Before we wrap this one up, you guys have any final tips for people as they're thinking about property managers, firing, hiring, whatever it may be, especially as a remote real estate investor?   Michael: Don't skimp on the hiring process. I mean, really go through the motions as best you can, if you have the time. And really, I think that's where a lot of time, energy and effort should be spent. And then also, on the back end, don't wait too long to fire, I think I probably did Emil, it sounds like you may have to give in your three months, maybe, maybe not. But I think that a lot of people try too hard to salvage the relationship. And that's kind of the balancing act. And everybody, it's gonna be different everybody personally, but again, don't wait too long, because that's an easier bandaid to rip off sooner rather than later.   Don't mistake that to hear he say, oh, fire somebody immediately. That's not what I'm saying at all, I think you should give people an appropriate amount of time, but just don't hope it's going to get better all on its own, I guess would be my last piece of advice.   Tom: My final thing I'll say is, you know, these types of relationships are a two way street. Like, you know, Don't be a jerk, I would say like over communicate, people like doing things that they like to work with. So book recommendation, How To Win Friends and Influence People. I know, you're the customer, and they're your client, but it goes a long ways, especially when these people are making decisions every day related to your property. If they say, Oh, this is Tom's property, like he's great, let's make sure we do a great job. You know, like not being a jerk. And like being a genuinely nice guy that over communicates open, honest, constructive, all that good stuff goes a long ways.   So you know, hopefully, you don't get to the point where you have to fire the person, the property manager, but if it does, that's okay. It's not written in stone, but be a good partner on the other side, that would be my final tidbit.   Michael: And just to piggyback off that, every year, I say my property manager gifts around the holidays, and just let him know I'm thinking of them and to say thank you. So I think help just to your point, Tom be a nice person and make them want to do good for you.   Emil: Solid. I got two I've written down here. Have the hard conversations just because they're gonna mess up, we all mess up right? You're gonna maybe mess up as the owner you could have a poorly communicated with my property manager realize I grilled them for something that didn't need to happen. So just know that there's gonna be ups and downs, have the hard conversations, if you need to do a reset, that's just part of it, dealing with the property manager, it's not going to be hands off always.   And then something I'm trying to incorporate now is I want to get recommendations from other remote real estate investors and local investors. I want to know they have a good footprint locally, like multiple people in the area are recommending them right. They have a good reputation. And then I also want to know a couple other remote investors, right? Because we have different challenges being remote. We want to know that like they're doing good by other remote investors who aren't in the area. So that's kind of something I'm trying to incorporate as I look for new property managers.   Michael: That's smart.   Emil: Alright, with that, let's end it here. Thank you all for listening to this episode. Again, leave us a review or rating. We'll give you a future shout out on an episode. And happy investing. We'll catch you on the next one. Happy investing.   Tom: Happy investing!

For may investors, buying that first property is intimidating to the point that they let deals just pass them by. In this episode Roofstock Academy Coach, Dean West, shares the story of how he moved through that pain point to eventually quit his job to invest in real estate.  --- Transcript   Michael: Hey everybody. Welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum and today I'm joined by my co host,   Tom: Tom Schneider.   Michael: And we have with us a very special guest today, Dean West. He's actually a Roofstock, Academy Coach and consultant with us. And he's gonna be talking to us today about his experience and journey getting started in real estate investing all the way up to what he's doing now as a coach. So let's get into it.   Awesome, Dean West. Welcome to the podcast, man. So happy to have you on.   Dean: It's a privilege Michael. Thanks so much for having me on your show.   Michael: Yeah, of course. So we wanted to give our listeners a little bit of insight into your background as an investor, and then ultimately becoming a rootstock Academy coach. So give everybody a little bit of background on who you are, and how you first got started investing in real estate.   Dean: Yeah, happy to do so. So it was the spring of 85 that I was born, and then from there,   Michael: and you've been at it ever since?   Dean: Yeah, exactly!   Tom: Spring of 85. Great time to be born. great time to be born,   Dean: Isn't it? So I was born in South Africa, I made my move over to America in 99. Since I've been in us, I've been all along California. So I've started in San Diego, then I was in Los Angeles for a bit. And then I spent about 14 years in San Francisco.   When I was in San Francisco, I spent the majority of my time so I was in a big four accounting firm working in the digital forensics e discovery space, which I loved. And I loved my colleagues and everything about it that at some point, I kind of got to this point in my career where I'm like, okay, I can either go for partnership, or I can kind of go this other path, which I've been had been slowly building over the past couple of years into real estate and I love Real Estate Guys Radio Podcast. And one of the things that I think Robert Helms always said was build a life that pays you to live it. So I've followed that ethos and quit my job and kind of pursue this full time.     Michael: Amazing. But so if we just rewind the clock back a little bit, not all the way to the spring 85. But when you first got started investing in real estate, what was your first soiree into real estate investing,   Dean: I started actually with my primary residence. So I purchased a home in San Francisco, I, like many other poor souls in San Francisco was hunting around with my wife for a few years or five years trying to buy a property. So I think I started in 2012 trying to buy a property and four years later, we finally found a home we've been making offers on these properties, but like everyone else, we were getting outbid and people were sending pretty pictures of their dog and family. In their little letter, though, we were kept getting outbid, and it was really quite frustrating.   So what I did like any logical person would do is I bet 25% over asking which wasn't enough by the way there was 16 offers on this property I was in the 16 I didn't know where I fell off my offer but I knew I wasn't the best one out there because I'd come back for another best and final offer so I raised it yet again to 30% over asking and I had after sending all my money I had the privilege of sending all my money to the seller and Yeah, got my first primary residence.   Michael: Awesome.   Tom: So in San Francisco big city is this like like a condo or a proper house or a townhouse and I'm curious having you know knowing San Francisco decently well yeah live it out like what area you were buying   Dean: Yeah, yeah, absolutely. Bernal heights.   Tom: Oh, very cool.   Dean: To just south of the city that's like a 20 minute drive into the city perfect places really close to the city is kind of one of those places where you know for people who weren't quite ready to grow up and move all the way to the suburbs. It's kind of like Southern lights because that city feels close enough and I you know, I wasn't quite ready to make that leap and fly my minivan and suburban just yet. So there you go.   I went kind of halfway in between, I tend to think of myself as you know, decently by the numbers and you know, this place was you know, a bit out of my league but the reason I kind of made the jump was because I saw the potential it's a beautiful property two bedrooms at the top one bedroom below and that bedroom below had a separate entrance right of the street, it was almost like an in law unit. So that property itself about 1500 square feet, of which the bottom unit is about 400 square feet and there's a perfect space for an Airbnb play. So when I was making that offer I kind of had that in the back of my mind that hey, I can kind of Airbnb this out and you know at least help pay the mortgage a little bit so yeah, that's that was essentially my first I guess real estate deal. Was my primary residence house hacking.   Tom: Awesome. House hacking. Beautiful. Yeah. Did you ended up going at it from an Airbnb like a vacation rental or longer term stay curious of like, what how that kind of played out, you know, and were you immediately thinking Airbnb or were you thinking like kind of longer term rental?   Dean: No, no, I right off the bat. I was thinking Airbnb. My wife was not thinking that but I was. Little does she know I was very much thinking about having a Airbnb at the bottom there. And yeah, short term rental was what I was looking at. And the reason for that it made it made sense for what I was looking for in San Francisco and California in general, that you know, the landlord laws tend to not be as lenient towards landlord and so I didn't want On to any kind of, you know, squatters or anything that may impinge on that. So I was looking for short term play, it actually really worked out quite well. Because even in Bernal heights, which is a bit outside the city, it was still I was getting, you know, 70 85% occupancy in my unit, which was great. And I was able to very much supplement my mortgage. I think I actually kept on to a 4.96 star rating super host threes years in a row.   Michael: Yeah, humblebrag much.   Dean: Probably the achievement of my lifetime is keeping my rating up there. And that's because I went down there, I picked up every bloody hair I could find. And I hooked on the hospitality aspect of it. I loved the feeling of having guests and trying to give them a you know, a good time here from another country or from from some domestic travelers.   Michael: You're like a unicorn. It's like meeting somebody with an Uber five rating. like nobody has a perfect. That's pretty impressive. Nicely done.   Tom: You don't trust the five?   Michael: Yeah, it's true. It's like, well, what are you doing?   Dean: There's something going on there? No, it was actually I know, the two people that kind of dinged my rating one,   Michael: Let's go find them.   Dean: I know. I know. I tried that. I had no like, the one was the lady who was staying for two nights, and I made the egregious error of not refilling the K cup coffee pods.   Michael: How could you?   Dean: I know, I told her, I was like, please forgive me, like I'll do anyway, she, she dinged my reading right there. And then the second person that's good and what I did, but anyway, just just a few people.   Michael: Okay,   Tom: In preparing to house hack with an Airbnb? How did you kind of prepare yourself to be able to do that? Or you just kind of just use your intuition? And then second question on top of that, was it easier or more difficult than you thought it was going to be having a short term rental in your lower house?   Dean: To answer the second question first, It's actually easier. And the reason for that Tom is actually because I enjoyed it. And everything in life is a lot easier if you enjoy it. I mean, not everyone loves going down and dealing with guests, and you know, trying to make sure everything's perfect, I actually quite enjoyed that I really did enjoy that aspect of it. And sure, it was a lot of work. And I was sometimes in there myself kind of cleaning the toilets going down, and just getting everything cleaned. I finally outsource that. But in the beginning, it was all me.   And then your first question in terms of preparation. For the numbers standpoint, I think I was using it was I think the air DNA at the time, or one of those other websites, or even Airbnb itself in order to get a kind of a ballpark figure of what type of rent, short term rent I could potentially get from this unit. And it actually pretty spot on my my pro forma was somewhat accurate for this aspect. So yeah, in preparation, it worked out quite well.   Michael: Nice. And I mean, I'm like, Tom, I know San Francisco very well. It's a very expensive market, I think it was, at least last year, the most expensive market in the country, even more than Manhattan. So as a percentage basis, how much of your housing expense, were you able to offset by renting this out?   Dean: About half? Actually, wow, that's in terms of growth? So I'll use real numbers. Yes, I pulled in every month, about three to three and a half $1,000 a month, my mortgage was six and a half ish. And then my expenses itself, I was paying about $600 a month for the cleaning and the like refreshing everything and like, you know, buying some ad hoc things, repairs, that was roughly my number. So in terms of buying the property just for Airbnb, it made no sense. But if we were living at the top and kind of offsetting the mortgage, it made perfect sense.   Michael: Yeah, that's awesome. And you're the fact that you're a tax guy. And you come from one of the big four, you probably saw immediately the tax benefits that you'd be able to take advantage of as well.   Dean Yes, well, you think that actually, so I'll company that I used to work for the giant accounting firm, my focus was digital forensics e discovery. So I was dealing white collar crime. So I was doing a very niche type of work. But I learned very quickly about the tax benefits. That was one of the things I really loved about Airbnb play was that I was living there. And I got to do the third of my heating a third of my internet, sort of the waters or the sewer because it was split, kind of two bedrooms and one so 3111 so 1/3 of all our deal use or deal purpose items, I was able to pack the dock so there are a lot of tax benefits or you're living in your primary residence and having a short term rental as well.   Michael: Right now I want to move on to your first remote investment because you joined the Roofstock Academy as a member a couple years ago now and have since been off to the races with regard to investing remotely. So talk to us about what that first remote investment looked like.     Dean: Yeah, you happy to walk you through it. So after the Airbnb that was going on, I was like, Okay, this is awesome. I love I love this kind of stuff. And I was kind of hooked. I assumed living in San Francisco and like okay, well I guess real estate investing, you always have to buy you know where you live. So I was like, Okay, I the only place I could Potentially afford was maybe the outskirts of Sacramento that was like the closest I could find where I could somewhat afford another place.   But I actually remember distinctly sitting in the parking lots of Trader Joe's are sitting with my newborn, I think she was two months at a time when my wife was at the grocery store. And I was scrolling through Reddit of Martha time. And I saw a sneaky little advert for this little company called Roofstock. And I was like, what does this mean remotes real estate investing, you can do that remotely. And I was kind of From then on, I was like it kind of the light bulb went off. And from that day, I tried to consume as many podcasts as possible. Real Estate guys, bigger pockets, the remote real estate vest that wasn't around at the time, otherwise, I would have been on that as well as reading books kind of just trying to saturate myself with as much education as possible. So I think after a full year of learning, I finally pulled the trigger on a property in East Atlanta, and the purchase price was 128,000. But got it down to 123 800. Because of some roofing things. Yeah, that was my first remote real estate. And that's   Tom: What a jump, like, psychologically from, you know, being so close to right on top of your, you know, real estate investment with the house hacking to East Atlanta, like way out there. I mean,   Dean: Yeah.   Tom: Would you say that preparation, that kind of like that time that you spent, like made it that much easier? Or was it still kind of tricky or   Dean: No, it made it almost harder. And it's almost like, and I think Michael knows this from our discussions, it's almost like analysis paralysis. And I find this in a lot of our investors, students as well, people spend almost too much time researching. And I was one of those people that I spent so much time analyzing, and really going down to the nitty gritty that I got almost paralyzed with too much information.   And I think there is kind of a fine balance of, you know, learning the fundamentals, and knowing kind of the basics of how to, you know, how to analyze the markets. And you know, how to read a pro forma, how to understand at least the basics of reading a, an inspection report, and at least being able to know who to speak to, because, look, none of us know everything about real estate, but we know, enough, I think, to be able to point them to another person or in the direction that could potentially help them. I went way beyond beyond that. And I was over analyzing, I was really getting frustrated. So I definitely didn't think in a year and preparation to purchase the place. But I did. But anyway, I purchased my first property for 123 800. This is work well.   Michael: And did you use roofstock as a platform to purchase? Or did you connect with an agent out there? And he's in Atlanta? How did that process work?   Dean: My first property purchase was through roof stock actually bid on quite a few other places before but there were quite a few hungry investors out there kept up bidding me on these properties,   Michael: Probably a bunch of local San Franciscans.   Dean: That's right. I know. quicker than I am. But yeah, finally, this one, I was able to get and pull the trigger. And this was, I think, a few years back now. And before that, even that signed up for roofstock Academy, and I started going through the lesson plan. And I even actually made a little trip over to Indianapolis with the roofstock. Team, my wife and I had our three month old baby with us in Indianapolis touring every Friday from a neighbor down to the D neighborhoods. We got a very good, very good tour of old Indianapolis.   Michael: How great.   Tom: so kind of related as soon as the pandemic is completely under control, excited to start those tours again, those are great.   Dean: Yeah, I think they're absolutely fantastic. I really enjoyed my time with the team out there. And it's easy enough to analyze property remotely, because even the numbers make sense. But it's also nice to be on the ground. Not that you have to do this, but it's you know, it's nice to see kind of the areas as well.   Tom: Yeah. And talk to your tax professional, oftentimes, that is can be deductible in some form. But this is not tax advice.   Dean: Exactly right.   Michael: As you say, it's funny, Dean, because I have a very similar beginning story in that I spent two years doing research and self education and absorbing as much as I could and bigger pockets wasn't around rusak wasn't around. So I had to piece it together for myself and stumble around in the dark. I always joke. So I'm curious, because I know for me, but curious for you. What was that? You know, one or two things that were able to help you get over that hump of doing this remotely? Because you have that foundation of education, but you know, you did it locally. But what was it for you that allowed you to be able to do it remotely?   Dean; I actually don't have a good answer for that almost that I knew I was stuck. And I knew that I was over consuming education. And you always hear in the podcast as well that you know people have analysis paralysis, and I knew I had reached that point that look I can read another five books. It's not going to ultimate viewpoint. Let's kind of just pull the trigger. Let's do this. Let's see what happens. So that's really what it is. There's no like there wasn't like one epiphany. It was just more like I think I've done As much as I can to prepare myself, kind of let's go for it.   Not everything in real estate works off. And it's not a kind of a surefire thing, just like any investment life. But I'd like to tell the story as well of I think it was my second or third purchase, but the Airbnb thing worked out for me really well, the Roofstock. And then the second third piece was this property I bought in Indianapolis man, this thing, I bought it with a tenant inside. And then day one, I took it over that tenant decided to stop paying.   Michael: Welcome to the neighborhood.   Dean: Yeah, welcome to the neighborhood. Yeah, not gonna pay you anymore. So that was fun. That took a few months to get her out. But eventually I did, then my next tenant came in. And there were two trees that happened to fall in my backyard, off to some big storm and damaged the fence twice, to pay to cut up a tree, remove it, repair the fence, and then a couple months later, another tree fell down, cut up the tree again, remove it and then repair the fence. So I didn't quite take that tree felling and date repair into my pro forma, that that is something I want to keep for the future. And certainly not for my performance. But after that, I said, you know, that worked out. So well. Let's go buy four Plex.   So I spoke to old Michael Albaum. And I was like, Who is this guy, you know, who thinks he knows more than me, I've done all this real estate education. I've read all the books. I've listened to all the podcasts. And then I spoke to old Michael here and not to kind of build your ego here. But it was really very enlightening. What I mean by that is that, you know, these podcasts and these books, they're all like a one way street, right? You're getting information one way, you're not able to convey what you're trying to say and what you want and what you're thinking, and have that kind of advice kind of tailor made or custom made. So the coaching I received through roofstock biomark, Michael was very helpful to really point me in the right direction, and just be able to get some customized coaching advice.   Michael: That's really sweet. For those of you can't see I'm totally blushing right now, by the way,   Dean: I can see it.   Tom: I've been marinating on that question. Michael asked earlier about kind of jumping in and just like a couple of points that I'll make on, you know, kind of Crossing the Chasm and then buying, you know, a way that I like to think about it is, you know, when you do make that initial investment, like you're not putting, you know, next month's food money at risk, you know, you are only, you know, investing with what is available to invest, you know, that isn't, you know, like a hard requirement for living your day to day, and you prepare yourself you understand the risks on both sides. I think when buying any of these properties, kind of understanding what are the different things that can happen? Oftentimes, it can be difficult to know, but you know, you have a very good idea of the range. But when you make that investment, you know, you're not putting in money that you can't live without, if that makes sense.   Dean: Yeah, absolutely. Right. I think this is one of the lessons in podcast, it's kind of like talking about like, you can put money into stocks, but stocks go down to zero, whereas real estate, you've still got the land, you've got probably about this still worth something. Whereas your stocks or other type of investments, you could potentially lose it all. So yeah, that's kind of the differences there,   Michael: In worst case scenario too.   Tom: Every single cycle, like they're going to learn that much more, I'm sure after every single deal. It's like, you know, just kind of upping your level understanding,   Dean: Absolutely. Tree following repairs   Michael: To minor expenses in the pro forma,   Dean: Exactly.   Michael: I think, too is as you were mentioning, the value can go to zero in the stock market, in the housing market, you know, things go really south, you can just go move into that property, it still has inherent value. So there's always something that can be done. And, Tom, to piggyback off your point, I'm just going to throw in my own two cents for how making that leap is so doable. So because I come from the insurance industry, anyone who's talked to me for more than five minutes probably has heard that we always ask ourselves in the insurance of your what's the bet? And when it comes to making a decision, because we could spend hours upon hours and days and weeks making a decision? Yes, know, one way or the other. And so we have to ask ourselves, what's the bet?   And if the bet is a $5 million loss, which in the commercial property insurance world is not a big deal, which is blew my mind. They always told me no one's gonna bat an eye, you know, 5-10 million dollar decision. I was like, oh, okay, so that's a quick decision. We have to scale that back for us as individual investors on what a big decision looks like. But then if it's a $1 billion decision, what if something happened once we are, you know, we're gonna spend a lot more time and evaluation on that decision making process. And so same thing for real estate investing, you'll ask yourself, what's the bet?   And if you take a step back and break things down into a bite size, monthly dollar expense coming out of your pocket and say, Okay, if I don't have a tenant in here for three months, what does that look like making mortgage payments, making taxes, payments, making insurance payments, I'm not going to have property management because it's vacant, I'm probably not going to have much of repairs and maintenance because it's vacant, not gonna have much in terms of capex and vacant. So really breaking down what your dollar amount out of pocket cost is on a monthly basis makes it a much more approachable, I feel like concept. It was, for me, at least anyhow, versus spending 150,200 $300,000 on a property signing up for that much debt. I was like, that's really overwhelming. But when I said, Oh, it's 12 $100 a month or 200, dollars a month, whatever it is, that becomes so much more approachable, and it was easier to digest.   Dean: No, you're absolutely right. And also the just the other things that you can benefit from that other investing doesn't have as these those deductions, deferrals and depreciation that go on top of all the other kind of three wealth builders of appreciation, equity pay down and cash flow. So yeah, real estate investing, if you want to know what the founding fathers wanted you to do you look at the tax laws. They're written for real estate investors and business owners.   Michael: Yeah, that's so true.     Tom: So time commitment. So this is a common question for investors are looking to do this more passively. You have a really interesting portfolio of experience with Airbnb renter that you had with remote single family with remote duplex, how has that changed your time investment that you're spending on your real estate investing? How has that changed over time? And I guess, kind of any general commentary on time commitment?   Dean: Yeah. Right. Now, I've just moved over here. So most of my commitments been to getting my my personal affairs in order,   Tom: Dean is calling us from South Africa, by the way, if you didn't, yeah, the wonderful South African accent.   Dean: That's right, not to be confused with British Australian hours, which is fine, and that he has South Africa, I should back up a bit. So I had when I was working my corporate job. And you know, I was really thinking to myself, I always knew I was going to live somewhere else, or do something a bit different in my life. And it made sense for me to move to South Africa, because my whole family's here. And I just wanted to be able to get that experience during my lifetime living here. So this is actually one of the reasons two years ago, or three years ago, whatever it was, a few years back, I started looking at remote real estate investing. And that sole reason was because I wanted to find something I could do that I could do from South Africa, and bring in American dollars, because the American dollar goes very far here in South Africa. And I would highly recommend everyone come visit Cape Town, beautiful spot to be and y'all have to very far here.   So long story short time that I have, since I've moved to South Africa and quit my job, I've had a lot more time on my hands. And I actually haven't spending that much more time on my portfolio just because my property managers are managing them to a certain degree. But once the dust kind of settles here, and I've kind of found my footing here, I plan to invest a lot more of my time because I want to go back and and buy more properties. I want to, you know, look at making my real estate portfolio bit more efficient and finding ways to do that.   To answer your question. My time spent now has been more on finding efficiencies in my rentals versus trying to understand rental properties and how to how to manage them.   Michael: That makes it makes total sense.   Tom: Make sense. I'm curious, Dean, kind of a two part question. One is what is like a beer and a burger costs in South Africa and US dollars,   Dean: A beer and a burger. So the bureau costs about 40 or 30 grand and the burger costs another 15 or 20 grand? So it's 50 round, which is about $3.80.   Michael: Tom,   Tom: That's a winner   Michael: Team trip to South Africa.   Tom: Let's go. Yeah,   Dean: That's right. It's just the flight that's expensive to get out here. And it's a bit of a trek. So we diverged here, but I like to do that. If you look at the earth, if you look at California, if you were to tunnel down through the earth, you would end up about 400 miles off the coast of South Africa. So it's quite literally you can go east or west. And it's a it's about equidistance. From from San Francisco.   Michael: Wow.   Dean: Fun fact.   Michael: Very fun fact,   Tom: I talked to a good amount of foreign investors like looking in buying it as well. So do you have dual citizenship? Are you buying or did you buy it? Not as a US citizen? I'd love to learn about that kind of process. And yeah, learn about that.   Dean: Yeah, no, that's that's a great question. Because I know we do have investor students who are you aren't US citizens? No, I do. I've actually I've had triple citizenship. South Africa, America and England as well.   Tom: Very cool   Michael: Humble brags don't stop. I'm telling you, man.   Dean: The man the man asked the question. Yeah.   Tom: Michael's getting sole citizenship with his golden visa aid adds some citizenship to my   Michael: Come on Tom step up.   Dean: It's all the rage. all the rage.   Michael: All the cool kids are doing these days by that. Yeah, exactly.   Dean: Where's your Where's your second citizenship, Michael, Portugal trying to sell? That's right. You did spend about a bit of time over there, right.   Michael: Yeah, so I'll have my conditional application was approved. So now I need to go over there and do some paperwork and then it'll start by time clock for a five year permanent resident status non habitational resident so I can be anywhere in the EU for five years and then I can apply for my passport and ultimately citizenship.   Dean: Oh, that's great. Yeah. Well, the EU is a great place to get citizenship. I just lost that privilege because England decided to, to Brexit out of there, right? So I'm back. I was from 22 or 25 countries, whatever it is, I could live there. Now I'm down to one. In the UK, unfortunately, that's a separate discussion.   Michael: Yeah. So I was gonna say we could go on and on about that one. But so I'm curious. Now, again, because you've now left your corporate job, your W two, and also the states, what do your prospects look like for getting loans? Do you know?   Dean: So what I did was when I left California, I quit my job. I also sold my primary residence in San Francisco. So from a near term standpoint, I'm looking to buy cheaper properties with cash. But from a loan standpoint, I have been doing some research and don't quote me on this, I haven't fully wrapped my head around it or or done the research. But I know there are asset based loans, that you can do that a higher percentage that that's one way to get debt coverage is through asset base loans. There's also not that I would want to do this long term, but hard money lending and other other forms of being able to get loans outside of your traditional lending types.   Michael: Yep, I'm gonna say go look at commercial lenders are going to be great for that. And also private capital, we just did record a podcast with Lima One, their private capital lender that I think anyone who's doesn't fit into that standard box of having a W two for a couple of years or has been self employed for a couple years should definitely explore because the road does not stop. Once you leave the traditional world. There are other options out there. But like you said, you just have to be a little bit more creative in sourcing and funding those deals.   Tom: Or crossover the 10 mortgage.   Dean: Yeah, exactly. Yeah, the 10 mortgage, you have to go commercial. And that's one of the things about real estate is so fascinating to me and it keeps it so exciting is that creativity aspect of it is not just real estate isn't one just one trick pony. Don't just buy a single family home. And that said you can go with that you can go so many different directions. You can do short term, long term, you can do hard money, then you can do wholesaling fix and flips. You can do brrrr and multifamily commercial, you can buy a Starbucks, there's so much to add. Or you can buy a burger shack in South Africa. There's so much to it, that you can do it. It's never boring. I love it. Michael: Yeah. So Dean, I'm curious to know what's next for you What's on the horizon,   Dean: The near term, I'm looking in Indianapolis, Atlanta, um, I kind of two markets, my go to market. So I'm looking to buy another couple properties there with cash. And then my epic goal to use the Roofstock terminology is to do syndication, eventually, I'm gonna run out of cash soon. And when I do, I plan to use that as my kind of next step.   So what I'm hoping to do is find a small apartment building or even a small portfolio of single family homes and source the deal, get the property managers do the research, do all the backend stuff, and then bring investors on board to to purchase that way. That's kind of my on the horizon, what I'm thinking of working on now.   Michael: That's great, man, I know how diligent you are and how analytical you are and how well versed you are in doing that research. So I think it's well suited for you.   Dean: Yeah, it's something that excites me, I love going into the details and go into the nitty gritty and I probably spend too much time that I should like really digging into the weeds and not really finding out details and kind of trying to cover every single aspect or unknown and trying to make it as known as possible before pulling the trigger on those kind of deals.   Tom: Alright, Dean, we're gonna end this episode with a quick fire. So this is kind of like a they call it a Rorschach test where you like see something and you like say the first thing that comes to your head is going to be the audible version of a Rorschach test. So I'm gonna ask you a couple questions. It's an either or question. You got to pick one or the other. Are you ready for your quickfire?   Dean: I got, I am ready to go for them.   Tom: All right. consolidation or diversification?   Dean: Consolidation.   Tom: High property taxes or high income taxes?   Dean: High income taxes.   Tom: High rent growth, or low vacancy?   Dean: Low Vacancy.   Tom: Love it. Cash Flow or appreciation?   Dean: Ooh.   Michael: Stumped him.   Dean: Right in the middle Tom. That was the hard. Cash flow.   Tom: All right. We're halfway done in debt or equity?   Dean: Debt.   Tom: Single family or multifamily? Somethings might be changing!   Dean: Single family.   Tom: Alright, I like it. I like local or remote investing.   Dean: Remote.   Tom: Turnkey, or massive project.   Dean: Turn key.   Tom: Alright, final three. We're going to get off of real estate, the midnight oil or early bird worm?   Dean: Early bird All the way.   Tom: Nice. Nice. Text message or email?   Dean: Text message.   Tom: And the final question. Olive oil or butter?   Dean: Butter.   Michael: All right. All right, man. Nicely done.   Dean: I like that no one understands, like any of the context behind the reasoning. I chose any of those answers, but I'm going to stick to it.   Michael: Perfect.   Tom: Yeah, yeah, it's they were all right and wrong answers and you got them all right.   Michael: All right. You nailed it. We should have some like Who Wants to Be a Millionaire music player. When we when we asked the other backgrounds That's right. Yeah. Well, the This was awesome, man, thank you so much for hanging out with us really appreciate you coming on.   Tom: Yeah. And you said you had a final pearls of wisdom?   Dean: No, I just wanted to say that one of the things actually that really helped me out get towards pulling the trigger was an accountability partner. So I joined a mastermind group and you don't have to go as far as you know, doing a formal group like that. But having someone in your life to You can tell what you're doing and tell them your goals and what you're working towards. And having them hold you accountable is is life altering, it can really help you push you along the way. Because not only are you responsible to yourself and your internal thoughts, it's that person who is kind of going to push you along the way as well. So I think it's very helpful to have someone like that.   Michael: Accountabilibuddy.   Tom: Alright. Awesome. Thank you so much, Dean for jumping in.   Dean: Look forward to doing it again. It's been a privilege to be here. Thank you all.   Michael: Awesome.     Alrighty, everybody. That was our episode for today. A big thank you to Dean for coming on, and sharing his experience and journey with us looking forward to hearing more about his journey. And we're going to be having him back on talk about the differences and going from single family to multifamily and what that experience looks like. If you enjoyed the episode, please feel free to give us a rating or review. Wherever it is you listen, your podcasts are super helpful for us. And as always, if there's a topic that you want to hear more about, leave us a comment in the comment section, and we'll turn it into an episode. Thanks so much for listening. catch you on the next one on happy investing.   Tom: Happy investing.

The 7 Dollar Millionaire joins us to share 1 simple tip that will help you make your children rich. The 7 Dollar Millionaire will be joining us for a full length episode on his book (linked below) very soon!   The 7 Dollar Millionaire is the author of Happily Every After: Financial Freedom Isn't a Fairytale https://www.sevendollarmillionaire.com https://www.sevendollarmillionaire.com/happyeverafter/ https://www.goodreads.com/book/show/55402867-happy-ever-after --- Transcript   Michael: Hey everybody, my name is Michael Albaum and welcome to another episode of The Real Estate Investor. On this weekend wisdom, we have a very special guest with us, The $7 Millionaire is going to be talking to us today about some tips and tricks you can use for your young ones when they're just starting out to help them get ahead financially later in life. Let's get into it.   Michael: So, Michael, I'm curious to know, Tom, has his youngster Charlie sitting on his lap here. And so we were chatting a little bit before the recording. Are there any tips, tricks, advice recommendations you have for folks that have really young kids where maybe the book doesn't make sense for them, but things they can still do to help their kids or young ones get ahead?   The 7 Dollar Millionaire: Yeah, it's it, I wouldn't put this in the book, if I discovered it before yesterday, which literally, when I discovered it, I was so frustrated because I do this stuff. And I'm a spreadsheet geek. And I'd never done this. But I worked out just yesterday that if you put it in $7,777 into an investment account for your kids when they're born, and if it makes 7% returns during their life, they will be a millionaire by the time they turn 70.   Now 7% is just the number I pick because it's the number I use and all the other stuff I do, but the s&p 500 has made nine and a half percent returns for every 50 year period for the last 90 years. So yeah, if you put in eight grand the day they're born, that could be a huge number by the time they're 40 or 50 just life changing for a grant. So I think that's one of the things that even if the kids are too young to learn these concepts, you can put it away you can talk to them about how it's growing. You know, you can talk to them about what they can do with it you know when they can use it all that kind of stuff really powerful.   Tom: That was a great par to just kind of follow.   The 7 Dollar Millionaire: Yeah.   Michael: Yeah. So Tom, you've got no excuse now for not making Charlie a millionaire. The pressure is on!   Tom: All right, awesome.   Michael: Sorry for throwing you under the bus.     Michael: You know, it's it's so funny you say that? I think one of the best lessons my father ever taught me was for my 12th birthday, he bought me a couple shares of GMC stock. And we said every day we looked in the paper and said, Okay, this is what the value is doing. It's going up, it's going down and and learning about just financial finances from kind of that basic level, I think is so eye opening. So when you can do things to help give people in your life a leg up. I think that's that's super helpful.   The 7 Dollar Millionaire: Yeah. And so I did it totally. I mean, one of the reasons for writing this book is I have in my day job, I get to meet billionaires and families or billionaires. And one of the common things that they talk about is the fact that their parents would talk about business across the dinner table from a really young age. And the rest of us don't have that we don't have I don't have any billionaires around my dinner table from a young age. But the more we can do, the more we do it, the more chance our kids have of having that level of skill.   Michael: Yeah, I love it. And was it was it Albert Einstein who said compounding interest is the eighth wonder of the world or seventh one or the world.   The 7 Dollar Millionaire: No, he the internet said it. If you get out, get out get that one. On Snopes. There's like a great quote from a physicist. He's like, do you have any idea how clever Albert Einstein was? He's not impressed by compound interest!   Tom: That's basic algebra. Yeah.   The 7 Dollar Millionaire: This is not the kind of thing that impresses him.   Michael: That's too funny. That's too funny. Well, Michael, thank you again was really such a pleasure to have you on and I'm sure we'll do this again sometime soon.   The 7 Dollar Millionaire: Excellent. Thank you very much.   Michael: Already everybody that was there episode a big big, big thank you to Michael for coming on the show. It was a pleasure hanging out with you all the way over in Singapore. Really great tips. I know Tom is going to be taking massive advantage of what we talked about today. If you enjoyed the episode, please feel free to leave us a rating or review wherever it is. You listen to your podcasts. We look forward to seeing on the next one and happy investing  

Do you have money and are not sure how to invest it? In this episode, we run the thought experiment on how we would invest $25,000. Listen to get 3 different takes on how we would use this money to make more! --- Transcript   Tom: Greetings, and welcome to the remote real estate investor. My name is Tom Schneider. I'm joined by   Michael: Michael Albaum   Emil: and Emil shore.   Tom: And today we're gonna run through a thought exercises. What if $25,000 showed up in our bank account? All right, let's do it.   Welcome, guys. So before we get into the episode, I think it's a good time to refresh and do a quick introduction kind of background on our remote investing experience all that jazz. Mike, why don't you lead us off?   Michael: Yeah, absolutely. So my name is Michael Albaum, California guy, I was working. Previously, I was used to work as a fire protection engineer, and the commercial property insurance industry and started investing about the same time I started working in single family homes in Southern California, and pretty quickly realized that that wasn't going to get me where I wanted to go fast enough. So I was traveling a lot for work. So I was traveling out of state. And so I was looking at properties wherever I was trying to work and realize pretty quickly that out of state, small multifamily cash flowed a lot better than single family home in Southern California.   So I started purchasing those, and then organically grown into medium sized multifamily. And then of over the last several years really specialized and found my niche with medium sized multifamily value add. So finding the junky dirtiest most beat up properties I can find then getting them repositioned, performing better and either selling cash out refinancing or just sitting on the killer cash flow, and now find myself working as the head coach with the rootstock Academy.   Tom: Cool and Emil.   Emil: So Hey, everyone, my name is Emil shore. I am also a Southern California native. I'm a marketer, by trade or by profession. And I started investing back in 2017. My dad invests in Los Angeles, and so I grew an interest in real estate investing. But when I had built up a little bit of capital, realize that Los Angeles was very cost prohibitive for me to invest in real estate, so sort of looking around at other options, so other people investing out of state. So for people living in high cost of living areas, some people were making out of state investing work. And so 2017, I bought my first single family property out in Jacksonville, and then went on to buy a couple more single families across the southeast and Midwest. And now I am also focusing on small multifamily in the Midwest to grow my portfolio. So yeah, that's my background. Tom, what about you, man?   Tom: So a little bit about myself, I got out of college a little bit before the housing crash. And while I was in college, I was very influenced by reading Rich Dad Poor Dad, which I think a lot of real estate investors. So getting out of college, I knew that I wanted to work in real estate and I wanted to work in system. So I really found a dream job working as a product manager for one of the very first publicly traded single family reads. And this was a super fun experience where it was before as a publicly traded, it was a brand new industry of single family where before people thought single family was too tricky to manage. But with the advent of mobile computing, cloud computing all of this cool technology, it made managing single family rentals at scale. And through that process, I got into it, I got the bug of investing on myself. So I just have been slowly accumulating single family rentals throughout the southeast, as well as the Midwest of the United States and try to add a couple properties every year.   I am also a California real estate broker. And I am the parks and recreation Commissioner for the city of Orinda, California,   Michael: Right on.   Tom: Little Orina shout out. Excellent guy. So let's go ahead and jump into the meat of the episode. So this is a fun exercise of you wake up this morning and you find an extra chunk of money in your bank account. So what I want to hear your guys's responses is the way that you're thinking about spending it the way that you're thinking about allocating it, what is your thought exercise and I get to pick who's on the hot seat first. And I asked Michael to introduce themselves first. So I'm going to mix it up and go Emil. All right, so you wake up this morning, and there's an extra $25,000 in your bank account. What is your next steps? your thought process? All that good stuff?   Emil: Yeah, I woke up well, are we painting the stage saying we have no rental property? We have no, my a brand new investor or am I just in my current spot in life and I have an extra 25 K?   Tom: You're in your current spot and in life, you know another fun thing about us as the hosts as the investors I'd say a meal is a little bit newer into his career. I have a couple more years of experience a couple more units and Michael has quite a few units as well. So he's got a ton of them. So in each of our answers, you're gonna get this lens of of how much experience and I guess units they have under their belt. So I think the context meal is you are a meal with us today on whatever the date is February end of February.       Emil: Yeah, I would probably do one of one of two things. I would either use that money to renovate some units that I currently have that you know if i renovated them, we could get rents up, you know, right now is a tough market to buy in not a lot of inventory. So one thing I'm thinking about as well, if I can't go buy something new, if I'm not finding what I'm looking for, can I use money to improve what I currently have and increase the profitability of those. So that's one thing I might do is look at some of this triplex I bought in November, and all in all, is by three $400 under market rent, but we're gonna have to make some upgrades. So I may invest in that right now. Like, let's, let's make these improvements. Let's get the rent up, and let's get this thing performing better. That's, that's one area, I would probably focus.   Michael: And as a performance metric measure, how do you determine whether or not to spend that money on the improvements or go elsewhere? I mean, how do you determine the return you'd be getting on that capital?   Emil: As real estate investors, I like to look at everything as a cash on cash return. So let's say I were to spend $10,000 to improve a unit I know, I can get $300 more in rent per month. So yearly, that's going to be 30 $600 3600 over the $10,000 investment. That's a 36% return on my cash, which is awesome. We're using the stock market. Typically, I know this year, last year has been crazy. But typical year in stock market people say is like average of 8%. I'm far exceeding that. So to me, that's definitely worth my time and energy to make that investment.   Michael: Awesome. Awesome. And so what would your ideal purchase be if you were choosing between purchasing something, or doing these renovations? I mean, what would your ideal purchase look like? Would you leverage would you buy something all cash?   Emil: Yeah, if I was buying right now, I mean, debt is so cheap, right now, interest rates are at historic lows, I would want to be juicing my returns and taking advantage of this low interest rate environment, especially if you're buying a single family home to lock something in 30 years at us, you know, sub 3% interest rate, I think, is what we're at that I mean, that's amazing, like your cash flow. It's unprecedented how much this helps, like we were talking about on another episode, I just recently refight one of my properties. And because the interest rate dropped by a percent and a half, I was able to pull money out without even changing my monthly payment that much. So right now, it's just such an awesome environment to go get some long term fixed rate debt.   Tom: Yeah, this is just one of the awesome things about real estate investing is you can just borrow other people's money so cheaply. And so easily, you have this huge infrastructure of lenders that you can just tap into and take that 25% multiplied by four with debt and you have for buying power. I like it. So you're debating with your magic $25,000 that you got for selling GameStop you're debating either some optimization, perhaps some little improvements on the episode Emil, you got to pick something. What do you do with that?   Emil: I don't know. It just depends, man. I know that's the worst answer.   Michael: No, it doesn't. You just got 25 grand in the account. It doesn't depend. What are you gonna do?   Emil: I mean, if it's 25 K, because I'm currently looking for smaller multifamily requires a little bit more capital than 25. k, I would probably be focusing on improving my portfolio, or just taking that 25 K and just using it to save up for the next small multifamily purchase.   Michael: Boo boring!   Emil: I know. I know, if I was just starting out.   Michael: Yeah. If you don't spend it in a week, it's gone. I mean, put it in a CD that gets point 2%.   Tom: I love that we keep changing the assumption says or I like that answer. I like that answer. That's prudent.   Michael: Emil was like, woah, woah, we didn't talk about the rules. All you asked was the question.   Emil: Yeah, Jesus, I didn't have time to think of all these possible scenarios God. Investing decisions aren't made in two seconds, guys,   Michael: Yes the are, or at least they should be!   Tom: Emil. You're you're off the hot seat. All right. I like it. All right, Michael. Waking up this morning.   Michael: Yep.     Tom: 25,000 in the account, an extra 25 k?   Michael: Yep. I'm gonna wait one day and make sure that the deposit clears my account, because how big of a bummer would that be to find out Oh, it was an error. And I go spend 25 grand and then it gets pulled out of my account, so I get a negative balance. So once I make sure that it clears the account, I'm going to Vegas red 22. roulette going to turn that 25 into several 100,000.   Tom: That's a mistake. Red 16 all day every day. Go ahead, man.   Michael: Classic rookie mistake. So I'm kind of with Emil I invest in multifamily properties, specifically multifamily value add. And so 25,000 is not going to go really far in terms of purchase. But right now I'm in the middle of several pretty significant rehabs on some multifamily projects, I'll probably use that to fund that deal. to fund some more rehabs in those deals. And very similar to me, I would probably use that 25 to get those units rent ready and then rent it out. And like Neil said, the exact calculation that's what I'm doing. I'm saying, Okay, how much is it going to cost to do the rehab work as compared to how much is that going to bring in additional rents? And if I can get a better return elsewhere by investing although elsewhere,   Tom: I'd love to hear you walk through. So you guys have Similar responses in that, like the bigger multi families are a little more expensive. I'd love for to kind of work backward on like, what, in getting to a fully performing multi stuff that's in your wheelhouse, like, are we talking about like a $300,000 building we're using like 50% debt, and then you're putting X amount for construction because you said this is a rehab, if you can just walk through just really kind of simple terms on like, what that type of capital requirements and that kind of project looks like.   Michael: Yeah, that'd be interesting. Totally. So like Emil said previously, it depends, which is the worst answer. But so I'll give kind of two extreme examples.   Tom: Vanilla. Vanilla me.   Michael: Yeah. So one is I bought a five unit building in the Midwest several years ago. And it was advertised at like, I think 155 or 160, or something like that. And I bought it for like 130. And it was already leased up…   Tom: With debt out the gates?   Michael: No so that was an all cash purchase. So one of the reasons I was able to get it for so cheap was was an all cash purchase, and then went and refinance 30 days later and got 75% of my purchase price back. So put dead on it immediately. And so that was a fully leased building that didn't need a ton of work. Some of the units had already rehabbed, but the rents were way under market. And so what I did is basically day one went in and increased rents across the board by about $200 per unit, and three people stayed and two people left, and so was immediately generating significantly more cash, I think that's an extra 1000 bucks a month in cash flow by having to do nothing physical.   Now, the two folks that left we did do some unit turns on those and that was, I think, ran like six or seven grand each, I think is what we ended up spending what I end up spending. So that was relatively light. Now I have another building I bought, it was an eight unit. Again, units were way under market rent for the area. But so were the updates. And so we did a full update on an eight unit building that was well into the six figures in terms of rehab costs. And so we have eight brand new units now brand new fixtures, appliances, plumbing, electrical throughout. So that's a much more intense rehab. And a significantly requires significantly more capital.   Part of the reason I think that it costs so much was because we were trying to do brain surgery and keep some tenants in place so that we could keep some cash flow coming in on the building. But it just ended up I think adding time and labor costs, as opposed to just getting the building fully vacant, and going in and being able to occupy or get access rather to all the units at a moment's notice and work more freely. And so again, if I could do that project all over again, yeah, I would give up the $2,000 a month or whatever that was coming in and rent to be able to just move more quickly and efficiently. Assuming all leases would allow for that assuming everybody was month to month.   Tom: I love the fun flow like aspect of this. So like with this other one was it did you buy with debt, and then later refi after the rehab was done?   Michael: Yeah. So that one I bought with cash as well, I was in a really strong cash position at that time, and then refight out immediately 75% of the purchase price, it was the same lender that did the prior one. So that was super easy. And then I knew it needed a ton of rehab. So I use that refi money to then go do the rehab, I was able to buy cash, get the purchase price down where I wanted it to be, let it sit for 30 days, then refied out 75% of my cash and then use that capital to go then improve the building and then haven't since refinanced out of it. I totally could. There's a ton of equity in the building. Now, most of its purchased because of the rehab dollars that I spent, but I could definitely tap into that. But the cash flow right now is so good on it. And the debt I have is so cheap. I'm a little bit hesitant to to refinance and change the structure. But I'm definitely going to investigate that as you know, probably actually get my tax return.   Yeah, Emil?     Tom: Question in the back from Emil. What do you got?   Michael: The peanut gallery?   Emil: I'm raising my hand for people who can only hear us and can't see us. I'm curious having done both of these. I think I've asked you this offline. But having done both these a light rehab where you you know, $6,000 per unit that's super light versus a full gut where you're changing electrical, plumbing, new appliances, all this stuff? Which one would you rather do going forward?   Michael: Oh, the light all day, the light. I mean, the light is so much easier, and so much less stressful and less headache, and less opportunity for things to go really sideways.   Tom: I think you're already leading on the counter argument, the like, you know, opportunity for sweat equity.   Michael: Yes. So I'm going to circle back to that to the sweat equity comment, Tom. But what I was gonna say is that now on that eight unit, everything is brand spanking new. So I have a new roof, I have new plumbing, new electric, I mean, everything, it's, for all intents purposes, a brand new build. And so I'm not going to have to touch anything. So my repair and maintenance costs and capex costs on that building are so much less than on that original five unit that I was talking about. Because we didn't replace the roof. We didn't replace a lot of this stuff. So you know, it could go either way, depending on your bandwidth and your appetite for risk and for growth. And so I would say that Yeah, the value add is significantly higher on that eight unit.   But that being said, Because five units of commercial property and value based on cap rate and performance, because of The fact that we increase the performance so much on that five unit, the value has pretty much doubled. I got a broker opinion of value on it a couple of weeks ago. And they're like, yeah, like you did a really good job, increasing the performance of this property, such that pretty much doubled. So there's multiple ways to add value. If you can take the cheaper approach, it's changing that financial optics most of the time. But if you have to go the physical route, there's a lot of delayed gratification and down the road benefits that you'll see as well.   Emil: I'm super curious, in five to 10 years, if you still have these buildings, to be able to look back and say, okay, you know, here's what I thought would happen, less catbacks, less Rnm, less repair maintenance,   Michael: What actually happened?   Emil: Yeah, that's what would be super, super interesting. And then, you know, you're just learning from your own portfolio, and you can make those decisions going forward. Like the full guides were great. I'm going to keep doing full guides, or like these light rehabs have proven better for me.   Michael: Yeah, hopefully, the podcast is still running. But I can call in from somewhere and say, Hey, remember that? That's killer?   Emil: That's right.   Tom: I'm guessing a lot of people underestimate like the cost of the repairs. So if you're buying a real estate that needs work to be done, you're probably thinking that it costs less than it actually does costs. I think this you know, rosie glasses are sometimes be a challenge for real estate investors. in evaluating these kind of deals, would you did you did you have rosy tinted glasses on there?   Michael: I had the rosiest thickest glasses you could imagine. And part of it was in part not to throw them under the bus. He's an awesome, awesome agent. But my agent was like, Yeah, I don't think it'll be very expensive. We can do this and everything. And he was he was helping steer the ship to a certain degree. And then we went and got quotes. And it was a lot worse than anticipated. And some of that was rosy colors, Rose tinted goggles of affection. And other stuff it is you just learn more as the walls start to come down and the drywall starts to come off. So a lot of this stuff you can't know about until you are in the building doing the rehab. And so there's no one's fault to that. But you just need to have a big contingency built in for that kind of stuff.   But yes, Tom, I think you're super accurate. And one thing that caught me off guard, we were doing this a lot of these rehabs during COVID time, it's just the cost of materials has nearly doubled, like cost, lumber, wood has gone a roof. So like who could have predicted that and you can't just stop the rehab and go, Oh, my God, cost just doubled. I bet. I'm going to press pause until those come back down in line to where they need to be. So stuff happens. And I think with real estate investing in general, you need to be able to bob and weave and be flexible and have a plan B, C and D contingencies so that when and if things do go awry, you're not up a creek without a paddle. I feel like I just use so many like colloquialisms.   Tom: I love it. I love it. I love.   Emil: It takes two to tango.     Tom: The henhouse house. Fox chicken.   Michael: Yeah. And a couple of canaries.   Tom: Yeah, I love the tangents that we get on just because like all this stuff is so interesting. So back to the original topic. So you have the 25,000 you're making sure that it's in the bank.   Michael: Yes. So I'm going to go rehab some units like Emil was saying, I've got some units in a building that I rehabbed. And now I'm waiting for those to get rented out and start cash flowing to then fund the rehabs on the other ones. And kind of countering myself, at my own words, I was saying previously, that if I could do it all over again, I would get an entire building vacant and do all the rehabs. This one, the physical layout was a little bit different. So that wasn't necessary. So I was able to do half the building at once. And then the other half is what I'm waiting on. So I would go do the other half with that 25,000 today.   All right, Tom?   Emil: You're in the hot seat, the hottest of hot seats.   Tom: All right, Bring it on.   Michael: It's about to boil over 25,000 in the account   Tom: 25,000 in the account. So I'm assuming you know, the check cleared, and I'm assuming there's just zero taxes on this mythical $25,000. So not needing to think about whatever kind of tax, whatever rate this is coming in. So as a single family, primarily a single family rental investor, I'm going to use this for a new acquisition. And if it doesn't get me all the way to the new acquisition, it's going to get me pretty darn close looking at just common financials on this type of investment. Let's say I'm spending $100,000, I'm going to put 20% down. So there's my $25,000, I'm going to look for something that's fairly turnkey, so not requiring a ton of construction, I'll use a debt in the very beginning and the acquisition, either putting him into my wife's name, so she can, you know, within real estate investing, using conventional lending, you can have 10 loans in your name using Fannie backed financing. And once you get over that you can perhaps your wife or a second or other whatever, husband, whatever can put them in their name.   So I'm using the traditional conventional financing, you know, for these $100,000 properties. There's an important question investing is like, Where are you investing at? I think of them as kind of three like tiers of market. There's like tier one, which is the bigger cities, the Dallas, Atlanta, maybe Atlanta is definitely a little maybe a little bit cheaper, Denver, these are these more expensive, and it's going to be really difficult to find something for $100,000 for these type of properties. But then there's this Secondary tier of cities, Indianapolis, Birmingham, there's maybe like slightly smaller, smaller populations, but a little bit less competitive on the real estate side. So probably deploying that capital in a second tier city, like a slightly smaller one to be able to get, you know, better school score whatnot. And that's what I'm gonna be doing. I'm gonna be adding another property in my little SFR portfolio with that $25,000. All right, you guys want to grill me on some stuff?   Michael: I've got a question for you. And I'm kind of cheating because I have a little bit of insider knowledge on you as an individual and your background. So I know that you have a HELOC on your primary residence as well.   Tom: Yep.   Michael: Would you ever consider coupling that $20,000 cash with the HELOC to go buy something all cash and then refinance out of it? You know, six months down the road?   Tom: Yeah, I could see that. You know, there there is advantages to buying all cash, it's a stronger offer. There's a little bit of like extra overhead that you have. So if I felt that it was like a really competitive property that I was making an offer on, and that would help me out I would consider doing that and then refi back out and put that money back in my keylock. I love that, that type of a strategy. And that's you know, keylock is just such a cool instrument of debt.   For those who you are not familiar of a home equity line of credit, or a HELOC is what it is, is basically a credit card. That is a really cheap rate. And the balance of that credit card is the difference between the amount of the loan that you have on the property and the value of the property. And usually it's up to 80%, or in some cases up to 90% of the value of the property. And it's just wicked, low rates. And I think it's Gosh, what is it like three and a half percent 3%, something like that. And it's a really significant amount. Like I think the one that I have is like roughly $200,000 available, just to go do some stuff. There's no HELOC police I can use that money wherever I want to spend it. So that's a good point, Michael, possibly using a HELOC and then refinancing back out to it.   Michael: How much rehab? Are you comfortable taking on if a property, you know has is relatively turnkey? I mean, do you want to literally have a tenant walk in the door? Do you want to buy something with a tenant already in place? Do you want to buy something with under market rents? I mean, talk to us about what this ideal property $100,000 property looks like? And why you're thinking about some of these different factors?   Tom: Yeah, good question, Michael. So I think on the the property condition side, buying properties, and doing big rehab projects is a little bit out of my wheelhouse. I'm okay, paying a little bit, you know, not getting a massive steel, just because I find that when you do those construction properties, just like we were talking before, it's difficult to estimate the construction costs. If you're right next to the house, it's extra difficult if you're, you know, a remote investor.   So, in doing the diligence process of buying this house, I'm gonna look for a property where, you know, perhaps there's some aesthetic stuff that needs to be done. But as long as like structurally, the roof, the foundation, all that kind of stuff is in good shape, I'm fine, you know, new carpets, new paint, all that stuff, you know, shouldn't exceed whatever $3000- $5,000 on getting the property what they call rent ready, but I'm going to look for a property that is in more or less in good shape, I think it's important to try and get a little bit of value and a little bit of a discount to the current price that can be extra hard these days, because it's just so competitive. But I find that going into some of these smaller cities, it's a little bit less competitive, versus trying to buy something in, you know, Los Angeles or whatever. I'm in Northern California.   So some of these smaller cities, it's a little bit less competitive, but you know, me wrong, like it's tough to find, you know, to get that little bit of a discount to market. But I think that's important to have a little bit of equity built in when you do your acquisition.   Let's see what else occupancy, you can. One thing that's cool with roofstock is you can buy these occupied, or you can buy them vacant, I'm not too particular, if I'm buying them occupied or vacant, wherever I'm doing my acquisition at just because I plan to hold these long term and through the lifecycle of these properties, sometimes they're going to be occupied, sometimes they're gonna be vacant. And my evaluation of the property shouldn't be on that just because it's kind of a transient thing. Now the value to buying it occupied is you're getting cash flow day one, but the value to buying it vacant is you can have more input with who you select as your property manager, or if you're self managing to set the tenanting guidelines and rules. So I'd say that's my sort of down the middle of the fairway strategy using getting back using more isms. like Michael, but I'm not a construction guru. That's not in my wheelhouse. So as part of my strategy of evaluating is finding properties where I decrease that risk by the inspection that's completed, it's identified that foundation structure whatnot is in good shape.   Michael: So Tom, I think those are all great points. As a follow up, we know what the goal is, we know what the criteria look like. So what are you going to go do today? Now that you see the 25,000 to me reaching out to agents are you getting on the MLS? Are you on Zillow? What are you doing right now to make this happen?   Tom: I have a pretty good idea on what my next markets are going to be in. I'm pretty heavy and throughout the southeast, so probably continue to build that portfolio out. There's a PM that I worked with for a while that I think is pretty great. So me We just continue to to lob more properties over the fence for them to manage for me. So I would start just put in an alert of new listings coming up within the different markets that I am looking at. Also, you know, monitor set up alerts on Roofstock on the MLS on all these different acquisition channels to just start seeing what's available. I like to look, sometimes there's opportunity for properties that they've been listed on the market for a while, sometimes they should be careful those just because there's probably could be a reason why they're listed on the market for a while. But my acquisition processes begin by setting up the appropriate alerts and notifications of new listings coming on in that particular neighborhood.   So those would be my steps is getting the awareness part of the funnel on listings in that target market and where I'm acquiring. And if I didn't have a property manager already in the region, I would start to talk to those local property managers, and get their feedback on certain sub markets or as properties come up. A great tip for people with remote real estate investing is when you identify a local property manager, don't wait till you like have done the acquisition, but include them in the acquisition process. So as you're evaluating properties, get their feedback on sub neighborhoods, whatnot, and…   Michael: Send them inspection reports. See if they can't walk the properties.   Tom: Yeah, exactly. They're your boots on the ground.   Michael: All right. So Tom, I think a lot of people throw shade at buying turnkey properties or saying oh, you make your money. When you buy, you have to buy with some equity. If you know, let's say you can't get a discount to market right now. But the numbers still make sense for you. And you're comfortable with the acquisition. What do you say to those people, who say, yeah, turnkey is for suckers?   Tom: I would say, oftentimes, like boring wins, like, you know, if I want to throw some money in like, you know, Penny stocks, or like, really high volatile stuff, I think that's really similar to buying a huge construction project, like you might be right. Some of the times, like, you might, oh, I accurately estimated how much it costs to fix it, I did it it uh, but if you are a more conservative investor, who just wants to take advantage of the kind of the tail winds of real estate without taking on a lot of the risk, your upside might be slightly smaller. But you know what, like that upside is still very high, even buying turnkey, you shouldn't buy a property where you're buying it for more than it's worth. Like, I think that's a mistake. But you don't have to swing for the fences and buy these properties that need like new foundation, new gut, new, whatever. And I think that's silly.   Michel: Yeah, sure.   Tom: You don't want to buy a property that the value is worth less than what you're buying it for. But you don't need to try to hit these homerun Grand Slams like just get a bunch of singles and doubles. Like that's building wealth, in what, you know, in a really pragmatic, prudent way. Michael: Yeah, I think just to piggyback off that my very first deal was totally turnkey, before I even really knew what turnkey was, or maybe even before it was a thing. And I'm so glad that it was because I could barely fathom the idea of spending all this money on the down payment, let alone additional money on any kind of rehab or innovation to make rent ready costs. And I was so overwhelmed with just owning the property and doing all the things that that took going through the closing and setting up property management, and all the things that are involved with owning a rental property. And so to then be thinking about, oh, well, what kind of how do we get a contractor in there, and all of the things that come along with doing value add or doing a renovation or return, it would have just been too much. And I think that probably would have left a pretty sour taste in my mouth with real estate investing as a whole.   So as a toe dip exercise as a way to wade into this water as opposed to jumping into the deep end. I think turnkey can be a really great way to go and just, you know, understand what's involved with owning and operating rental property in its easiest form, and then move on from there.   Emil: I want to bring in something from our good friend of the podcast, Michael Zuber, who has been investing for 15-20 years, and he's really transparent about he's been investing 15-20 years, he's very transparent about where he made mistakes. And he often talks about in the early runnings, he would buy these cheap properties, that same deal, right, you're getting them at a good price, but then he has to go put 10-20K in. And when you look at his cash on cash return, oftentimes had he just gone turnkey, his cash on cash return would have been better, because he didn't have to think that extra 10-20K, basically, someone else goes and makes the rehab. Yes, they sell it to you for a profit, but then you get to use leverage to bake those into your loan. And then your tenant is basically paying for those renovations in a way so you're not coming out of pocket.   Anyway, he talks about all the time how he wishes in the beginning, he had bought less of these like cheap but needing 10-20 K and repair single family homes, and just scooping up more turnkey. And again, he's done this for 15-20 years. So he's got a pretty long time horizon to be able to look back and say, these are some of the things I wish I had done differently early on.   Michael: Yeah, it's great point.   Tom: I think a great analogy is value stocks versus growth stocks, where a growth stock would be, you know, high beta like it could go either direction. I think that's the equivalent of buying some fixer upper. And as a remote investor, like that's extra hardware value stocks, you know, Warren Buffett whatnot like those are buying tried and true properties where there's just less risk, you could say, in that you're not needing to open up walls and find all kinds of potential issues. So value investing.   Cool, guys, so love this topic and a lot of great tangents. I think what we're gonna do is in our next episode, we're gonna do the similar exercise but bump up the value. So what would we as investors do, woke up and there was $200,000 in your bank account? How would you deploy them?   Michael: Oo, la,la I know my answer is gonna be different. Emil, are you gonna have similar or different strategies?   Emil: I'm putting it all in Bitcoin. Yeah, so you'll get for Bitcoin, hey, I'm getting for Bitcoin. But bitcoins gonna be worth a million dollars in the next month. So that's not a big deal.   Michael: You heard it here first, folks.   Emil: Everyone who's into bitcoin is going to hate me now. So I'm sorry.   Tom: Thank you so much for listening. I hope you enjoyed the episode. If you did, please rate us Subscribe. All that good stuff wherever you listen to your podcasts and as always, happy investing.   Michael: Happy investing.   Emil: Happy Investing

Join us for this exclusive pre-released episode as part of Finance Podcast Week. This episode is brought to you by Michael Albaum, Emil Schour and Tom Schneider of the The Remote Real Estate Investor podcast. ... 25K Dollars Appears in Your Account, How Do You Invest It? -- In this episode we entertain the thought experiment of how we would invest an extra $25K that appeared in our accounts.  We grill down on the details of why and what strategies we would use to execute. --- Transcript Tom: Greetings, and welcome to the remote real estate investor. My name is Tom Schneider. I'm joined by  Michael: Michael Albaum Emil: and Emil shore. Tom: And today we're gonna run through a thought exercises. What if $25,000 showed up in our bank account? All right, let's do it. Welcome, guys. So before we get into the episode, I think it's a good time to refresh and do a quick introduction kind of background on our remote investing experience all that jazz. Mike, why don't you lead us off? ... Finance Podcast Week runs from March 26th-March 28th, 2021 with live-streamed sessions and panels, and brand new, exclusive episodes.  Utilizing Podbean's live streaming platform, we're offering you the opportunity to join the conversation and be part of the experience. Finance Podcast Week is brought to you by Podbean and brings you expertise and insight on podcast topics ranging from personal finance, budgeting, real estate, cryptocurrency, investing for millennials, the GameStop short, and more!  Follow the Finance Podcast Week channel here for daily meditations, episode releases and more! For more information and to register to join the live streams in real-time go to www.podcastweek.live.finance    The content of Finance Podcast Week is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained on our site and podcast constitute a solicitation, recommendation, endorsement, or offer by Podbean or any third party service providers to buy or sell any securities or other financial instruments.

In this episode, we cover how to set up your accounts to easily track your expenses and simplify your tax process. --- Transcript   Emil: Hey everyone, welcome back for another episode of The Remote Real Estate Investor. My name is Emil Shour and today I'm joined by my co hosts,   Tom: Tom Schneider,   Michael: and Michael Albaum.   Emil: And today we're gonna be tackling getting your financial house in order. So a friend of mine hit me up on Twitter asking for accounting best practices. So we're gonna read his question and start tackling it piece by piece to show you how we do our accounting and keep everything in order. So let's hop into this episode.   Emil: Alright guys, so I'm going to read Alvin's message to me and then we'll start tackling it.   So, hey Emil, fan of the pod think y'all are doing some awesome work there. Thanks, Alvin. One potential topic to consider for an upcoming podcast is accounting best practices. I'm just getting started with my first property in one area that I'm wrapping my head around is how to best set up bank accounts, like operations, reserves, etc. credit cards, all those things. So I'm not dealing with a tax nightmare next April. Thanks for considering and keep up the awesome work.   All right, Alvin, this is a great question. I think we, I think we covered it inside of an AMA. But we wanted to break it out and dedicate its own episode, because it's definitely a good topic and something to think about, especially as you're you're just getting started. So do you guys either one of you guys want to start just mentioned how you set up your financial accounts, either checking savings, things like that   Tom: I'll lead the way, so I probably have a super simple structure. So I have one separate bank account that I took out through one of the big banks and with that account, I to connect my mortgage payments to it. So I do an automatic withdrawal to pay that within the mortgage accounts themselves, I will have an escrow in there where they'll take out a little bit extra every month to manage my taxes and insurance. So I don't have to worry about that throughout the year. But if I want to be more proactive and not let them have my float of escrow account, I could pay that you know when it's due, but I like the past 70 of just setting up that impound account.   So you know, checking account automatic payments in and out to the mortgage and kind of a similar structure with my individual property managers where I have my bank account connected with my property manager, and they hold a little impound account where with each property that they manage for me, depending on how many that property manager manages, they'll keep a couple extra couple $100 if any maintenance or issues come up, and I set up with them a not to exceed limit. So if the price of any work that they're going to do is over 200 bucks, I want to know about it. If not I trust my property managers with most of them. I've been using them for over a year. So I feel okay about them making decisions on some smaller stuff.   You know, I never thought about until this episode that with both of these sort of key partners that I have I let them both have a little bit of an impound account. So I have, you know, my main checking account where funds are coming in funds are going out. And then both with a lender as well as with the property manager, they both have little escrow accounts to manage the stuff that they have to pay via insurance or taxes or any maintenance stuff.   Beyond that I don't have a credit card that I use for any real estate stuff that I do the most of the transaction that I'm making. Personally, you know, outside of the initial acquisition and end and downpayment in acquiring the property, there isn't really a lot of transactions that I make that would be manual, everything is is pretty automatic set and forget it, you know, monthly money in pumping money out and then these two little separate escrow.   Emil: It's basically what is your financial house look like? Do you have a separate checking account? Good mention of like the the impounds with property manager and lender, which is very common, it's nothing unusual. So yeah.   Tom: And I heard the question before within Academy members asking, Hey, do you set up a different checking account for every single property if you have multiple LLC? Sure, do it for each LLC. But for me, I don't get a unique checking account for each property. And also, what I love about that as having a separate checking account for my rental properties is I know that money's in that bank account, I'm not taking it out. And it gives me a really good finger on the pulse on where cash flow is going month over month as funds are going out and funds are coming in. So I like that canary in the coal mine of the checking account balance level that I just look at pretty regularly.   Michael: That's great.   Emil: On the same note, I have a chase personal checking account. And when I started, I created another checking account that all of my rent goes to any expenses come out of so it's just completely separate from my personal. I just use chase because I had them with my personal banking and I manage it the same way. Just keep them separate all properties go into this one checking account, nothing fancy no credit card or anything like that so far.   Michael: Sweet, nice, simple clean. So I started very similarly to you both just having a separate checking account and then I had two properties that both went into that account. And then again, just like I mentioned, I kept it very separate, very unco mingled. And then I add my third property purchase. I started an LLC and so I moved everything over to an LLC account. And so then I need to open up a new LLC bank account. And have everything flow through, they're still keeping it totally separate, no commingling and so everything just got paid out of that account. Really the only difference in operation was that it had a different name. And it was a business checking account rather than a personal checking account with the name of the LLC. But from an operational standpoint, it was still handled in the same fashion to was handling it previously.   And it wasn't until this past year, because I've opened up several more LLCs over the years, as I've purchased new acquisitions in different parts of the country. And so this most recent year, I've been working on this massive rehab and my contractor started accepting credit card payments. So I just applied for a business credit card this year got approved and got that and that's been awesome, because it's money you're spending anyhow. So this has a 0% interest for like the first 12 months so I can carry a balance on it if need be. The problem is that it's a super low balance, and I'm constantly paying for rehab. So for that purposes only make a lot of sense. But there's cashback incentive, which is nice, because again, it's money I'd be spending anyhow. So it's kind of a nice perk.   But Tom, kind of like you mentioned, there's not outside of that rehab and…   Tom: Getting some airline miles there?   Michael: Yeah, that's it. I mean, I get…   Tom: Cashback, at restaurants, Starwood Hotels?   Michael: That's, that's right, we get my Marriott points...   So yeah, so outside of that, you know, there's really nothing I put on credit cards for the business or the LLC expense. Most of that stuff, I could pay directly added that the debit account, by property taxes and insurance, I could set up to be pulled directly from that account, all the mortgage stuff went directly from that account, it was very little that I would need to be spending on a credit card anyhow, so it just didn't seem worth it to have the extra overhead or extra tracking to have a credit card for each LLC. So I only have one for one of my LLC.   And then as far as tracking the expenses. I think that was part of Alvin's question too. I personally, I just use Excel, I have an Excel sheet. And I think we've talked about it in a prior episode, like you're mentioning me on one of the other ama is where I just have it broken down by LLC at the top, whatever LLC it is, and then all the different properties within that LLC. And whatever the expenses are associated with that LLC. I track the date, what the payment was, what the expense was, and then how much I paid. And then I sum everything up at the property level and the LLC level. And then I just send that file to my accountant at the end of the year.   And there's not a whole lot that actually has to go into that because like I was mentioning, I pay my property taxes separately, I don't have them impounded. And so for a lot of my stuff for some I do for most I don't so I don't impound my taxes, I pay it off separately, I pay my insurance separately, and then any kind of rehab stuff that I have to pay that gets all tracked on that sheet.   So at the end of the year, I see okay, how much did I pay for this property outside of what the property manager paid, because the property manager gives me a summation, a year end profit and loss statement that shows Okay, you paid this much in management fees as much in repair and maintenance this much in whatever snow removal. And so I just said everything to my CPA, and he's like, great, here's your tax return   Emil: Perfect. And some property managers will like literally pay all of your bills for you. So it's tracked in this system that Michael mentioned, in St. Louis, I own a single family home. And St. Louis is weird in that they split the water bill from the sewer bill. And so the water bill is under the tenant, but the sewer bill goes to me and I have a property manager who will take over all my bills, so I can tell them to be the name on the sewer bill, they pay it directly right out of the rent. And then I get my profit and loss like Michael mentioned right out of their system, because they handle accounting much better. And I don't have to like, you know, think about how much I pay and sewer bill times 12 track that in Excel blah, blah, blah. So that's another option you have is talking to your pm seeing if they can take over your bills.   I guess if you didn't do this proactively, what would you do? Maybe print out your checking account for the entire year, look at all the money going out and maybe say like which property it was assigned to and what it was for? I think that's maybe like, but that's kind of the nightmare that Alvin was talking about that you probably don't want to do.   Michael: Yeah, that becomes a pretty big lift, especially trying to keep track of like what the expense was and on which property? Because you definitely I've been told what to keep everything on like a per property basis. And so like whatever expense associated with property a key with property a and so if you've got everything in a single account and aren't tracking it, that becomes Oh, where was that $57 expense, which property was that for? becomes pretty, pretty confusing pretty quickly.   Emil: An awesome tool I want to shout out here that can help people not have to do what Michaels doing in Excel.   Michael: If you want to be way smarter than me,     Emil: I need to do it too. Because I haven't been doing a good job of this, I need to go sign up for is Stessa great tool. It's like the QuickBooks for your rental property. It'll see all the you know, you'll tie it to your checking account. It works with all the major banks tie it to your checking account, it'll look at each thing coming in and going out and you can just assign those to a specific property and a specific expense. I can say this is the St. Louis property and its sewer bill right and then it's all tracked. At the end of the year I get a nice easy export that I can send to my accountant. So definitely check out Stessa if you want to make this make your expense tracking much easier.   Tom: I use Stessa, I like it the document it's like simple but just effective and we've talked about it For the podcasts and documents, storage, you can connect your bank account to it as well. But it's a very cool tool.   Emil: Absolutely. Another part of Alvin's question, which I think is is really interesting. And I want us to tackle a little bit harder, you'll see a lot more different stuff is in terms of reserves. So I'm curious, do you guys you know, a lot of times you look at a pro forma, or how a property expenses and everything should look like and you'll see an item for cap x or things like this, like money, you're gonna put aside for major repairs. And I'm curious if you guys like, actually on each rent check that comes in? Do you take a amount or a percentage or whatever, move it to a different checking account? Or how do you guys handle your reserves.   Tom: I know that I have this pool of money within this checking account once they're coming in. And I already know that I have these escrow accounts I talked about before that the property managers are holding based on the number of properties in the portfolio. So I'm not doing any extra work, once the funds are coming in and moving them to a separate bank account, I'm getting that fool of the main bank out is as fat and happy as it can and then use it to reproduce to make a new property to feed the beast.   So you know, I know roughly how much money I want to have in that general funds. And once I get to the point where I can acquire another property all take money out of that pool, buy another property and just plug that into the system and then let it run. So I'm not moving on a monthly basis. Now I'm not moving moving into any separate checking accounts.   Michael: It was the same for me when I was first starting out, and I didn't touch any of that money, like what would be cash flow. And I just left everything in the same checking account. But what I did do is as I started to want to use that money for things other than just investing, I like open that faucet a little bit. And so I based on my pro forma and based on past history, I would say okay, well, I made about 200 bucks a month cash flow per property. So if I had three properties and call it 600 bucks a month, so I would just set up an auto transfer for like 400 bucks from my property checking account into my personal checking account. And so that was like my portion, that was my cash flow. So everything else stayed in the account. So the reserves, everything else that wasn't cash flow just stayed in that account. And so whenever I needed to do something, I would just dip into that account and pay for whatever capex item was needed.   But I was starting to feel the effects of the cash flow. But I just made it a smaller amount than I had anticipated for it in case I made a mistake somewhere. And at the end of the year, if there was a ton of money leftover in the account, I could square up with myself, so to speak, and give myself an extra pay.   Emil: Solid.   Michael: How do you handle it Emil?   Tom: Putting it all in GameStop Emil?   Emil: I take all my money and I put it in whatever Wall Street bets tells me to know what I what I did is when I first started, I basically have a minimum balance that I keep based on unit count. So when I bought my first property, I think I put $3,000 in this account, where did I come up with that number, I don't know, I just kind of arbitrary, it was like a 3000 that should cover any like minor expense. And if I have anything big, I'll figure it out.   As I bought subsequent properties, I just made sure that minimum went up higher and higher. And basically anything above that minimum, I would like you Tom, that's just funds to go help with the next acquisition, right. So if I say my minimum is 10 K, and I have 17 k in that account, I know that seven k delta I can go use when I go buy another property or whatever, or that's available to me to for acquisitions.   So that's kind of my strategy right now I don't set it aside, it just stays in that checking account. But it's just a minimum based on unit count. And it just goes up a little bit more with each subsequent property. But this is just my personal opinion, I don't think it needs to be linear. So let's say you started with three K, right? It's not like you need three k for every unit. So when you're at 20 units, you don't necessarily need to say I need 60 k in that account. The reason being is is like I think ownership is lumpy, you'll have expenses on property one year and then expense on another property another year, it's not like five roofs could happen. But it's unlikely that five roofs are gonna go out same time. So just allows you to have an expense kind of build up the reserve again, and then another expense comes in like that.   Michael: It makes total sense. And I think about it the same way, like what's the statistical likelihood of having those five roofs go out on the same year across all five year properties is pretty low. So yeah, I think like you mentioned lumpy is a great adjective to use. And so you have expenses pop up on one property. And so the other properties can support the payment for that. And so they all just look to to keep each other afloat, so to speak. And the more properties you have, I find that the smaller dollar amount per property needs to be kept in reserve.   So if your number was 3000 per property, maybe if you have one property, you keep 3000. If you have two properties, you keep 5500. So your next property might be an additional 2500. So like you said the sum total is going up with each subsequent property, but the dollar amount per unit is actually decreasing. That's how I think about it.   Emil: I think we we covered most of Alvin's questions. So   Michael: I got a quick question for you both and I think I know the answer. So I think I asked you all you both probably about a year ago. Do you guys track your depression? And mortgage pay down on any kind of calculator sheet   Emil: In my spreadsheet where I have all my properties, and I'm looking at all the numbers on a yearly basis, I calculate all my cash flow. And on that yearly anniversary or whatever, I'll go look at the estimated property value and update on my sheet. And I'll go in and look at my outstanding loan. So it will like, you know, calculate how much equity am I sitting on in my portfolio? So I'll do that once a year.   Michael: But you don't have to, like the depreciation for most of us is going to be a straight line depreciation same amount every single year. Do you have that calculated or written down anywhere to see, okay, am I gonna be paying taxes on this income on this cash flow income? Or am I totally covering it?   Emil: I do not let my account handle that.   Tom: Trying to try to make us feel bad Michael trying to put us on the spot.   Michael: No, I was just I just curious.   I try to figure out how big of a nerd I am. No, no,   Tom: You're up there. Man. I love it. I am as well. But I have not done that exercise. I mean, I'll take a look at end of the year when the CPA fills it out. But I like the exercise. I like the exercise a lot. I personally don't do it, I take advantage of it and have a CPA who has that type of expertise to do that. But I haven't How do you do it Mike, why don't you work us back?     Michael:   Michael: Sure, yeah, I'd be I'd be happy to use it's a fun exercise. For those of us that are numbers driven, which I think many of us real estate investors are. So basically you can only depreciate the land portion of the purchase. And so that typically works out to about 80% of the purchase price. But if you look at your property tax bill, it'll say land value and then building value. And so you can only depreciate the building value of that. And so you take that value, residents property depreciated over 27 and a half years, you just take that value divided by 27 and a half, and that's your annual depreciation amount. So we'll make the numbers fairly easy on $100,000 property, if I assume 80% is in building value, that means I take 80,000 and divide that by 27 and a half years and I can depreciate $2,909 every single year on a straight line depreciation and so if your cash flow is less than 2900 bucks, you likely are going to have a negative or paper loss for that given year with the depreciation covering your all your cash flow.   So I think you have to remember, though, about that is that your your principal portion of the mortgage payment is not a deduction, I think only the interest is and so you have to get add the principal portion back in and then look at the total. But at the beginning of a loan, the principal payment contribution is so small, especially on like $100,000, or an $80,000. mortgage, you know, it's probably going to be 100 bucks or so you can look at an amortization schedule to see what it is.   But add that back into the equation and then take out your depreciation and see if you are still negative in terms of cash flow. And if you are, you know, it's highly likely that you're not gonna be paying taxes on those dollars in your pocket, which is a pretty amazing phenomenon.   Tom: Love it. And then any, you know, costs that come up. So yeah, that's your depreciation schedule, but any deductions you have so some R&M, your property management costs isn't up to you pay for some nice education through Roofstock Academy. This is not tax advice, please talk to your tax advisor. But that is, from what I've heard is doable.   Michael: Absolutely. Emil. you like that rant?   Emil: Yeah,   Tom: I love a good rant, I love it.   Michael: The other thing to keep in mind too, is chatting with your tax professional and strategizing a little bit if you have major repairs to make at the end of the year, you know, that year or at the beginning of next year, because that could have an impact on your taxes. And so I think to be more strategic and proactive can be really beneficial. And so talking about these types of questions and strategies with tax professionals is a super good use of of time and money.   Tom: Yeah, that's a that's a great way to you know, interview tax professionals that you're potentially using them as needle them on some of these different questions. I was just speaking with my tax professional about building a small office like unit and I was interesting learning about it like to be able to use that as a deduction of the costs of building that and again, this is please check for yourself, this is not tax advice, yada, yada, yada, all that preamble, you can only use that space for that particular activity that you are, you know, assigning it for and as soon as you do something else in it, it's violated, right? It's totally not the right way to word it. But there's a couple of very specific rules on building little little offices of being able to deduct that   Michael: Don't let anybody catch you playing fool in that space.   Tom: That's right or whatever working out. Yeah, that's right. Cool. We have two little rants out of that two little baby rants out your answer. Mine a little bit less in depth and technical. Yeah,   Emil: What would an episode of the remote real estate investor be without a couple rants? Guys?   Michael: That's a really great question. Boring.   Emil: Very, very boring. Not entertaining at all. Alright guys, let's end it here. Thanks, everybody for tuning in. Hope you guys got some value out of this one. And like Alvin did, hit us up on Twitter. I'm at Emil Shour. Michael, your at AlbaumMichael and Tom. You're at   Tom: TSchneido. I think I came up with that when I was like 16.   Michael: Like how you give out your email like skater do 27 Yeah, I made that when I was 16 like there's embarrassing. Yeah.   Tom: I just think it's the better things to say but funny names but yeah, nope, not gonna say them out loud. Keep em on the inside.     The old AIM names that are just so ridiculous thinking back to like those and the names my friends had it was ridiculous.   Alright, so that's our episode. Hope you guys enjoyed. Hit us up on Twitter if you have a question we'd love to tackle on a future episode. And we'll catch you guys in the next one happy investing   Tom: Happy investing.   Michael: Happy investing.

In this episode Tom and Emil share their experience with the Refis an HELOCs they are currently processing.  ---  Transcripts   Michael: Hey everybody, welcome to another episode of The Remote Real Estate Investor. My name is Michael Albaum and today I'm joined by my co hosts,   Tom: Tom Schneider   Emil: and Emil Shour.   Michael: And today we're gonna be talking about loans, how to get them trials and tribulations upon getting them and things you can do to expedite the process along the way. So let's jump into it.   Alright guys, so Tom, I'm curious now for a quick update from you, how is your insurance restructuring coming along?   Tom: So I had the call with Nick, who is a an academy member and also an insurance broker expert. And I am we had a great call, and I'm sending him my current policies right now. hopefully get that done today. And then he's going to come back with game planning some options. So it's making progress, albeit not at work speed, but I'm ahead of where I was when we recorded our last episode on my 2020 failings. So making progress.   Michael: Okay, good to hear. I will follow up with you on the next episode and see where you're at next.   Tom: Love this. Thanks. Thanks for being my accountability buddy, Michael,   Michael: That's what I do. That's what I do. Is he looking at every single one of your policies, or just only a handful?   Tom: He's looking at a handful of them. He's looking at like six of them. So well, I don't know. We'll take a look. I'll keep you updated.   Michael: All right, guys, I know that we are all in the midst of some form of loan product. And so we're going to be talking about some of the different products that are out there some of different products that we've utilized in the past, but a meal, I want to start with you since I know that you're in the midst of a cash out refinance, which is something that a lot of investors utilize along the way. So can you walk us back to why you wanted to get this? What was the kind of point and then what the results have been thus far, and what kind of ping us some questions along the way?   Tom: And you're a good person to go first, because you held us up and recording because you had some stuff to do while we were waiting on the line for you related to your refi.   Michael: So we're gonna blast you at the hotseat.   Emil: Yeah, that's right, this is very pertinent, because they basically just asked me for my firstborn child so we can get into it. Alright, so this is the second property ever bought property in Indianapolis, we bought it for 115,000, back in 2017. And right now, with interest rates being so low and inventory being so low and prices going up a bunch because people are owner occupants are driving prices up, because everyone wants to get in a home. Now, the value of this property grew, I thought to about 140,000, or 150,000. So my plan was I could probably cash out our original investment down payment, closing costs, all that stuff was around 25 K.   And I figured if values have risen to 140, 150K, I can probably pull out around 20,000 bucks, and it won't change my payment every month all that much. Because when I got the property, it was a 4.6% rate. And now at the refi, it's going to be a 3.1. So point and a half drop will offset a lot of what would be, you know, if I cashed out at the same rate, I'd be paying a lot more each month. But with that one and a half percent rate drop, my cash flow doesn't really change, my monthly payment goes up like 15 bucks or something 10, 15 bucks, and I get to pull this cash out.   So we got the appraisal back last week. And to our great surprise, usually the painful surprise, this was a good surprise, it appraised for 157,000. So we're actually gonna be able to pull out our entire original investment of 25,000 bucks. So we'll be in this property for $0. And our monthly payment i think is going to go up like 25, 30 bucks in total.   Tom: You know what, I think that is Emil. I think that's cool. You wanna know why I think it's cool?   Emil: Why?   Tom: BRRRRRRR BRRRR   It's actually not like a traditional verb I cut he basically like effectively kind of did a burger, just being able to take all your cash out with the refinances. So it's not a full BRRRR. It's like a BRRR. Like you just Yeah, well, you probably didn't do a big renovation. Emil: I didn't know renovation, I was texting Michael, we were chatting on slack. And I coined a new phrase for this. It's called burger. And so what that stands for big GRP. So one is by the first key is get lucky and have the Fed drop rates. The second key is get more luck with low inventory and high demand. So prices go up. Yeah, the R is refi. And then the P is this probably won't repeat, we probably won't be able to do this lucky sequence of events because we just got lucky we didn't do anything we didn't we didn't force value and force appreciation we didn't do anything special. It's just a nice sequence of events that sometimes when you're in the game, and the environment changes, you can take advantage of that. That's all happened here.   Tom: BGRP. So that's sticky. I like that.   Emil: Very, very sticky. It doesn't quite roll off the tongue.   Michael: Rolls off the tongue so nicely. Fluid, you know, BGRP. So I have to ask though, I mean, I mean, it's we always joke on the show that you're a pessimistic person and I'm an optimist. Do you think that you made your own luck? Or do you really think this was just dumb luck? You threw darts at a board ended up in Indianapolis ended up with a, you know a great property? Or do you want to give yourself a little bit of credit and say, yeah, you know what I did some research, I did some legwork. This was a very calculated decision,   Emil: I would say more luck than anything else, I'm not going to pretend like I saw this coming. And that's just me being really honest, I think you can often delude yourself into saying, Oh, I did all this research and blah, blah, blah. And sometimes, you know, maybe when Detroit or Cleveland in the past, you know, in 2008, when they had meteoric falls, I'm sure there were tons of people who were looking in those markets and saying, I bet Detroit or Cleveland could be on pace for great things, and then unpredictable things happen. I know, we all like to give ourselves a lot of credit and stuff. But I think a lot of stuff comes down to luck in my eyes.   Tom: Yeah, I think that's true. But you also like need to be at the table to like to be lucky like that. Exactly. Like, if you're not if you're not gonna..   Emil: You need to be in the game playing in the game.   Tom: That's right. So circling back on the finance aspect of this, this is something that I think about when I refinance, especially when I refinance pretty quickly from the original origination of the loan. So your example, so you said you bought in 2019, or 2018? Emil: 2017   Tom: So you've made a bunch of loan payments, or a better way to put it as your renter has helped you make a bunch of loan payments. And with it being an amortized loan, the majority of those loan payments aren't cutting into the principal at all. It's just you're just basically, you know, paying that interest piece, I love to hear your guys's thoughts like in refinancing so quickly, it's like, you know, you don't bring the total loan basis down that much, just because those initial payments, so much of it is interest heavy, do you think that makes it like a better time to refinance versus just because you no longer into your mortgage, the more you're going to be able to cut into that hang down that principle total. And I'm just digging a little bit in the conversation and thinking about, I mean, I think we all like the concept of refinancing. But to play devil's advocate, so when you when you're refinancing, you're basically going back to square one, if you're doing another 30 year amortized loan, where you're only paying off interest for you know, are primarily interest for the first several years.   So I know that Michael probably has some a good rebuttal where he's gonna say, I disagree with you, Thomas, I'm happy to hear it. But just to be devil's advocate, you know, with these loans and the way that they're amortize those initial payments, you're just paying principal. And once you get over that extreme, you're just paying interest. And once you get over that, then you're actually cutting into the principal and by refinancing so quickly, you're never really cutting into the principal. So when you take out your mortgage for 30 year amortized, your first several years, so since 2017, your mortgage payments have primarily been going to just paying off interests. And over time of that 30 year loan, more of those payments are going to go towards the actual principles, but by refinancing so early on, you're never really cutting into the actual principal. And you know, to be honest, I refinanced stuff pretty quickly, either there's a pop in appreciation, or I was able to get it a little bit of a discount or whatnot. But my argument for this discussion is, are we throwing money just by only paying these loan interests before refinancing right away and not really cutting into the principal at all? Does that make sense?   Emil: Yeah, no, I get your question to me, because my primary objective right now is to grow my portfolio. I'm not concerned with paying off anything I don't, I don't want to be free and clear on anything. For me right now to be able to pull out $25,000, right, only have my payment changed by 30 bucks a month and be able to go use that to buy something that I don't know, adds 100 $200 cash flow, whatever it is, it's a no brainer in terms of and then I get to have more properties in which I could potentially do what I'm doing right now with right like instead of one property that gets the appreciating you do a cash out refi. You take it and make it two properties, right, and you snowball a lot of that initial equity.   Tom: Got it. So just a paraphrase. Even though the principal isn't getting cut down, because we've refinanced really early on in the mortgage. It's more valuable at this point of your life to just Hey, I want to scale this as quickly as possible, less concerned about getting as much of that loan paid down. Emil: It's like his net worth or cashflow, more important I get is that kind of like?   Tom: Sure, yeah. Yeah.   Emil: For me, I'd rather take that equity and create more cash flow rather than pay down and have things free and clear, grow my net worth faster, things like that.   Tom: I dig it.   Michael: I tend to agree. I don't have a big looming rebuttal for you, Tom. It's not something that I look at super closely. And in fact, actually, I have several mortgages that are interest only because I'm doing some rehab stuff. And so that's like the epitome of what you're talking about is you're literally just paying for the right to have access to the money, you're not changing the principal balance whatsoever. And so doing a quick refinance, when you will see where you have potentially see a dramatic drop in the amount of interest that you pay, I think it'd be a really good thing to do.   And I know a lot of people that are in your like 20 or 25 or 30 year mortgage, and they're thinking about refinancing, and I think that the Question you're posing is much more applicable in that situation where they are so close to getting their home free and clear. Versus do they want to reset the clock, but take advantage of a better rate, there's a lot of things to consider there. And so at that point, you're just so aggressively beating down the principal versus someone in yours, you know, one through 5, 6, 7 even is it making a massive, massive dent on their principal, but something that I personally like to do, and I know, I've chatted with Emil about it in the past is on higher interest rate properties, or on primary residences, I'll actually make extra principal payments, either 50 bucks a month, or 100 bucks a month, something that I would, I'll never notice, thankfully, but that seems over time to make a pretty significant impact that over time, even in that short run, after one to three years of paying a loan down can have a pretty significant impact on the principal. And so make that refi even more exciting, so to speak.   Tom: I like it good little little sidetrack of thinking about the amortization aspect of these interests and timing on a refinance. And it makes a ton where you're super late, you know, your year 20 into a 30 year when so much of your payments is going towards beating down the principal, anyways, just wanted to sidetrack us a little bit on that aspect, cuz it's something to think about, you know, on how much of your payment is going towards principal versus interest.   Michael: Absolutely. And I think if anybody hasn't looked at an amortization table, or amortization schedule for their particular loans, they definitely should, because it's really eye opening, seeing how much is going to principal and how much is going towards interest. I think people are often really pissed when they like, if you add up the total amount of interest paid over the life of the loan, it ends up being like, I don't know, 170% of the original loan amount to begin with, and people stand, it's like, yeah, that's how loans work. So it's really important to really go into it eyes wide open, understand what you're paying, and for how long.   Tom: Yeah, and just to kind of beat over the head of the topic of the amortization. Basically, when you have a 30 year loan, your payments in the beginning of that loan, it's broken up between that payment, some of it is going towards paying down the principal, and some of it is going down paying towards interest. And with amortized loan in the beginning, the early years of paying that loan, the majority of your payment is just going towards the interest and not the principal. So just a concept to understand.   Michael: Okay, so I just pulled up an amortization table that I built for the Roofstock Academy, we have that as part of our academy playbook. And so for example, $192,000 mortgage at four and a quarter percent interest amortized over 30 years, the payment on that is $944.52. And so the payment is going to be consistent month over month for the entire life of the loan. But what changes Tom, like you're mentioning is the amount that goes to principal and the amount that goes towards interest. So in that first month, you make your payment, you have a principal payment amount of $264.52. And interest is $680, for an ending loan balance of 191,735 and 48 cents.   So we can see that the interest portion of the payment totally eclipses the principal payment. So year over a year, so in year one, we will have made a total payment of $11,334.30. And that stays consistent again, throughout the life of the loan, because your monthly payment never changes, the yearly principal that we've paid down on this particular mortgage is $3,236.86. And the amount of interest we've paid is $8,097.43. So again, a massive massive portion going to interest less so going to principal, versus as we get down into year five, again, we've still made a total payment of 11,334, because our monthly payment hasn't changed. But now we've paid 30 $835 in principle and only 7500 in interest. So as we slide down the time continuum, that scale shifts heavier weighted towards the principal side and lesser so on the interest side.   Tom: So it's kind of mind boggling to learn, like the way that amortization work because I always thought like, okay, you make a payment of of your mortgage, and it's it's always split evenly between your principal and your interest. But nope. Yeah, it changes over time.   Michael: Economics is crazy. It's definitely in favor of lenders, that's for sure.   Tom: Yeah. Let's get back to Emil. Some of the friction that you have been dealing with in your refinancing, what are some some takeaways, some gentle frictions and thoughts on, managing anything you could done differently? Go ahead.   Emil: Yeah. So I joked earlier that they're asking for our firstborn. And what I mean by that is they just asked for so many documents, right? And it's funny every time I refi or get a new loan, it seems like it's never standard. It's always something a little different. And if you're doing a cash out refi versus just buying the property that's a little different. The biggest tip I have I would say is like keep a folder with as many of these documents as you can write, like, all your prior tax returns, all of your leases, all of your evidence of insurance on the property, and then anything that comes up that a new lender needs throw that in the same folder.   So for example, they asked me for the certification of our trust, because we hold these properties in our trust, the lender is asking for like that first page, that certification of the trust is what it's called, it's I've never been asked that before. And so I had to go, like find that and scan it or whatever. But now I'm going to keep it in that folder for any time someone in the future asked about that. And I have like, one central place that I can keep these documents.   There's certain things like every lender is going to ask you for two months of statements for all of your checking and savings accounts, and your pay stubs. So those are things you're probably not going to regularly update every month. So those are probably something new you go get when you submit an application or whatever. But there's a lot of things that are standard that you can just keep in a folder, and it'll just make it so much easier to collect and wrangle all these files and documents you need to send the lender.   Michael: What else? Do you have anything Top of Mind of other documents that people should expect to have on hand that you've been asked for? In this particular refi?   Tom: Like, is that a question you're asking when you have an answer in the back of your head of some additional ones?   Michael: No, no, no, I'm just curious.   Tom: I just get I sometimes ask questions that I like have an answer for   Michael: To set myself up to spike it?   Tom: Yeah, just set up yourself.   Michael: The Michael Jordan of podcasting questions,   Tom: but Michael Albaum.   Emil: This one was a little different in that this is the only property I have with an HOA. So that was a new one where I had to go back and dig up like proof of Hoa. There's also this funny side story of I hadn't paid my Hoa in a year and a half. If I had $1. For every time a bill got sent to the property I own and not not to me, man…   Michael: You have $5   Emil: I'd have $5. But I paid way more in fines. Let me tell you. So   Tom: That's miserable.   Emil: And there's nothing you can do. It's not like guys, you had the wrong, this is recorded. Why wasn't it changed? The buck stops with you. So you got to take care of these things you can't expect? I don't   Michael: So are you saying that as a result of this? refi? You found out you hadn't paid your Hoa in a year and a half?   Emil: Yes, sir.   Michael: How was it being paid before you've owned this property for you know, almost four years.   Emil: What happened was I've changed property managers in that time. And my last property manager was terrible. Sometimes you just forget that things need to be transferred or whatever. The thing is, is that there's so many bills you forget when one you're like, wait, have I paid my Hoa bill? You know, there's like Hoas…   Tom: How did you manage? So did you end up just having the property manager reach out to the HOA? Are you doing that on your own? Or how did you know?   Emil: I got a letter from an attorney saying there's a lien on my property until I pay my Hoa. So in the middle of a refi. No less. So that was fun.   Tom: Oooogh   Michael: It's so interesting how attorneys can find your proper mailing address immediately, but.   Emil: Exactly. Yeah, it's hilarious. Yeah. I at least told them what happened. And then they removed like their attorneys fee, which was like 100 bucks, which was at least nice. But still, it's   Michael: So you have a year and a half worth of HOA dues. Plus late fees, I'm sure.   Emil: Yeah, exactly. More or less don't buy properties with an Hoa is just a general.   Michael: You know, Counter point. I don't think we can make that blanket statement.   Emil: I know I just personally now dealing with an HOA if there's two properties you're looking at, and one doesn't have an HOA. The non Hoa is our choice.   Michael: Yeah! HOAs 99% of the time a real pain in the butt to deal with.   Emil: I know, look at this property is appreciated. It's got an HOA it's obviously been good. Like, that could be part of why it's appreciated in this area, right? Like the the community takes care of their properties and whatever. So   Michael: Totally.     Tom: Don't bite the hand that feeds you.   Emil: Yeah, totally. I'm just bitter right now. I'm a little salty right now, because I got fine.   Tom: Michael is asking what other documents are asking for. And I think that is emblematic of the document request process where instead of just asking for one time of the documents you need, it's like an ongoing run of like, every two or three days asking for a different document. It's like, Hey, you know, I'm excited to get you this information that you need that we both are excited about closing this loan, just send me an email, just just send me what you need. And I will respond back, I get it that sometimes, you know, something may come up where it will end up asking for another document.   But I feel like most the times, it's just a very slow trickle of like, okay, send me your, you know, IRA or 401k or bank account or checking, okay, now send me your insurance on these other properties. Okay, now, it's like, let's just do let's do one request. Let's do it one time, but I mean, whatever, not a big deal. The other kind of grinds my gears in this process, the website of the loan application. So a lot of these companies, they have one website for the loan application, and then one for actually managing the loan. So you set up this email account this for whatever, uploading documents or whatever, and then the loan closes, and you go back to that same website to do anything and it's like now That's just like a special purpose website for this company even though it's the same company as managing the loan they make you go to a different website let's let's get this all integrated Come on Come on everybody like we're originating loans and managing the loans let's do it in one spot.   So anyways that's the other grinds my gears you know, basically one storefront for originating so and I think most websites are like this you go to I'm not gonna say specific companies but even though it's the same company, originating it the other website for actually managing it, let's, let's get this all integrated.   Emil: You know, the first point you mentioned Doc's, like, all throughout the process, it's like you get, they ask you for a ton in the beginning. And then it's like your closing week, and they ask you for a ton. It's like, Ah, there's never anything in the middle. It's always in the beginning. And always at the end. It's so funny. It's always the same. It always works like that   Tom: In a marketing language. It's a drip campaign of asking.   Emil: This is like, all up front, and then all on the back.   Michael: Tidal wave.   Emil: Yeah, exactly.   Michael: I was gonna say real quick anecdote for kind of two stories relating to document request ridiculousness. So I bought my primary like two and a half years ago, and I got approved for the loan without going through the underwriting process and like, Oh, hey, we need this k one, which for anyone who doesn't know k one, it is basically a membership as part of an LLC form that you report on your tax return so the LLC performs a tax return and then gives all its members a K one so I bought some stock like $100 worth of stock in his company several years ago. And for whatever reason this company issues k one   Tom: Bitcoin, it's doing pretty well now it's, uh, you know,   Michael: I wish I wish, but so like, I don't know, on the K one, it shows like your membership ownership, percentage, and mine was like point 00000074 to have whatever like $100 for the stock. I got, like a $2 dividend. And like, Oh, we need this k one. Are you kidding me? Like I got a paper copy of it. And I sent it to my CPA years ago, because it was from two years ago, tax return. And now I don't like I don't have it, like, Oh, well, we need it's like, Are you kidding me? So my CPA, who's a partner at the firm is like, this is not materially important. This is like a $2 distribution. Like, I don't understand what the problem is. And they're like, Oh, yeah, okay. Okay. All right.   And then, literally, like you saying, a meal a week before we close they go, we need a letter from your employer saying that you can work remote. I was like, I'm literally on my way out the door to getting married in Costa Rica. You can go figure out how to get that because you're not going to get it in the next two days. When we settle too close, like, Oh, we need it. We need it. Like maybe I'll just come down to your office. I'm like, dude, I work for a multinational company, headquartered, like on the east coast. Like, that's just that's not happening. Sorry. So you should have asked for, like, months ago when you were doing this and like, okay, we'll get it figured out like, great. Do that. See ya.   It's like, unbelievable. So I think the lesson takeaway for me is like, push back, like they don't have the right to just delay and delay and delay like, we have some power as borrowers. And just yeah, I think just don't take flak from people be like, Hey, this is your fault. You need to go figure it out. Now. Don't make your lack of planning my problem.   Emil: That's right. Yeah. Especially when they ask you for that downpayment. You just say, No, I'm good.   Michael: I'll pass. I'm good.   Emil: You guys got this?   Michael: All right, Tom, I want to shift over and ask you a couple of questions. So I know that you're in the process of doing a HELOC. But you know, any final thoughts before I take you out of Limelight?   Emil: No, no, I'm done. Take my mic away.   Michael: Okay. So Tom, you're in the process of getting what's called a HELOC. And for anyone who's not familiar, maybe you could walk us through what that is and why you decided to utilize that as opposed to a Neil's cash out refinance.   Tom: Yes. So HELOC is a home equity line of credit. And we've talked about on the show a little bit. And basically what it is, is it is a line of credit that you're getting. That is the difference between your loan amount and the up to a certain percentage of the value of the property. So for just a really simple example, let's say your house is worth $100,000 and you have a $50,000 loan, you can get a HELOC. Most of them go up to 80%. I've seen up to 90% that would be worth in this example of a $100,000 home with a $50,000 primary, this would be a $30,000 HELOC, so that's a rough the way the mathematics works. So I have this once this closes and I'm actually signing, I think tomorrow to close the HELOC then I will get basically it's almost looks like a checking account where this money is available for me to take out and spend on whatever the heck I want to there's no like rules on what I can or can't spend the HELOC money on and there is 10 years in which I can draw on this money or take it out. And then I believe it's another 20 years that I have to pay back on it. So that is the HELOC it is pretty much the same process as you would go through as a refinance where they'll do some sort of an appraisal on the property to determine what the value is so they determine how big of a keylock you can get you there is title involved. So this gets put into a second position behind like the primary mortgage there is you sign with a notary when you close to me All official.   Michael: So the process sounds pretty similar to like a traditional cash out refinance or traditional refinance. So yeah. Why did you opt to go for the HELOC versus a cash out refi.   Tom: I went for the HELOC? Well, this is on my primary. There's some benefits to it. One of it is you don't pay anything if you're not using, but you have that credit available. So I actually did all of this in 2020. I mean, just the fruits of having super low interest rates. So I did it initially did a refinance, I didn't take any cash out. So I kept a pretty healthy loan to value ratio, a lower loan to value ratio and instead of doing a cash out refinance for all of that equity that I had in the home, I am capturing that through the HELOC. And as I said before, the benefit of HELOC is I don't have to pay anything on the on it when I'm not using it. It's just there as like an available credit card at a super super low rate and the amount that you can take out. Depending on how much equity on your house can be super high. Like I know this one company, you can get a HELOC up to $200,000. And I can spend that on whatever I want. If I want to go buy some down payments, buy some property depending on how comfortable I am with debt and all that good stuff. Or if I want to do a personal remodel or stuff like that. It's whatever I however I want to spend that money I can.   Michael: Right on. And so process wise one isn't really any easier than the other it sounds like it's similar. What I will say that with both he locks and cash out refinances.   Tom: Oftentimes they won't even require a full appraisal. Like if you're buying a new property and buying it with a loan, they're going almost always going to require an appraiser to be on site and do that rigmarole but with key locks as well as refinances. Oftentimes, they're fine just doing a desktop appraisal. And what that is, is an appraiser just from their home looking at comps and not needing to go and do a full inspection. So it can be a little bit cheaper and faster on the on the appraisal side.   But it's the same process of like document requesting. And one of the issues that came up this time since you know we did this in pretty tight coordination where we refinanced our house then get the HELOC right after and when we refinance our house, the original lender didn't clear title completely. So there's some still some stuff that they're doing. So in the process of pulling this HELOC, they're like, hey, there's still a lien on your property. So it was probably a week and me going back and forth with the original lender and the company that's doing the HELOC and the title title company that's helping the HELOC where I'm like doing phone bridges between the new company like and what it needed to happen is they needed to notarize a document the original lender that had the original loan, you know, had to notarize a document saying we do not have this lien position anymore, blah, blah, blah. And and I probably started this process in November and it's getting close to finish and it's hard with a lot of investors are super type A and like move fast. And you know what, alright, what's next, what's next and just to be moving in this sort of slow motion it's like having a big chalkboard and some nails constantly dripping through but…   Michael: Fast as molasses.   Tom: As fast as molasses that's right.   Emil: I'm smiling and shaking my head because I just got an email telling me the same thing on this cash out the last title company, whatever hadn't cleared it when we bought it in 2017 So…   Tom: You know, though, I think the important thing to put in a context is this is kind of a moat, you know, this is a moat of the business that for a lot of people you know, it's not worth this kind of work and not that this is a lot of work it's just kind of the hands of a bunch of institutions. But I like to think of it as a moat like this type of investing strategy. There are a lot of benefits to it all the stuff we talked about with cash flow appreciation being able to you know, do things with debt and tax advantages and a reason why everyone and their mother doesn't do this is because there's this little bit of overhead that you have to deal with and a little bit of a know how and on what's available and getting through it. So something that keeps me whatever optimistic and like totally worth it is this is a little bit of a moat as in like not everybody wants to go through this process and I'm okay doing that to get the fruits of real estate investing that like that fruit taste.   Michael: The fruit to the castle, the fruits of the castle.   Emil: Yeah, you're right. It's a hassle and that's the silver lining is that probably scare some people away.   Michael: Okay, guys got anything else tidbits, additional tips, tricks to make people's lives easier and grease the skids for getting their loans done.   Emil: You had a good one that you posted on Twitter the other day about how you kind of organize files and folders. I think that'd probably be a good little message to end this episode on.   Michael: Yeah, that's a super great point, Emil. So actually, for everybody listening check out last Saturday's weekend wisdom. We actually recorded an episode talking about specifically folder structures and how we structure them to be as most efficient as possible when doing refinances or purchasing or anything lending related, or even just end of your tax planning. Having all of those documents accessible at your fingertips makes your life much easier.   Thanks so much for listening, everybody that was our episode. If you liked it, feel free to leave us a rating or review wherever it is you listen to your podcasts, they are really, really helpful for us. So we'd love and appreciate the support and shout outs, always looking for more content. So if you have an idea for an episode that you'd like to hear, leave us a comment, and we'll talk to it. We'll see you on the next one. And happy investing.   Emil: Happy investing.   Tom: Happy investing.

Investing with family can be complicated.   In this episode, discuss things you should take into account when investing with family and some of the agreement structures that are common for this.  ---  Michael: Hey everybody. Welcome to another episode of the remote real estate investor. My name is Michael Albaum and today I'm joined by,   Tom: Tom Schneider   Emil: and Emil Shour.   Michael: And today we're going to be talking about partnering with family to do real estate deals, this can often be a hotly contested and debated topic. So I'm curious to get everybody's insights. Alright, let's get into it.   Alright guys, family, money, sex, drugs, rock and roll, all the cool things, all the fun things we want to talk about in the show. Have you ever done a deal with a family member? Tom?   Tom: I have not I've approached family member but I think my family is generally a little bit risk averse and doing this kind of work. And that's okay. I you know, I've heard horror stories of friends doing stuff with family members were friends that it's gone south, but I personally have not done so. I'm going to be sniping in some some questions and maybe throwing some pessimism shade. But I've heard of people being successful. But anyways, long answer No. Short answer long. No.   Michael: So when you say that your family is risk averse, does that imply that real estate investing is super risky?   Tom: I think that it's fear of the unknown. Michael, if you're not familiar with it, it's can make you concerned that…   Emil: It is a very common consensus.   Tom: For sure. We'll have to kind of drill into some of that on another episode, but not risk averse. But just yeah, fear of the unknown. That's where I'd say my lot my family, I think a lot of people like a lot of them, like get it and want to do it. But man that going from zero to one is a pretty big move. That hasn't happened.   Emil: Yeah, everyone has heard that horror story too, right? Like, oh, I had a friend who bought real estate and it became a crack house. And then it's like, okay, we're gonna pull the one. Everyone's heard that story. And so I think that's where the scariness of real estate is coming from, right? Michael: No one ever says like, Oh, yeah, I had a friend into real estate and worked out really well. So I want to do it now, too.   Tom: Yeah, I mean, I think with a lot of people, it's fear of like, looking like a dummy, you know, and like throwing money away. And I think anytime you're quote, unquote, like making moves, like there's some risk for that. And a way to think a lot of people is just turn into a turtle and just do nothing.   Michael: I like turtles,   Tom: Nice throwback, cultural reference.   Michael: It's interesting. Like, I would argue more people invest in the stock market, via retirement accounts, or via taxable accounts than invest in real estate. And so it's almost become normalized to say, like, oh, man, the stock market went down. So I lost a bunch of money today. And I was like, Oh, yeah, like that happens. That sucks. Versus in real estate, I think because there are less people doing it, it's probably talked about less. And so people are getting less exposure to it. And so they don't want to be that one person that looks bad, who went and lost money in real estate versus all their friends, family, whatever other acquaintances are losing money in the stock market, no one thinks twice about it because it's been normalized.   Tom: Yeah. It's like what weighs heavier like the aversion for loss? Or the what's the opposite of aversion?   Michael: Wanting? Desire?   Tom: Desire, there we go, versus the seeking gain seeking. Yeah, aversion is a very strong force.   Michael: I think loss aversion is stronger than gain. I think we did a book club at the Roofstock Academy, where we were talking about negotiation and that kind of thing. And people's loss aversion is a stronger driving factor in their decision making than ability to win and gain.   Tom: I think it's not just loss aversion, but like aversion to looking like a dummy. You know, like, you don't want to be that person that the family talks about, like, oh, Tom, you know, he put all his chips on XYZ and lost it all.     Michael: We told him it was silly.   Tom: Yeah, it was silly. But anyways, no, so have not done deals with my family. I think I'm the only one in my family network that has drank the kool aid the sweet, sweet kool aid of real estate.   Michael: Okay, Emil, what about yourself? Are your lips sticky with kool aid? Or have you gotten other people to, to enjoy with you?   Tom: Do you share her kool aid?   Emil: I don't. I don't like germs. I have spoken to family and I have family who is interested and ready, but I haven't found anything where it makes sense. And I haven't needed to include anyone yet. So I've had the conversation. Have some family members who are interested for when the right deal comes along where we need some extra capital they're interested in you know, I've set up some terms with them like we've gotten all the groundwork done like what they're interested in, how I think I would want to structure it. So had a lot of that conversation just haven't pulled the trigger because we haven't found any things investment sure   Tom: Question for a meal or in moving forward with this. If you had to say the kind of the push the impetus is it more you looking for another capital partner or is it more Your family or friend wanting to participate in, in the kool aid of real estate investing,   Emil: I think it's more so me requiring capital. And obviously, I'm going to offer them attractive terms better than some of the other invest… like, my family who I'm talking about here. They have other investments that they do on like the lending side. So they'll do, it's not like hard money lending, but it's this company that issues loans to people who have a harder time getting lending, so the interest rates higher. So they usually get like, I don't know, six 7% annual return.   So I'm thinking, you know, how can I offer a, an even more attractive return so that they'll want to invest with me if I need that money versus going and putting it with this other company? So they have some experience investing in real estate notes? Yeah, direct real estate, but with me, it would be like a note where I would pay them back, I don't know, maybe in 12 months, or whatever, depending on the type of project we take on.   Michael: So that would be a debt structure as opposed to an equity structure,   Emil: Correct? Yeah, right now, it's only been talks for a debt structure and not like a JV type partnership.   Michael: Okay. And out of curiosity, why is that for you?   Emil: Um, for me, it's probably just my control freak nature, I would rather just be the one in the driver's seat and not having to really answer to anybody and really make my own decisions, rather than, you know, you include people and they get a right to make those decisions, too. And that's not what I'm looking for with my real estate investing. So if it requires me to grow more slowly, because whatever, I'm the only person in the driver's seat, that's fine. But there's people who are interested in just the debt side of it and don't want to do any of like dealing with real estate or the operations or whatever.   Michael: So is there a way to structure it where they have an equity position, but can still maintain that positivity?   Emil: I'm sure there is. I approached it from a debt structure, they were cool with it. And that I think, works for both sides. So I didn't even you know, think about exploring kind of other avenues.   Michael: Yeah, makes sense. And for people listening, that are sports fans, that might not know what the term JV means in real estate, what is JV?   Emil: So that's a joint venture, that's where multiple people are pooling their money together multiple names on title multiple names on the LLC, or whatever it is holding this property. So they own the property as well, versus this would just be me owning it, I have like a note with them a debt obligation to them.   Tom: And continuing to do the just the definition game before going back too far. Equity versus debt. So debt would be just someone who's just acting as a bank, they're not they're not on title, they're not you know, in a JV, it's just straight borrowing money from that person, where equity be equity is actually participating in the upside of the of the real estate. So debt would be like a confirmed amount on what you're paying back, you know, to that person, you're borrowing from where equity, it could be variable, there's risk, you know, perhaps the person who's loaning money loses money, if they're, you know, structured in an equity way, versus debt. It's just a flat percentage, or however that is structured. And there are pieces I should, we're missing in my explanation there, guys?   Michael: No, I think that's great. But just to kind of bring it all home is If so, Tom, if we're in a debt structure, partnership, and I'm going and buying the deal, I might borrow $100,000 from you, and I'm going to pay you back X percent or X, you know, dollar amount monthly, based on your preferred return whatever you're trying to achieve as the bank. versus if I were to go into a LLC, I sell that property for 200. Grand, I just pay you back what's outstanding of that note of 100 grand versus if a meal and I were partners were Equity Partners. And I bought that same property for 100 grand and we were 50% partners, went up to 100 grand Emil would share in that profit as well versus you, Tom, as the as the debt partner would not.   Tom: Why you gotta leave me out like that? All right Mike, your experience, partnerships, family friends, yeah,   Michael: So I've done a bunch of stuff. My very first deal was a debt partnership with my family, they loaned me the money to purchase that first property. And that was worked out great at the time, interest rates were so low, I mean, interest rates are still so low, so they're able to get a better return than having their money sitting in the bank. It's a very safe investment with me, because they know where I live if I were to default, and it's secured by the property. So there's really very little risk involved for them. They didn't have to do the true traditional underwriting that a lender would traditionally do on somebody to determine, okay, is this person a reasonable borrower, because they knew me and stuff. So that was a really, really great win for both sides.   Tom: How long? You don't mind what what were the what was the length of terms of the debt?   Michael: Yeah, so the term was interest only for five years, because I borrowed more than 20% to help me get into the deal. Because I was just coming out of college, I didn't have a ton of cash. So the mortgage payment, the fully amortized mortgage payment would have made the property negative cash flow. So my dad helped me do is he's like, Okay, well, what if we just do interest only that significantly reduces your monthly payment amount, and then this property will cash flow. At the end of that five year period. Hopefully the rent will have increased So that way you, you'll be able to support a full mortgage payment.   So that's happened, I've opted to continue with the interest only route just because the cash flow is really killer and the appreciation is quite rapid. And so instead of paying it down, I have a better use for that cash flow elsewhere. At the end of the lifecycle of that property, whenever I ultimately sell it, or at the end of the next five year term, I'll either go to a fully amortized payment with principal and interest. Or if I sell the property, the loan balance has remained unchanged over time.   I mean, it's an expensive way to have access to capital. But it was the only way that made sense for me. And it was the only way I could get into the deal. So I said, Okay, it makes sense. Let's do it. And it worked out really, really well.   Tom: Opportunistic.   Michael: Yeah.   Emil: When you structure this, do you put your family on title? Like, how do you kind of is it just like you have a contract? And it's just you making payments? Like, how do they get in on it so that they feel secure? And everything? I'm curious for my own?   Michael: Yeah, so it can it can be one of two ways. So one way is just to have a promissory note that everybody signs and says, okay, yes, Michael Albaum is on the hook for this dollars. And it's, I mean, it's a contract. So if I don't make a payment, there's a late fee. And if I don't make the payment after the late fee, then they probably can get foreclosed on. And depending on how you want to structure it with your partner, or the family member or friend is they can actually have take a first deed of trust on the property and record that as them being the lien holder.   So if things go south with the relationship, and you just decide to not pay them, they actually have they can take title to the property quite easily. And so then you have to have them as a mortgagee on the insurance and on title and all that kind of good stuff.   It can go a number of two ways. The promissory note is definitely the more informal way to do it. While it's still formal, it just is less eyes on it, I guess you could say it makes it a little bit easier. versus doing the recording is is a little bit more hands on. That was one deal I did and then I partnered with my brothers, we bought four duplexes out in the Midwest. And so I bought two and they each bought one and we formed a multi member LLC. And so we kind of pooled our money together, we talked about a couple different ways to structure it. And the reason we did that is to get a killer deal on these four duplexes, because basically, we bought a mini portfolio, they were all bank owned foreclosures. And so we said, okay, we'll buy all four of these from you, bank, give us a killer deal. And they did. So in order to do that, we had to form this multi member, we didn't have this multi member LLC, boom, it was much easier to do, because now it was just a single transaction as opposed to, okay, my older brother buying his one, my younger brother buying his one and me buying my two. So that was a really great winner as well.   And now what we decided to do is share the expense load, because the properties had slightly different property tax rates, for whatever reason, even though the purchase price was all the same, we knew that they were going to have slightly different expenses from one month to the other. So what we did is we said, Hey, you know what, let's just pool the expenses across all of us. I'm a 50%. Owner, my two brothers are 25% owners. So it's almost like a co op in that regard. So if you know, my elder brother had a really bad month, this month, we all share in that loss versus if it's smooth sailing across the board for everybody. Everybody comes out ahead.   Tom: I got a question for you, Michael, I love the way this is working out. We're just kind of go into these use case, because I wrote a bunch of questions ahead of time. So the amount of work that it takes to operate and do the acquisitions and all of that, how did you guys determine that upfront? And is the person who's doing more of the work getting compensated? How do you structure that?   Michael: Great question. So typically, in that type of arrangement, if these weren't my brothers, I would have asked for, what's the word?   Emil: Acquisition promote?   Michael: Yeah, kind of like a promote, which is basically just the work involved for putting the deal together. And so it's family. So I was like, yo, whatever, you know, we don't need that, I'm happy to do it. And I was actually already in the area for other reasons, anyhow, like looking at another deal for my family. So it worked out quite well. But so for the management of the manager, because there's definitely a lot of ongoing work, paying the property taxes, paying the insurance dealing with the manager dealing with the home warranty, companies setting all that stuff up. So we decided to do a management fee that the LLC would pay the manager which I happen to be, but I had to participate in that payment as well. So I was paying 50% of my own management fee to manage the manager and kind of do all this stuff on a monthly basis. So he said that up until automatically every month from the rent, I got paid a management fee to deal with all that deal with the taxes, accounting taxes at the end of the year, all that kind of good stuff.   But so I think it's really important to outline all of that in whatever kind of partnership agreement someone's utilizing. We utilize a multi member LLC structure. So we just had an operating agreement, that outline Okay, who is responsible for what these were the duties, roles and responsibilities of each person? And it was very cut and dry. And it worked out really, really well.   Tom: On the acquisition side was it I assume, since you liked the taste of that Kool Aid so much, who was driving the acquisition process?   Michael: I was, so I was out there looking at another deal for our family and and happened to come across these other properties. And I said, Hey, well, you know, while now here, I may as well look at other stuff because my family always loved doing things for multiple reasons. So we were already invested. As a family out in this other property, and so I said, Oh, these are these look interesting. And I was making contacts with property managers and agents anyhow. So I came across these and say, yeah, this, this sounds awesome. So put it all together and brought it back to my brothers. And I said, Hey, you guys want you on in?     Tom: That's awesome. And so you said your family was already doing stuff out there anyways, I mean, just kind of curious digging into the life of Michael, was this deal done, like before you were involved, or the other stuff that was going on out there?   Michael: No. So it was simultaneously. So we were in the process of purchasing a commercial property out there in the Midwest. And so my dad sent me out because I was being physically constructed. And so my dad was like, hey, go check it out. Because that's what I used to do for a living is look at buildings and fire protection, and all that kind of stuff. So he was out there looking at the building and setting up our kind of footprint out there setting up the team meeting with property managers, meeting with agents, just kind of getting a lay of the land, so to speak.   And so got in touch with this other residential agent, and hit it off. And after interviewing, several decided this was the one to utilize. And she showed me some great properties. It was interesting, she actually double ended the deal. She had the listings from the bank, which again, they were bank owned foreclosures. So anytime this bank foreclosed on properties, they gave it to this agent. And so she said, Hey, I got these four properties. And it worked out really, really well. And then she stayed on as the manager as well. So I always talk about that in the academy, anytime you can utilize a agent who is also a manager, I think it's a big win, because they're very tied into the sales and acquisition side of the market, as well as the rental side. And an agent gets paid based on commission based on when they transact. And if they take off, you never see them again, you know, tough luck versus an agent, you're kind of hitching your wagon to their horse, so to speak. And so you know, you're in it together. So if they sell you a lemon, they've got a manager, lemon.   Tom: Got it cool. Any other examples, or you want to walk through it?   Michael: Yeah, so I've. So that was, let's say, we covered debt structure. So I did an equity partnership with a family member, they provided the capital, I provided the deal, and the management and the rehab and all that kind of good stuff. And so we're in the process of selling one of those properties right now. And they get to collect all of their money back plus, hopefully about a 50% return on their money for just providing the money to do the deal. So that's been well knock on wood will be once it finally sells a great win for everybody. And then another property that we bought together, they'll just get to collect cash flow, and literally have to do nothing for it and gets participate in the upside as well for when that property ultimately does appreciate. And we do sell it at some point down the road.   So I've done both debt structure and equity structure, they both have their place, they both can be great. On the debt side, it's great, because everybody's making money, the lender is making money day one. So if that's something that they need to do great if they have capital laying around, but they're not sure what to do with it, or how to invest it or maybe not interested in learning how to invest in real estate, but want to participate in the upside that real estate offers, the equity structure can be a really great way to go. And it's nice, because then you don't have that debt burden looming over your head as an owner operator. So especially for rehab stuff, which is a lot of what I'm doing right now, the equity structure makes way more sense, because the properties just aren't cash flowing, because they're being rehabbed. So to not have that looming, it's really nice.   Tom: Michael, I'd love to hear what are some of the different terms or I guess, common terms that you've either seen or used, both on the debt side? And on the equity side? And specifically those terms? You know, how long are these typically structured for? And on the equity side? What How is that typically broken up? I'd love your…   Michael: Yes, so I've been super fortunate in that I've got very caring, loving, flexible family. So anywhere from three to 6% on the debt side, in terms of interest rate, which is traditionally better than what you're going to get sometimes can be better than what you get at a bank, both in terms of being the borrower, and then also in terms of being like in terms of parking your money there. So for the person doing the lending, there's no way they're getting three to 6% by having their money in the bank. And as a borrower, there might not be any way I'm getting three to 6% depending on the asset and timing of the loan. So it can be a really great way to go again, kind of a win win.   And then on the debt side, I've just done 50/50 partnerships where people plug in, they pay for the acquisition, and most or all of the rehab, I take care of everything else. And then we just split everything down the middle 5050. And that's worked pretty well for me in the past. So it all kind of depends on each person's individual situation and what their individual goals are. If like Emil, you were mentioning, you're borrowing from family that's doing hard money lending, they have an opportunity to make, you know, 567 percent so you might have to offer more attractive terms versus the person that just has their money sitting in the bank because they're scared of the stock market and they don't know real estate, you know, they might be thrilled with a two and a half, three 4% returns, that's way more than make it in the bond market. And then as far as as structuring, they typically just do fixed 30 year financing and Basically locks in payments to that family member for a long time.   And of course, because we're family, we try to be flexible. And we all understand that there's money involved. And that can often complicate things, but we all talked about, look, if anybody feels like they're getting taken advantage of, or things aren't working out, let's talk about readjusting this. Because if interest rates go up to 15%, and somebody can get 15% by just parking their money in the bank, well, yeah, there's gonna need to be some conversations had to adjust that. So that's the nice thing about doing this with family is that you can be flexible, you're not beholden to the Fannie Freddie rules, you know, this is so much less regulation and eyes on it. It's just whatever is gonna work for everybody involved in the deal.   Tom: Have you ever had a deal go sideways, or had some like major issues, I'd be curious to learn about experience in conflict management, but just like you're doing this partnership with somebody and things are going poorly, some one recommendations and to maybe some case studies or experience in managing when there's issues.   Michael: Yeah, so might not be the best example. But this most recent deal that I worked on with a family member, where I was at 50%, equity partner, they put up the cash to do the deal. There was a contractor that we had involved to just was not working out well at all, he had all the right answers for all the questions, and then turned out to be a total slime bag. I mean, on the verge of criminal, so it did not go well, needless to say, but he was who we were planning on utilizing for a lot of the rehab on the building when we bought it. And so I was running point, giving updates to the family member that financed the deal. And I had to come and say, Hey, you know, this didn't work out. This isn't go as planned, we were supposed to have everything turned around in six months for X dollars. Well, that didn't happen.   So I basically fronted all of the additional costs to get it right. Because the way it worked out is that we just we didn't get the rehab done. And so things were slowing, and the building was eating money. And the rehab wasn't getting done until we weren't generating additional revenue. And then property tax payments, hit insurance payments hit so everything happened at the worst possible time. And so I, you know, I could have gone back and said, Hey, I need more money. But I made a commitment to my partner. And I basically said, Okay, I'm going to eat all this cost all the additional costs and fund the rest of the rehab that you thought you had funded already. So to make it right. And so that was a really big punch in the gut to just not have things go well, but being honest and transparent was by far the best way to go. And my partner was very flexible. They understood that, okay, this is real estate, they understand construction, things are always more expensive and take longer. But this was just one of those instances where things went really sideways, and you're playing with other people's money. So that to me has a much bigger weight on my shoulders than if it's my own money. So I said, Hey, I'm going to go make this right, I'm going to do right by this partner and suck it up and deal with it.   Tom: I love it. I think it's kind of a general takeaway in these like communications is so important, open, honest, constructive, real time. And you might have mentioned this in a previous episode, but I love the Four Agreements by Don Miguel Ruiz, and it's the the four agreements are, be impeccable with your word. Don't take anything personally. Don't make assumptions and do your best I think, as a general credo for life, and then also partnership is a good way to go with. Go ahead, Emil, I see you jumping in.   Emil: Yeah, one other takeaway I thought might lay your your thoughts here is like if you're doing this, either have some of your own money set aside, or raise a little bit more as a buffer in case things do go sideways, you don't have to go back and make I guess what's called like a capital call, right? Like projects going extra, you don't want to go back to your investor and say, Hey, we need more money makes you look bad, it makes it likely that you're not gonna less likely that you'll do a future business with this person again. So like just having some money set aside in case some things do go sideways, whether it's your own, whether it's the money you get from them, just having a little bit of buffer for things that do happen like this.   Michael: There is such a difference for somebody, if I go to you and the owner and say, Hey, Emil, I need $30,000 to do this project. Really great, cool. 30 grand, here you go. And then I come back to you a few months later and go actually I'm able to project perform really well. Here's five grand back, you're like, Oh, awesome. Michael crushed it.   As opposed to Hey, Emil, any 15 grand to do this, oh, three months later, by the way, Hey, man, I need another 10 grand to get this done. And you're like, what? So at the end of the day, it's still 25 grand out of your pocket, but to under promise and over deliver as opposed to doing it the other way around? is I think so huge. So that's for sure been, like my biggest takeaway is things will go wrong. They will go sideways more than you think. And it'll be more expensive and take longer than you anticipate. So just be ready for that, especially with construction. It's just one of those things. So with partners, you want to be over deliver.   Tom: One more question for me, and I'd love I know, Pierre is looking into doing some stuff with family members as well. I'd love to hear some, you know, give him a chance to have some self serving questions. But my last question is related to initial kind of prenup or contract that you have. What aspects Do you think it's really important to get into writing upon making either a debt structure or an equity You know, just to specify make it super clear upfront, I'd love to hear your input on that, in that that prenup, but you know, I'm saying…   Michael: Yeah, yeah, just like, like an operating agreement, essentially, if it's a form LLC, or how you're going to operate things if it's not an LLC, so I think it's super important to just have everybody understand what the expectation is around their dollars, whether they're putting money in or they're expecting money out, how long is this money expected to be tied up? And how do you see decisions get made? Is it majority number of people who vote is it whoever put in the most money that gets to control the decision making is it whoever is the manager who may have put no money in so understanding the roles and responsibilities and duties of every person, I think is really important. And having an understanding of who's responsible for what and how power is distributed, so to speak, is really, really critical, because unmet expectation is really what leads to friction in relationships.   And so if you talk about all the expectations, again, for time and for money, and for roles and responsibilities, that tends to alleviate a lot of things down the road. Now, of course, you're not gonna be able to think of everything, you're not gonna be able to anticipate every situation. So planning for the worst, but hoping for the best with whatever you're aware of is great. And then talking to other people that have done partnerships, because that's a blind spot, like that was a huge blind spot for me was not anticipating the property taxes? And what if the contractor doesn't work out? And what if this goes longer than expected? So now that's less of a blind spot for me still working on it on a regular basis. But if I had talked to somebody that had done this exact thing a little bit more in detail, probably would have worked out better?   Tom: Nice. Yeah. Pierre, do you have any self serving questions you want to ask?   Pierre: We're just talking about this yesterday, trying to figure out a payment structure, what's a fair payment structure that he could pay me for the time that I put into what we're doing, we still haven't come to a conclusion yet. But we want to make sure we have some sort of contract so that no one's feeling… I mean, my brother is very generous. So he doesn't want to feel like he's using me. But at the same time, I feel a little bad, because I don't think I'm bringing massive value, if you hired a asset manager, they'd be a lot better at doing what I'm doing. for him. I'm just like bumbling around trying to figure this stuff out with him. And so Asset Management do like one to 2% of monthly income. And so if there's only one property, and I'm only working on one property, that's pretty low for me doing but then at the same time, I'm not bringing that much value compared to what a real asset manager would be bringing in, like Tom says, short story long, I don't know what the heck we're doing.   Michael: So you can do it a couple of different ways you can do an asset management fee. And you're right 1% of one property is not a big deal. But 1% of five properties is starts it gets pretty sizable. So you get to grow together as a team in that you get to build your reputation and experience level on that one property. And you're right, if you're not bringing much value, why should you be getting paid this, you know, a whole lot of money. And so you have to think of it too, from not necessarily his perspective, because he is your brother and his family he loves, you know, that kind of good stuff. But as an owner perspective, right?   Why would an owner be paying someone 567, whatever is a sizable amount of dollars, when there's not a whole lot of value being brought to them. So you can do an asset management fee. And then you can also do like sweat equity, because you're putting the deal together and doing all the legwork. So and participate in the upside. So maybe you know, 5, 10, 15%, whatever of the upside, when the property sells or gets refinanced above and beyond the profit you get taken advantage of. And so you're putting in all of this effort and value into the deal, not seeing a whole lot of return today. But when your brother sees a lot of return, that's when you that'll manifest itself.   And so I actually just remembered, this reminded me, that's what we did with that duplex deal I do with my brothers, I didn't charge them anything on the front end. But when they go and sell the property, I get X percent of the sale price as my feet for putting the deal together. So they're obviously winning, because they're now selling those properties. And so then I get to participate in that upside as well. But so it's kind of a win win. Again, it kind of hitches my cart to their horse, so to speak, and if they don't sell well, then Okay, then I don't get it anything.   But at some point down the road, I would anticipate them to sell these properties. And if not, that's okay, too. That's great. We all got a big win. So think about doing something like that as well and chat about it with your brother.   Tom: Yeah, you know, it'd be an interesting way that I've seen here and it's kind of similar to Michael Zoomers model is if you're doing it when you sell like maybe your brother gets the first 10% of profit. And then you guys split after that. There's a lot of flexibility in the way that these can be structured. But I'd say on the acquisition side, like right now, it's so valuable the value that you're getting, getting and going through this exercise and kind of building that confidence that there's it's pretty awesome. It's important.   Pierre: That's kind of how I feel about it is that I'm very thankful to be participating in this with him. It's I'm learning at time so that when it's my turn to do a deal, it's not going to be my first. So another thing we're talking about is just you scratch my back, I'll scratch yours when I go into a deal, he's going to help me the same, you know, we're just going to be working together when I do my next acquisition. So yeah, this is helpful. I'll hash this out with him.   Michael: Yeah, yeah. And you can think about, you know, you can do a percentage, you know, 1%, or 2%, whatever asset management fee, or you could do a flat dollar amounts, the nice thing about the percentage that it grows over time as the rent grows, but if, again, if it's just one deal, you could just say, Okay, let's do whatever a flat fee, we're comfortable with this. Yeah, just another thing to think about, and take around.   Tom: This is what I without giving recommendations, this is what I would recommend, I would recommend, like a very small percentage of the acquisition price as sort of like a finding fee and like doing that work, because that is like some pretty significant work, like maybe a half of 1%. So that would that if you're buying $100,000 house, that's 500 bucks, you know, not and then I think and then at the exit, I would book ended, I would do something on the front end, and then from something at the very end, and that way you're not…   Pierre: and no fee monthly?   Tom: No, no fees monthly, just so it's, you know, so keeping the operating costs low. And maybe, you know, if he's planning to hold it indefinitely, maybe some like option for you be able to pay him to get equity, if you want to in like five years, you know, at a predefined amount. I mean, what's so fun with these deals is it's very much a white canvas in the way that you structure them, my recommendation would be the book ends with an option to get some possible equity on the inside.   Pierre: I think that makes a lot of sense. Because once you own the place, then there's going to be long periods of time where nothing is happening. And I'm not going to need to be doing a ton of work until we're going to be in the market to buy another place. Yeah, so it doesn't make sense for him to be paying me unless we're actively working.   Michael: There will be active work going on, especially at the beginning with dealing with the property manager and getting the system set up and dealing with the accounting side of things. So there will definitely be stuff. But I think Tom said I think the vast majority is the legwork done on the front end getting to the acquisition point.   Pierre: Yeah. The other thing is that we see this kind of as a partnership, and he's not making money right now. Why should I be making money right now when he's the one putting up the capital? I don't feel right taking money right now, because you're not making money right now. Let's get a deal and contract before we think about putting money but it'd be nice to know what the money is going to do when it's time for it.   Tom: Yeah bookended and give yourself an option to get on the equity. I think for the work on the acquisition side, I think it's reasonable to take a you know, whatever a finder fee or whatever, when so when I was doing acquisitions for one of these rates, you know, that's our bonuses would be on, you know, acquisitions. And do you want to get really creative you could do some sort of bonus on how quote unquote good of a buyer it is, but I don't think you need to get that creative. It's like a family member. Just something simple and right, you know, simple and fair. So..   Pierre: Sure. Thanks guys.   Tom: Exciting stuff Pierre. Exciting stuff.   Michael: Totally. Very exciting.   Alrighty, everybody, that was our episode for today. Thanks so much for listening hope that was valuable for people that are thinking about partnerships or that are in partnerships and how to structure maybe restructure them. If you liked the episode, feel free to give us a rating and review wherever it is you listen, your podcast has really helped us out quite a bit. We look forward to seeing the next one. Happy investing.   Emil: Happy investing.

In this episode, we hear from Roofstock's own Michael Albaum, the Head Coach of Roofstock Academy. Michael lays out the benefits rental investors receive from being a part of the Roofstock ecosystem. We walk through the various research, analytics, due diligence and insights provided to investors so they can make educated decisions when adding to their portfolios. Additionally, we discuss the Roofstock Academy and their unique spin on the real estate education market. You don't want to miss this episode! ----------------- Connect with Matt and Spencer: gkhouses.com Visit the Podcast Website: TheAtlantaRealEstateInvestor.co Guest: Michael Albaum from Roofstock | Roofstock Academy Email the Show: podcast@gkhouses.com ----------------- Production House: Flint Stone Media Copyright of gkhouses 2020.

In this episode Tom and Michael go head to head yet again with a hot debate on what is best; buying your primary or an investment property first.  --- Transcript   Emil: Hey everybody welcome back for another episode of The Remote Real Estate Investor. My name is Emil Shour and today I'm joined by my co hosts,   Tom: Tom Schneider.   Michael: and Michael Albaum.   Emil: And on today's episode, we're gonn a be doing another showdown of the century talking about buying your first rental property before you have your primary residence or buying your primary residence before you buy a rental property. So Tom and Michael are going to be going head to head and I'm going to be officiating this one. So let's take out the gloves and start the show down.   Michael: Tom, did you drink your um cheat juice this morning? aka coffee?   Tom: I did I did. We were talking about this yesterday. The espresso nap.   Michael: Oh boy. So did you espresso nap before we record this?   Tom: I did an espresso sleep. I what I did is like, I put the espresso in time release capsules. So I could you know start my sleep early. And then it dissolved at around you know four o'clock I got a solid 45 minutes asleep. I just watched elf pretty recently so I got a solid 45 minutes of sleep eating the the four main food groups. There's sugar bear,   Michael: candy corn, candy canes,   Emil: Maple syrup. Is it the last one? Yeah, we've all watched elf way too many times. Clearly.   Tom: There's like, within movies, there's like funny quotes that just like stick with you that are like not like super obvious. Yeah, my favorite elf quote is when elf is offering the spaghetti to like, what's his face? The dad and the dad's like, he's like, Oh, yeah, of course. Of course. We don't want that. Yes. My wife has an inside joke. Like when someone says like, No, I don't want that to go. Oh, yeah, of course. Of course.   Michael: That's really good. That's really good. All right, enough of the friendly gestures, the friendly pleasantries. Let's get down to it. Tom. Emil: Why don't you guys get your corners here.   Michael: Weighing in at 150 pounds!   Emil: All right. So, Tom, Which side are you taking? To start this round off,   Tom I'm gonna start with the buying the house that you live in for   Michael: Easy one, 1st round knockout.   Emil: Alright, so Tom, you'll start this round, Michael gets the rebuttal and you get the final word. All right, I want you guys to meet in the middle touch gloves and fight.   Tom: Okay, so within this battle, the reason that you should buy your house first, before you buy a rental property is a simple question of math, that's going to be my number one argument. And it's a simple number of math because you need to think about your investing in your life holistically. So there's money in money out when you are buying a house that you are going to be living in not only are you getting on the old appreciation train of buying a house that you're living in, but you are drastically decreasing your costs. So when you buy a house that you are going to be living in good news, you're not paying rent anymore, you're paying a mortgage. So those that fun that you're using to pay that mortgage, you would still need to be paying rent if you were to buy an investment property elsewhere.   So, huge difference that is a Crossing the Chasm if you will of no longer paying rent number two which is I think more straightforward is you are learning the ropes if you want to get into specifically remote investing, what better way to learn the mechanics of a transaction and lending and all that stuff by boots on the floor doing the transaction where you are going to be living? Right makes sense. So learning the that transaction process the financing process and lastly, is we do this investing as a way to you know, get to a point to financial freedom, we do it for ourselves and what better way to do it for yourself then to get into a place that you can call home especially in these times of being you know, in a pandemic you might want to do a house project can you do that if you're renting Nope, can't do that. You could do that but it's not ultimately now yours so pay yourself first you know that's how you buy buying a house that you're going to live in you are paying yourself first smoking mirrors, smoking mirrors, okay. Okay done.   Michael: Well Tom, those are all really great points. I'm so glad that you brought up so many of them. And I just took kind of your first point I love the fact that you brought up paying a mortgage now instead of paying rent because there is no faster way to be unsure about how much your housing expense is going to be then with paying a mortgage and the utilities and the extra expenses you have with owning a home so if I'm renting a home for 1000 bucks I know month in and month out I'm paying 100 bucks a month the end Bodie Bodie.   Tom: What!? That is not Bodie. Did you just through my dog under the bus?   Michael: I through my dog under the bus>   Tom: You're dog is named Bodie too?!   Michael: Yeah.   Tom: Shut up.   Michael: I've told you so many times?   Emil: Way to pay attention Tom.   Michael: but he's squeaking his toy right in the middle of my home run here,   Tom: Smoking and Mirrors,   Michael: Smoke and mirrors. That's right. So there is no better way to be uncertain about your monthly housing expense than by owning your own home. So up, we have a leak in the roof, that's $2,000 got to fix that up the stove broke, got to go get a new one that's in there. $600. So when you're renting, you know, month in and month out exactly how much your housing expense is going to run you. And I would argue that as you're saving up to start investing, that's one of the most important things is knowing what your savings rate is. Number two, we also talked so often about how and the investment property world you want your tenants to pay your mortgage? Well, that's true for the investment property that you buy, and then rent out, why can't that also not be true for your primary residence. So go buy an investment property first, and then let your tenants pay your mortgage on your primary. Thirdly, depending on where you live, this might be out of the question for you.   So Bay Area, California, Seattle, New York, the cost of housing is so expensive. And so if you take that down payment for what you would pay in downpayment and go elsewhere, you can potentially buy properties all cash, you could get into numerous investment properties. But I also think that in order to save up for your down payment for your primary, it's going to take a while. And so if you can go invest and build up cash flow, this cash flow train this cash flow snowball, by buying investment properties, first, your tenants will pay your mortgage and your tenants might even pay your down payment on your primary versus going the other way, it's going to take you a long time to save up for your next down payment if you go buy a primary until you can start investing in rental properties. So I love that you brought up appreciation, Tom, because you're absolutely right, go buy investment properties and have those puppies start appreciating all the while you're waiting to go buy your primary residence.   Tom: Alright, so     we're going to come to an agreement on a point you made is I think house hacking is kind of the splitting the difference of this argument. And what house hacking is, if those are not familiar, that's buying a duplex living in one unit, renting out the other unit good point there,     Michael: It doesn't even have to be a duplex. It's just something bigger than you need for yourself. So if you're one person, you could go buy a three bed house and rent out the other two bedrooms. You could buy a duplex triplex or quad or rent out the other unit. So it can be a really diverse approach doesn't need to be just a duplex. So just to clarify that.   Tom: Yep. Like that. So okay, so that to your argument, you're making at me here. So one of them was related to unknown costs. So you're saying, you know, if there's a leak in the roof, great, you're spending money and there's unknown costs on buying your own house? Well, Michael, there's unknown costs are just as likely to occur on your rental property than they as they are on your property. But in fact, I would say you have more control of those unknown costs at your own personal house. So for example, if something say I don't know, some simple plumbing issue or something happens at your personal house, and then also happens at your rental house, you are guaranteed to have to pay pretty much top dollar at that rental property to get that fixed, where at your own house, you know, you kind of make an adventure of it, you know, oh, just cold water? No, it's good for your lymph nodes to get into cold water shower.   But on the rental property, you can't control that you're going to you're going to be paying to fix that. So I'd say those costs measures are you have a little more control of your own house, also on the cost factor. So I rented for a couple years and oh my goodness, did I get jammed on rent every year, I think it went up like 25% year over year, where if you're buying your own house, you're getting fixed costs. Sure, there are some issues that can happen with the plumbing, but then you get a really good health treatment where you get a cold water shower for a little bit as long as you don't want a cold water shower. But those costs are fixed versus if you're renting. And if that landlord wants to jam ya for 25% increase, you're just subject to that you just have to take it so I would say that you know your argument that around costs is you definitely have to pay whether things happening to your rental property and for your own personal house. You can make some cheap decisions around health and financial well being of accepting culture. Yeah, I think that's a I'm going to end on the cold shower.   Micheal: Emil weigh in man, please.   Emil: All right, there's a little bit of thunder left you know a little bit of juice to squeeze out of these two topics. I don't want to steal your guys's thunder and call everything you know what I mean. Yeah, just wait till the end.   Michael: All right. Yes. All right.   Emil: All right, guys. That was a very fierce round, a little bit less fierce than I've seen you guys in the past like sometimes I see you guys just just going straight for the jugular this time, you know, a little more civil.     Michael: It's the holidays, you know, you got to be   Tom: I started the day with a cold shower. My endocrine system is doing awesome. You guys.   Emil: Alright, well now that we're switching So Tom, you are taking buying your rental before you buy your primary but we'll let Michael go first. With buying a primary I want you guys to bring a little bit more fight. All right, like throw the haymakers Let's go guys give the people what they want. I'm raising my standard. Yeah, there you go, Tom stand up. It's game over. Let's go. All right. All right, Michael, when you're ready?   Michael: Yeah. So it's kind of a no brainer you got to take care of number one first and that's you as an individual get your housing squared away first and foremost before even thinking about going in investing. I mean if you're gonna have your rent payment jacked up like Tom mentioned previously, how could you possibly be forecasting for the future with saving for future investment. So take care number one, get it locked up, get it squared away, first and foremost. Secondly, there is no better financing than owner occupant financing. So go buy a primary residence, let the appreciation train work its magic. And in a couple of years, you can either move out of that primary residence and convert it into a rental thereby creating a rental with owner occupant financing, or do a cash out refi or get a HELOC on that property. Again, with owner occupant financing and use that money to go start investing down the road, it becomes so much easier and so much cheaper when you have owner occupant cash to compete against peer investors for bidding on properties. So it's a no brainer. In my opinion, go buy your primary First, get it locked, ready in an appreciating market. And watch what happens. It'll blow your mind.   Tom: Mike, you ready to take it?   Michael: Let's just do it. I would love to see what you're going to try to drum up here.   Tom: All right, Michael, it's time to September some real talk. Michael, I think you need to be long term greedy. You know, I think the short term greedy thing for you to do is Oh, I'd like a house the women that I own right now and to go buy a house, you know, and that might be great for current Michael. But future Michael is going to be so much better off for so many reasons of deploying the capital in building his real estate Empire, you have plenty of time to buy a house. In fact, you're going to be able to buy a better house in the future by making these smart, prudent, long term greedy decisions now of buying, you know, buying rental properties right now. And one of the reasons why it makes a lot of sense is your money can go so much further if you were to buy rental property, especially remotely. So where you're living at now, Michael, you weren't what you would be paying to buy a house, you could buy like three houses three rental properties, think of all that cash flow you can have your money just goes so much further versus in the market that you're living right now versus if you were to go and invest in one of these remote markets. So be long term greedy.   The other really value of this is being a person Michael, who likes to travel and stuff. You don't have to weigh yourself down with some house, you can deploy this capital, get it working for you, if you have it just sitting at your own house. It's not working. It's being slothful, you want to get this working for you invested, get it running. So you can go do some fun things. Oh, you want to go ride a motorcycle up and down Chile? Great. You can go do that. If you want to go to Spain, great. You could do that. It's out working so you can go be playing, right? So get your money working. Be young, be awesome. Go do fun stuff. And do that.   So my next little bit, I'm going to just put on my economist cap. I'm going to mess the countries up. But this is that I'm specifically talking about but I'm it's going to be directionally right. So within Europe, there's this inverse relationship between unemployment and homeownership. It's true. So countries like, again, I might nest the specific countries, but countries like the pigs countries like the Spain, Portugal, they have very high ownership, but also very high unemployment, versus certain Scandinavian countries like the Norway and Sweden, they have relatively low homeownership, but very high employment. And the reason for this insert inverse relationship is by not owning your home that you're living in, it gives you a lot more flexibility to move around to wherever the jobs are at.   So when you're done riding your motorcycle in Chile, you can go to wherever the jobs have, it gives you flexibility, but you know that key investment in housing, you're able to still participate and all that upside by deploying that capital in a good market that you can be remote investing. So in closing, you want to be long term greedy Michael, don't be shorted short term greedy, buy your house now and get your money working for you. Number two, take your money further, you're able to do a lot more by deploying it in investment properties. And number three, look at the European model be a Scandinavian country not a one of the pigs country that Portugal, Spain, I forgot the other ones, but be one of those ones where it's a high employment, you know, riding a motorcycle in Chile. Go ahead.   Michael: Tom, I really love and appreciate those points you brought up first and foremost being long term greedy, I couldn't be more excited that the fact that you brought that up because what could be more long term greedy than living in a property for two out of five years and getting a capital gains exemption when you sell the property of 250,000 as an individual or 500,000, as a married couple. It totally personifies long term greedy. So thank you so much for bringing that up. And then secondly, get your money working for you. I also love the fact that you Mention this point, I'm getting an owner occupied key lock on my owner occupied property that I live in at two and a quarter percent. What better way to get your money working for you then appreciating in a California market and being able to take advantage of that owner occupant financing for the purchase and then owner occupied HELOCs. Amazing, amazing money again, really great point. Thank you for bringing that up for in support of owner occupant property first before investment property.   And then you mentioned taking your money further. What better way to utilize your money than using an FHA owner occupied financing loan where you only have to put down a much smaller percentage and 20% 20%. And on it so happier to 25% get out of town. If I can put down between two and a half to 5% on a primary residence, get into something get rid of paying rent, start building appreciation, building equity, getting HELOCs, getting owner occupant financing. It's just an all day when win win win you look at the math, so I would say you know thank you so much for proving my point, that owner occupant is the way to go.   Tom: Yeah, yeah, yeah. All right Emil, come in here.   Emil: Ding ding ding Guys, get back to your corners. That's what I'm talking about. That's how we throw some haymakers bring some emotion, leave it all in the ring, guys. Well done. My comments here you guys on the second round, basically got through some of the stuff I had written down, FHA loan was being the big one on the primary just to be able to get in with 5%. Down, I think the to step back from our debate here and talk about our own personal situations, all three of us, I think, bought a rental property before we bought a primary. I think just depending on where you live, it just makes more sense to do one or the other us being in expensive cities, looking elsewhere, buying a rental property, I think made sense. But I don't think there's anything wrong with buying a primary if you can afford it just like the Hilo cash out that you mentioned, Michael, especially if you're an appreciating market, and you use like an FHA loan to get in for 5%. And then your home appreciates a bunch. Like that is an awesome way, if you don't have a ton of cash up front to get into something stop paying, you know, quote, unquote wasting rent, you know, build some equity, and then in a couple years, if the market is good, you can actually pull some cash out and then go buy rental properties with it. But you know, I think there's something to be said about us all buying rental properties before we bought a primary. And the big one that stood out to me was you're using you know, if you think about it, the cash flow from your rental properties can go towards paying your own mortgage on your primary, right, you can use it to pay your mortgage, you can use it to just grow your portfolio, whatever it is. Yeah, I think solid points on on both sides.   Tom: Yeah, I mean, I bought a rental before my primary. And I would do it again. And again, there's a great article on the New York times.com slash interactive slash 2014 slash up slots hash by slash rent slash calculator. If you just type buy or rent calculator, New York Times, it's a really cool calculator that they have that evaluates like, oh, should you buy or rent, basically, and it's very situational from person to person on where they live, it got to the point where me where I was just getting jammed at this apartment in the East Bay, just outside of San Francisco, where my rent was very close to what my mortgage would be. And you know, there was an initial kind of nut to pay with the downpayment. But after that, it was actually cheaper on a monthly basis to pay my mortgage versus my what the rent had gotten to and it wasn't like that when I first went in there was just as crazy increases in rent year after year.   So it just at that point is like, okay, you know, bite the bullet, I suppose that that was like super hardcore and discipline, I would just continue to rent and just continue to use that down payment and using my house on other rental properties. But there is something to be said, of, you know, having a place to live that your own that you can do fun projects on is is fun, it may not be the most long term greedy thing to do if you're really bullish on on building your investment. And this is a decision that you know, I have now like pretty regularly like, Oh, do I want to do some remodeling on the kitchen? Or do I want to add a couple of roofs or do something like that it's it's honestly kind of hard and making that decision. I mean, it's a very blessed to be able to have like decisions like that to be made, but it's kind of a constant pull and tug, tug and pull, push and pull, you know, how much am I spending on building this these rental folio, which I love and is really fun and has major long term benefits versus these current times doing projects on the house or whatnot. So it's a kind of a push and pull for me kind of related to this conversation of ongoing stuff, you know, that you want to do on your own house. So for my 10 cents it's different for everybody's situation,   Emil: You guys view the primary as a hotly debated is your primary and investment?   Tom: No.   Michael: I would say pretty confidently for me that it's not I kind of I use Kiyosaki Rich Dad Poor Dad definition of asset versus liability, who puts money in your pocket, it's an asset. If it takes money out of your pocket. It's a liability. No point in getting any more complicated than that. Every month I pay money to live in this home. It's a liability. Every month I get money in my pocket from my cash flowing investment. It's an asset so you could expand that absolutely and say well Yeah, if I sold it down the road and I made money on the sale, well, maybe it would be an asset, but on a kind of snapshot month by month basis, it cost me money. So it's a liability.   Tom: I like that. I mean, I would take Yeah, whatever the kind of harshest stances, you know, it's, yeah.   Emil: I wanted to rent for a long time until my wife was pregnant. And we were both just like, to me buying a home is a emotional decision. And you do it because you want to not because you think it's gonna be this amazing investment. Hopefully, it turns out that way, but I try not to treat it as such. So yeah, for us, it was just like, the timing was right, we were in the place in our lives where we wanted to do it and and did it for nothing, besides wanting it not looking at it as an investment.   Tom: Yes, pretty funny. the buying process of like owner occupied versus buying a rental where I feel like a rental, like I'm extremely disciplined, like, I have my performance, my max bid and all this stuff. And like now I'm out, get out of here, versus like when you get it home, and it's like,   Emil: It's so emotional   Tom: Wife and baby look at it like, oh, that's the one that's the right one.   Michael: I took a semi different approach when we bought our primary. And so we were looking down in the Central Coast and everything became way more expensive than we anticipate. And I had a really tight budget just because I knew how much I wanted to pay on a monthly basis based on how much the rentals are bringing in. And so I thought, Okay, this is what we can afford. So we actually ended up buying a condo down here. And we analyze it as an investment because we knew if we were to move out, or when we were to move out. And when we started having kids that we were gonna turn it into an investment. So it totally makes sense as an investment property and cash flows as an investment property, which is super exciting.   But something else to be thinking about as you're looking at buying primary residences is the maintenance and exteriors additional stuff that just comes with owning a property when you're living in it versus being a rental and Tom, we were kind of talking about that in the showdown is Yeah, you're gonna have expenses that pop up that you're able to control a little bit less on your rentals and your primary. But if it's your primary, you're probably going to take a higher degree of like, you just want things looking a lot better, I would say in your primary because you're living there versus a rental. So there's a lot more pride of ownership, as they say. And so I find that people often dump a lot more money into their primary than they would into a rental of similar caliber.   And so with a condo is just kind of nice, I don't worry about exterior maintenance, roof, paint, any of that stuff, all I have to take care of is the inside of my place. And and it's good. So from a maintenance standpoint and a cost standpoint, aside from the HOA, I mean, the condo can be a decent way to go. So I would employ everybody to kind of think about that. And then also evaluate it as a rental for if you ever plan on converting it into one or at least that at that point, you have the option two if you'd like as opposed to being saddled with this huge mortgage payment that would never make sense as a rental. Now you're stuck.   Emil: You don't pay to fix your roof on a condo?   Michael: Every Hoa is a little bit different. But the condo pays in my particular case, they pay my water sewer trash, they pay all the exterior maintenance, which includes paint, landscaping, and roof and then just maintenance in the association itself. The Hoa the fee is way too high for what we're getting, because we don't have any real amenities. But my homeowners insurance is a little bit less. I don't have to worry about any of that stuff. So we just had our roof redone, like last week. And we didn't come out of pocket for that. Yep, it's nuts. It's nuts. But something to think about and consider as an option, because I didn't for a long time, but it's just especially in older homes. First time homebuyers are looking to get into you know, if there's a lot there, I think there's just a lot more than meets the eye. So make sure you go into it kind of eyes wide open.   Tom: So Michael, are you aware of your condo if they have Hoa rules about renters if you were to move out and to rent that place out?   Michael: Oh, yeah, we checked the CC&RS way before we purchased this thing, and they don't, which is the important thing. So they don't have any rental restrictions.   Tom: Good, good, good.   Michael: Well, okay, I think that like they have rental restrictions for short term rentals. So there has to be 30 days or longer. So when we Airbnb at our place, we had to have a 30 day minimum stay, which because we're doing this during COVID times that worked out just fine.   Emil: Cool, nice job guys any other parting wisdom before we clock out of this episode.   Michael: I would just say to everybody who's kind of on the fence considering between the two, just look at the numbers, like Tom was saying at the beginning of the episode and see what makes the most sense. But also understand that there's an opportunity cost it to whatever decision you make. So if you buy an investment property before you buy your primary, just look and understand how long it's going to take you to save up your down payment before your next either investment property or to your next primary. And conversely if you're going to go buy your primary before your investment property, go look and understand how long it's going to take you to save up for your down payment for that next investment property or for the first investment property for buying your primary first and understand that there's a cost and benefit to doing one versus the other. And I don't think there's one right or wrong universal for us. It seemed to be investment properties first owner occupant you know, primary residence after the fact but everybody's coming at it from a different place. So talk with whoever's in your life   Tom: Love it just to reword it, you know, have a plan that everyone's situation is unique. But just kind of map out short term, long term, midterm middle term, middle term. Yeah.   Emil: Did you guys actually plan that far ahead? Like for me, I kind of just like, let me get some rental properties. And then we'll kind of figure it out as you go along. Like, do you guys find that like, mid to long term planning is a helpful? And B, do you even stick to it? Like, do things just change so much in the journey that it's like, it's almost not even worth it, Tom: I enjoy the exercise of putting it down to paper, and then modifying it everybody's functions differently. But I think doing it at some sort of a high level, there's value to that, in that there's more of a Northstar. And like we talked before, with like Academy, you know, write it in pencil, have an idea doesn't need to be in pen or in stone. But in sort of providing yourself sort of a Northstar. There's a lot of value to that. And in the way that you're kind of managing the day to day to have that.   Michael: I totally agree. I mean, for me, when I first started investing, I was just flailing around. And not having a plan makes it so easy to flail, but I was also single, I wasn't married. And so none of that was even part of the picture. I was just go go, go, go go. And then after the fact is like, Oh, I guess I should consider buying a primary, I guess that makes sense to do now, now that I'm getting married. So I think, again, if you have the resources, like the educational resource that goes into this podcast, you can just evaluate where you currently are, and then also talk to other people who have done it before you I didn't have that luxury. When I first started investing, I was kind of figuring it out. My dad now we're kind of figuring it out for ourselves. So didn't have many other people to lean on to talk to you about what that planning might look like or even how to strategize.   Emil: Thank you everybody for tuning in to another episode of the real estate investor. I hope you guys enjoyed this one. If you do, we always like to ask that you leave us review. Let us know your thinking of the show. And if you do sometimes we'd like to just pick people at random and send them some cool stuff, like we've done on previous episodes. So wherever you listen your podcasts, leave us a rating and review we'd love that and we might pick you to get some cool swag. Alright guys, check out the next one. Happy investing.   Tom: Happy investing.   Michael: Happy investing.  

With the holidays upon us, we share our recommendations for 7 books that will make excellent holiday gifts.  --- Transcript   Tom: Greetings, and welcome to The Remote Real Estate Investor. On this episode, we're coming into holiday season and with holiday season, it's gift giving. So we're going to talk about on this episode, our favorite books that we have read to help us with our investing career. And we're gonna talk about why we like them some highlights over them. And this could be something you give to yourself or give to a friend. All right, let's do it. How is everybody doing today?   Michael: Stuffed still from Turkey and pie.   Tom: Nice. Lowkey he goes, just go to family stuff.   Michael: Yeah, we just stay put. My wife and I we had a friend in town. We adopted a friend as part of our family. So had something at the house hung out. It was great,   Tom: Nice, Emil?   Emil: We had some family over in the backyard. It was windy and cold that night in Los Angeles, which is rare. So everyone was in cold turkey and mashed potatoes by the time we brought it to their table. But you know, it was good times.   Tom: Yeah, Pierre?   Pierre: So I just went down to visit family had Thanksgiving with my mom and my sister. And then you know, got out and hiked at Big Sur and had a grand old time.   Michael: Nooiice.   Tom: Nice, it was beautiful out.   Pierre: It was gorgeous. Yeah, it was beautiful.   Michael: Tom, would you get up to man? Tom: Oh, lowkey. Little mother in law, Thanksgiving dinner, very lucky. Usually with the holidays. I'm like, my parents are local. And my wife's parents were like bouncing from house to house. But to limit the exposure, we just did one house and it's kind of mellow, kind of mellow like that. But let's go ahead and jump right into it. So on today's episode, as we mentioned, it's going to be the books episode. So this could be used as a gift for yourself, for somebody who you think might get value out of it. But let's go and start with Michael. Michael, what is the book that you're bringing to the table to talk about first?   Michael: The book that I'm gonna bring to the table talking about first is a classic. It's been talked about for years and years. And I think so many real estate investors have gotten so much value out of it. And that's Robert Kiyosaki Rich Dad, Poor Dad.   Tom: Hmm.   Michael: And so he's a pretty prevalent author. He's written numerous books, but this is the one that I kind of set me off on my path to real estate investing. And it's funny, I always say that it it kind of summarized what I had always known and kind of thought was true, but put it really nicely into a packaged sentence in Word format, because I'd always have these jumbled ideas in my head. And then I read this book, and I was like, Oh, yeah, like, that's what I've been trying to say, for all this time. And it's a super easy read. It's not complicated. It's more of a mindset book and a mindset shift book. And it's super straightforward, very easy read very simple, simple concepts.   But at its highest in its highest level, most basic level, it basically says buy assets don't buy liabilities, that's what it boils down to. And so if you can do that more times than not, you'll end up net positive, and that should be good. And so it doesn't talk about how to invest in real estate, it doesn't talk about the mechanics of what that looks like. It just talks at a high level, hey, these are some things that you should be thinking about, and different ways to be thinking about some of the things you probably already know. And so he tells the story from a child's perspective, and it was just super great read.   Tom: I bet you so many people have had their real estate awakening, like to that book, like, wait a minute, like, I want assets. I think that's been such a common I don't know in disgust talking to other people that Rich Dad, Poor Dad is just such an eye opener, because I mean, it's really easy to have the fallacy of thinking of things that are really liabilities and thinking of them as assets. You know, I don't know, cars and stuff that just that's No, no, it's not I remember I read that I was listened to as an audiobook just at a college and they were talking about real estate was one really big piece of it and systems with the other. And so I'm like, Okay, I'm gonna build my career around systems and real estate and just like, you know, ran with it.   Michael: And here you are, here I am. Yeah, it's like everybody's first. You know, they all talk about the shared experience. And yeah, like you said, so many people get started. I feel inferior. Have you guys read that book?   Pierre I have. Yeah.   Emil: What's funny is like every real estate investors Bible, I hadn't read it till like four months ago, because everyone's like, oh, rich, Dad, Poor dad's best. And it was good. I was happy I read it. I think if you've already gotten into real estate investing, it's like you said it kind of already distills why you got into it in the first place. Hundreds of people have regurgitated what has been said in it. So by the time you get if you haven't read in, you're already investing in real estate and you follow the real estate investors read blogs or whatever. You've already gotten most of those lessons. It's just getting it from the original source he's like the OG on a lot of this stuff that most real estate investors talk about. So glad I read it. Great book. More people should read it definitely changed a couple of things for me so glad I read it.   Tom: Good point. Probably more of a beginner more entry.   Michael: Yes.   Tom: Maybe you have a friend who or partner or whatever sibling Why are you buying real estate on the other side of the country? Why are you both you know, like,   Michael: Yes,   Tom: Yeah if you already like the Kool Aid taste, you don't need to drink more kool aid for this stuff.   Michael: That's right.   Emil Yeah, There's more stuff in it than just real estate investing though I think like if you're in real estate investing, and let's say you have a full time job, he talks about business and the idea of paying yourself first and all these other concepts, which those were a little bit newer for me, like I've always heard pay yourself first, but he kind of actually frames it a different way than I had originally thought pay yourself first. I won't spoil it. But I think even if you're in real estate, there's like business lessons in there. There's other lessons that a lot of people can get stuff out of.   Michael: Dig it.   Tom: Emil, you're up next.   Emil: Alright, so first book and keeping it real estate investing related. I got one rental at a time, which is by our good friend who has come on the show a couple times. Michael Zuber, it is also not a how to book but is the story of his journey. And I like that he's a working professional, which I think a lot of people listening to this show can relate. We're not very few of us, if any, you know, our full time real estate investors right now. We have a full time job. So balancing being a real estate investor and full time job and all those things. I think it was a really unique story.   I don't think you read a lot about those. You know, you hear more about someone who quit their job went into real estate full time flipping this and that, but he is a buy and hold investor hear about his 15 year journey through real estate and how he achieved financial freedom. I love it. Great book. I recommend it to a lot of people. And Michael's a really smart guy. So definitely recommend if you haven't read it, read it. If you have send it to a friend. It's one of my favorites.   Michael: It was interesting, because we had him on the podcast, before I had had a chance to read his book, or you guys had had him on he was on and you guys interviewed him a while back. And then I picked up his book. And then we had him on the podcast. And I was like, Oh, I liked the book so much better after having heard him speak and just realizing that like, Yeah, he's just a guy. He's just a dude, like super cool guy super down to earth person. He's not this high and mighty, you know, you have to do this. You have like God, like, this is my story. It worked for me, maybe I can help you too. That's great.   So I think you hit the nail on the head of nail, it's very much mindset shift. And he kind of breaks it down into a little bit more granular of like, this is what I did kind of like on a step by step basis. And it's not so overwhelming. He really did eat the elephant one bite at a time. I think when we see or hear about real estate success stories always see is that person at the mountaintop, but we don't see all the blood, sweat and tears that they left on the way up getting there. And so he kind of talked about that a little bit, which I thought was really humanizing.   Emil: Yeah, it's rare to read the full story. You know, a lot of times, it's like, you just see the guy or gal who has 200 doors. And it's like, How the heck did you get there? And this book, like really distills it all down, which is it's fun to read.     Tom: Yeah. What I liked about his book, and him is he's like an open book. So like, I think real estate can oftentimes be guilty of putting terms and acronyms and making it sound more fancy. And like pretentious than it really is. I think, Michaels Zuber does a really good job in his book and just talking to him of being really practical and giving specific actionable stuff and saying, no, it's very doable. This is what I did XYZ, and not throwing a bunch of jargon and leaving parts out and talking about it. So as an open book, I think is the best way to describe him, as well as the book and talking through his experience in a very non hoity-toity or non…   Michael: Just uses layman's terms.   Emil: It's not intimidating.   Tom: Yeah, exactly. Yeah. And he's just stripped that away. So great book Emil, front of the pod.   Michael: The other thing that I like about that, before we move on is that a lot of people talk about how difficult it is to invest in California, or how hard it is to make the numbers work in California, but he did it. And so people could say like, Oh, yeah, he had a California salary. But you can take the same thing and scale it to any other part of the country. Right? If you're not investing in California, you don't need a California salary. So if you can go live in the Midwest and earn a Midwest salary, you can go invest in the Midwest and things scale, oftentimes geographically. So I think I don't know if that makes sense, or if that's material to us, but whatever.   Tom: I dig it. All right Pierre.   Pierre Sure. Yeah, I'll deviate from the whole real estate theme. And I'm going to recommend an old book here. I think this one's from 1946. And it's called Economics In One Lesson by Henry Hazlitt, not overly sophisticated not using jargon, it's very accessible. He systematically destroys 20 economic fallacies with cool calm logic and historical evidence to back it up. And the whole point of the book is to show how to feel good or do good economic policies that are meant for a specific interest group can often have adverse outcomes for the general public, hurting everybody. So it pushes back against these currents of economic thought, and showing how the inconsistency in the principles that they're derived from can cause some pretty destructive effects in practice.   So like each chapter, he just takes on one fallacy at a time and destroys it with simple language. And it's super easy to understand. And so really great entry point into reading economics. And it's fascinating to see how some of these fallacies that he was talking about back in the 1940s are still so prevalent today. And that are kind of the rallying cry of so many of the political movements today from both sides. So it's fascinating to see how on the nose this guy was back then and how relevant his arguments still Is today.   Michael: What was one of the best fallacies see debunked.   Pierre: So he starts with like the most simple ones, the broken windows fallacy, and its cousin the blessing of destruction, how different economic prosperity has come from war, and then the curse of machinery. How a lot of people are mistaken about how these labor saving devices are putting workers out of work and hurting society as a whole. He talks about like, who the tariffs actually help, and this drive for exports, and is it really beneficial. I won't dive into each of these arguments. So you can go and read it. It's a short book, it's only about 200 pages, or a little less than 200 pages, but parody prices, saving specific industries, how  prices actually work, what government price fixing, does what rent control actually does, what minimum wage laws do the function of profits and inflation and stuff like that   Tom: Two things I like, but I haven't read it. I'm adding it to my queue. But something that was written a long time ago, and still getting super high reviews, I just looked at the Goodreads. It's like the rotten tomatoes score of moving on, you guys have seen that for and it's like four plus, which I automatically like, and then also something about brevity being kind of short and concise.   Pierre: Yeah. And the version that I have the forward is by Steve Forbes, and it's recommended by Nobel laureates like Frederick Hayek and his teacher listed on Nice's the pillars of Austrian economics and the Austrian economic business cycle, the main takeaway that I have from it is just thinking about how something that might look good for a specific group right now in the short run will almost always hurt the general interest in the long run. And once we implement these policies, it's super hard to undo them. So we get stuck with these policies that are delivering the exact opposite of what its stated purpose was.   So it's really good to be able to look in and say like, oh, there's a second, third, fourth order effect of this thing. And we should be very careful before quickly adopting something that sounds pretty nice and romantic. And if you want it for free, the Mises Institute gives it away for free. If you go to mises.org economics in one lesson, type that into your search bar, they'll mail you a free copy of the book, because it's that important.   Michael: Nice.   Tom: Nice, nice. Check it out. Awesome. The next one, I'm going to do just a comment on some of these books. So about a year ago, and a little over a year ago, and preparing for Roofstock Academy and building this product out I just went on a binge and I read like I went onto Goodreads and like read every top one, just put it in my audible account and pounded through one. And this one particularly I liked a ton it is the millionaire real estate investor by Gary Kelly. It was written back in 2005. And I would say this is kind of a beginner to like middle experience. I think even if you are do have a bunch of properties, I think it's a really good way to think about it.   It appeals to a lot of different like systems thinking so just kind of I had to use four different kind of descriptors of why I like this book. One of them is it speaks to hard and soft skills. So in the beginning, it talks about mindset and goals, which is so important. If you're doing this kind of longer journey of building wealth through real estate, it's important to have the right thought in the way that you're thinking about it. Otherwise, it's over time it's hard to sustain. The other is into the more technical skills into acquisitions and ownership and, and thinking kind of system mindedly. I think it does a great job of blending those two aspects which are both really important in real estate.   The other is it is like realistic and the way that it's set it up. As I said, building wealth through real estate, I can sometimes take time and it is not the hotel ballroom, we're going to make you rich and just follow these five steps. It's very pragmatic about this is not a get rich quick and lastly related to that is it includes at the end of it a ton of use cases of people who have had success and what their journey is so kind of similar to Michael Zubers book, talking about his detailed journey. This includes a bunch of use cases of people so excellent book millionaire real estate investor by Gary Keller. Yeah, have you guys read the millionaire real estate investor?   Michael: I have but it's been a while. I don't have much colored   Emil: I just picked it up. See that? I'm pointing to it here.   Tom: Yeah, I can see the top book right there.   Pierre I do recognize it there, yeah.   Emil: I just picked it up a feeling it's been recommended enough. I'm like, Alright, I'll skim through it. Let's go.   Pierre Let's go!   Tom: Let's go. Highly recommended.     Emil: Do you guys skim through books now? Like there's certain books where I'm like, I've gotten good at just skimming through books instead of just reading them cover to cover. Curious if you guys do that?   Pierre It depends on the kind of book.   Emil: Yeah, true. Business, real estate investing those kinds of books.   Tom: Yeah,I do the audio version of skimming, which is speeding the speaker up to like 3x. And just like have a little bit of blood dripping out of my ears.   Michael: Okay, for the first time this is what you are going to do.   Emil: I listen to every podcast on 1.5 x. And if you go back down to one after listening to like a podcast for 20 minutes, it sounds like everyone's drunk or something. It's so funny.   Michael: It's like if you've been speeding on the freeway driving 90 then you go back to 65 like man, this is a snail's pace.   Tom: Yeah. All right, I got one more round of book reviews. or book recommendations this time may or may not be related to real estate. So, Mr. Michael Albaum lead us off.   Michael: Yeah. So we started a book club at the Roofstock Academy that's been going on several months now. It's been a lot of fun. So we recently read How to Win Friends and Influence People by Dale Carnegie, which is a book that I read years ago. It's a classic book. I think it was written in the 20s 1920s. Pierre, correct me if I'm wrong.   Pierre: Yeah. Originally published in 1936. Michael   Michael: 36 awesome thanks. Yeah.    Tom: Gotta love books with staying power.   Pierre: That's right.   Michael: But uh, it's a book. And, Tom, I love that. You mentioned Gary Keller's book about soft skills and hard skills. This is a book all about soft skills. And it talks all about people skills. And that's something that's so rarely taught, and the hard skills you can learn anybody can really teach that to someone. But it's the soft skills that I think are a lot tougher to master. And so it talks about ways to be likable. And I mean, I think the title kind of sums it all up How to Win Friends and Influence People really nicely. And it's a book that you can reread over and over and over again, I intend to read it once a year, at least, as some good refresher and good tips and tricks. Just in your everyday life doesn't have to be specific to real estate investing doesn't have to be specific to business, but just in living your life as a human being. I think it offers some really great tips and nuanced ways to live a happier life and just, you know, be a more like person.   Tom: Classic one plus one, I have kind of a funny story. I've got a funny story related to this book. So I got this book in college, and I was reading it and I play football in college. And I had left the book in the training room just on accident, like icing or doing something after and I left in the training room. And this guy who was kind of like a big scary defensive lineman had took it after I'd left and was like, he took it and he was like reading He's like, Oh, this is really this is great stuff from I'm like, Yeah, good. Take it. It's all yours, man. He was a super nice guy, Matt Moil, I hope your hope you're doing well out there. I haven't talked to you in a while. But anyways, I was an early evangelist and sharing this book with some big defensive linemen. But yeah, for all the stuff that Michael said just a classic I mean, kind of similar in a way that Rich Dad Poor Dad and kind of turn people on to that this book on to personal development and sharpening the saw and all that really important stuff that pays huge dividends. So great book,   Michael: I think one of the best parts of it is that it's actionable like day one. It's easy to read, and you can just go practice the things that it's talking about, like, Oh, this works for me or Oh, this doesn't. It doesn't require you to spend money or invest in real estate or anything like that, to realize the fruits it has to offer.   Tom: Alright, Emil. Got another book?   Emil: All right, my next one, just given its end of the year, I think a lot of us are thinking 2021 goals. I don't know why Michaels laughing in the background, but I'm gonna keep it going anyway, you know, as we're thinking 2021 goals. I'm a huge believer that a lot of your goals and the things you want to achieve are just habits you need to create. I don't think they're just these like, giant monumental things that need to happen. A lot of the big stuff you see are the changes you see people make are just tiny habits they've formed in their lives just compounded over a long period of time. I think you could even say that about real estate investing a lot of different things. So the book I'm recommending is called Atomic Habits by James Clear, really practical guide on how to build good habits and break bad ones. It also has some cool tips, you know, we all have our vices, right? And he just gives you some like really practical tips on how do you make a vise feel less like a vise like, how do you do something good before you kind of indulgent advice, and I just think it has a lot of good practical tips, especially heading into the new year where people are planning their goals. So I'm probably gonna reread it heading into this month, myself.   Michael: And Neil, what's a vice for you Just out of curiosity?   Emil: Man, I don't really have any right now.   Michael: But because you read the book,   Emil: No, I can't believe I'm gonna admit this on the show. I haven't played video games in like a decade, and my brother in law got an Oculus, and I tried it out. Oh, man, it's unreal. so freaking fun. And so I couldn't help myself and I bought an Oculus. And that is going to be my vise. And so it's like, you know, what's, what's something productive you can do for 10-15 minutes before you spend some time playing Oculus. So it's got some some tips like that.   Michael: I've played on Oculus and I found myself I was sweating after I got done. So it's kind of like a workout too.   Emil: It can be there's games where you're like, doing a lot of movement and all that, which is what my wife was stoked about. So she's she's in on it too. That's gonna be my vice. That's my main one.   Michael: Right on.   Emil: I also eat a lot of sweets on the weekends. That's another vise   Michael: Just on weekends.   Emil: Yeah, I have a big sweet tooth and I just kind of limited to the weekend.   Michael: You're a stronger man than I.   Emil: Oreo fiend.   Tom: Pierre, got one more for us?   Pierre: Sure, you guys, read Sapiens by Yuval Noah Harari?   Michael: Oh, it's so good.   Pierre: It's super fun book I know is on the bestseller list. But if you haven't read that that's a fun interdisciplinary historical account of human history. tracking all the different domains of human society and development and all the way up into these complex societies that we live in today. So I think that's a really fun book. I think I've read it three times. So…   Michael: That's a long one, too. Yeah,   Pierre: Yeah. But it reads itself. I mean, that is both reads itself. And he has two more and following that…   Emil: Homo Deus   Pierre Homo Deus, and then 21 Lessons for the 21st Century. But I think Sapiens is definitely his best. The other one's are kind of more speculative and preachy.   Tom: He's a big, month long, Silent Retreat, like meditation guy, he doesn't like yeah, four months, a year, every year, I think it is like two month ones at a time. He's getting those those ideas around sapiens, you know, thinking about it.   Pierre: I love books of human history. I like like, oh, the last 13 years in human history. These are the theme of books that I read a lot like Guns, Germs and Steel and things like this that I find really fascinating. But what I really love about Harare is that he pulls from so many different you know, economics, religion, nutrition, culture, and warfare and politics and like you have this really thorough interdisciplinary scoop of history. So I think that's a really fun way to look at things, how they're all interconnected, and how they all feed into the world that we live in today.   Michael: It was pretty eye opening when they were talking when he was talking about that, you know, domesticating animals Yeah. And how you know, the dogs came from wolves. And the reason that dogs are man's best friend is because all the ones that weren't man best friend, they just kill them. So they just got like, the best jeans like yeah, this was so good. Like, see ya. Eye opening.   Pierre A pretty dumb side note, but I saw this meme. It's like a wolf looking at the fire and it says like, some food scraps next to the fire. What's the worst that can happen? It's like 10,000 years later, another picture. It's like a pug and a pink hat all dressed stupidly.   Michael: So good.   Tom: So good. I'll closes out here. So I'll actually make it to just because I like that that Sapiens call, Eric Larson is an author who does like history like tracks some event like some major event, and then some like little subplots within that event. The most recent one that I read is called the splendid and the vile, and it's about Churchill's during the air raid the what's it called the German air raid during World War Two. Anyways, awesome, awesome book. He also does the Devil in the White City, which is really good as well.   But my real pick for this the last one is another kind of soft skills mindset. One, it's called the Four Agreements by Don Miguel Ruiz, and I'm going to summarize it real quick is it's a short book it is there's four kind of key things from it as ways to live your life one is, be impeccable with your word. Don't take don't take things personally. Don't make assumptions and always do your best I think, in all aspects of your life. If you could go by those four key you know, drivers, you're gonna be, you're gonna be in good shape   Pierre I should have know you were a mystic, Tom.   Tom: I am! I'm a Sufi mystic.   Pierre: Yeah, no, that's a good book. He has another one called the Mastery of Love, which is also kind of a great little life lessons. Great little interpersonal life lessons.   Tom: Yes. Cool, guys, any final thoughts on books, the episode, all that good stuff.     Michael: I just think books can be such a great gift for people for I personally was never a big reader growing up, I would always have more fun goofing off. And then I started reading more about something I was passionate about real estate specifically, and, you know, kind of self growth, self improvement. I was like, oh, there's this whole world in books that didn't even know existed. So if you're not a big reader, to all the non big readers out there, you know, find something that you're passionate about, and try opening up a book. I think you might be pleasantly surprised.   Pierre: And if that's hard for you hit the audiobook.   Michael: Yeah, exactly.   Tom: I joke that I can't read it, but I can listen really well.   Emil: Something tells me our audience are readers.   Michael: Voracious readers.   Emil: If you're taking time out of your day to listen to podcasts like this. I think you you like learning and knowledge and I feel like we got a lot of readers.   Tom: Blinkist is another interesting website. They take nonfiction primarily and they condense it down into like, 1 10-minute spiel worth of reading. So they have I think they have like PhD students like PhD people do these. They were they break down. They have tons and tons of titles and you pay an annual subscription. We're not getting any, any any profit from Blinkest or from any of these recommendations. But yes, it's worth checking out Blinkest. It's like Cliff Notes, but like for adults for nonfiction stuff, so Blinkest.   Michael: Do they have that audio version as well?   Emil: It's primarily ausio.   Tom: But they do have a PDF versions as well.   Michael: Sweet.   Pierre: Oh, and also everyone out there. Hit us with your favorite books in the comments down below.   Tom: Yes.   Pierre: Let us hear what you guys are reading out there.   Tom: Yes. Awesome, guys. Well, on that note, I think it's a good time to close it out. All right, Happy investing.   Michael: Happy investing.   Emil: Happy investing.

With the holidays upon us, is it a good time to buy properties? In this short episode, we talk about a few benefits, risks and considerations about buying right now.  --- Transcript   Michael: Hey everybody welcome to another episode of The Real Estate Investor. My name is Michael Albaum and today I'm joined by my co hosts   Emil: Emil Shour   Tom: Tom Schneider   Pierre: Pierre Carrillo   Michael: And today we're gonna be tackling whether or not the holidays can present a good or bad time to buy real estate. So let's jump into it.   Michael: So guys, we just passed Thanksgiving today reporting this the first of December about to approach the full fledge holiday season. is now a good time to buy. yea or nay everything in between. Emil, what are your thoughts?   Emil: Hell, yeah. Right. now's a good time to buy. People or your competition, ie other buyers, sleeping, getting ready for the holidays. I think just overall you have less competition during this time of year. I think it's been proven through stats most you know you get the best deals December January timeframe typically. So I think if you're in a position to buy right now is a great time I am active. I mean, I think you should always be active but I think December January can be a great time to snag property.   Michael: Right on. Tom?   Tom: Tryptophane. Is that what's in turkey? and red wine?   Michael: Yeah!   Tom: Sluggish. Yeah, tastes like opportunity. But what I do is I get tryptophane free turkey and then I just hit the market. Getting the jump on everybody else. Yeah, get the jump on everyone. I would say it's, it is as good a day as any day to do buying. So you know, stick to your process, building your buy box analyzing properties. And I would try not to have too big of gotta buy now glasses or don't gotta buy now glasses. Just let the market speak. Let your work, speak and finding property. So I guess not a very specific answer. But it would be my honest answer is continue to your work and analyzing properties.   Michael: Always let your spirit guide?   Tom: Yeah, let you're conscious… you can do it.   Pierre: For a little bit of balance here, what would be some of the risks about going into the market now finding a tenant in January? Is that something that we should be considering?   Michael: Yeah, absolutely. I think finding a tenant is definitely tougher in the winter, in the vast majority of markets. And I would say talk to a property manager about what the stuffs look like, at this point in this time of the year, because they're going to have a better idea than anybody else. Because let's be real, there are leases that are expiring around this time of the year. There's only 12 months in a year. So there's always new lease expiring. So whether or not people are looking to move is a whole nother issue. But the opportunity, I think is absolutely there. But it's definitely market specific.   Tom: Great point, Pierre. Two things that I would make on that point, is related to a lease, if you do end up buying and then getting a lease, I would recommend trying to make it like an 18 month lease so that the end of the lease is hitting an a more desirable time period of when people are moving in and out not to have a 12 month lease. So it just hits directly back into the winter, which is not ideal. The other aspect of buying in the winter is that you're buying in an area that deals with a lot of snow, perhaps you're buying in Pittsburgh, it transactions can be slow, just because doing inspections can sometimes not be practical, because the inspector can't get to the roof to inspect stuff. So there is some additional challenges that is presented during the winter. But don't let that get in your way of avoiding tryptophane and doing the hard work. So great point here.   Pierre: And also more specific to this time in history, or you know, this specific moment that we are going through a new president coming in, a little bit of economic uncertainty, what are some considerations that we should be taking in mind moving into an acquisition now?   Michael: I think to only kind of double down on Tom's point with the slowness of acquisitions, this time of year, people are taking vacation, people are doing all kinds of stuff. So just the whole process can be slow as molasses, in addition to the fact that we have all this economic uncertainty and interest rates are so low, so many people are doing the finances, but it just seems like the whole system is kind of log jammed with stuff, whether that's transactions, whether it's wi fi's or purchases. So just be aware that it might take longer, and especially with COVID, like Tom was saying with inspections and with appraisals, just stuff is taking longer. So I would just plan for that and kind of have that in the back of your mind. And think about maybe writing that into your purchase and sale agreement, giving yourself some extension timelines and extension windows, if needed. Because the process is just taking longer than expected.   Tom: I think on the aspect of financial uncertainty, I would just make sure that you're not overextending yourself so that you have the proper reserves, the property is vacant for a little bit you have reserves to handle a month or two that if you're using financing, that that financing cost is not going to be too big of a burden on yourself. So I think just practicing good discipline around what your available buying power is. and kind of just generally speaking like I have, yeah, there's a little bit of there's some economic uncertainty, but I think that for the most part, the government does a good job of steering the ship where it needs to be steered if there are issues for better or worse here. You know, we are in to like some major economic issue that comes up and it could be a reasonably safe assumption that there's going to be some additional stimulus support.   Tom: That was episode everybody. Thanks so much for listening. If you'd like this episode, feel free to give us a rating review and subscribe where it is a new podcast. We look forward to seeing on the next one and happy investing

Investing in real estate remotely can be intimidating when you are juggling a full time job, family and the host of responsibilities life throws at you. In this episode we give you 4 tips to make sure you get everything done and stay on track.  --- Transcript   Michael: Hey everybody, and welcome to another episode of The Remote Real Estate Investor. My name is Michael Albaum and today I'm joined by my co hosts,   Tom: Tom Schneider,   Emil: and Emil Shour   Pierre: and Pierre Carrillo   Michael: And today we're going to be talking about time management, something that's really important for most people, but especially important for those of us that are investing at a distance remotely, we're gonna be talking about some really practical things you can implement into your daily routine as an investor to help you manage some time. So let's get into it. Alright, guys, so we all know that time…   Emil: Hold on, hold on, hold on, we got a special guest on this episode, I feel like he deserves a very, very warm welcome and introduction to our listeners.   Michael: Pierre?   Pierre: Hey, what's up?   Michael: Can you give our listeners a little bit of background on who you are you pepper in some really great commentary in some of the episodes. But now you're going to be a full fledged host on this episode. Who are you?   Pierre: Yeah, I've been lurking in the corners since the beginning here, typing in when something's relevant. But yeah, I'm the producer on the show. And just starting out in the real estate game with my brother currently. So I don't speak much because I don't have much experience in this space. But I'm just learning from you guys. And excited to get in on this stuff.   Michael: Right on, we're stoked to have you.   Tom: Fantastic, and a great episode to jump in on time management being juggling, like 10 different jobs with the podcast and Academy and getting your real estate investing stuff going like, yeah, excited to have your input on this episode.   Pierre: Well, thanks. I need some of it too, because I have a weekly meeting with my brother. And we're always like, how do we use our time to really move this project forward? Because it's easy to just get stuck? Oh, let's analyze properties. Let's dive into this. But I think this is really going to be helpful. I'm going to definitely link my brother to this episode afterwards.   Tom: That's like the theme of the hosts is what is it self serving.   Pierre: Self serving?    Tom: Selfish like, bring on guests we want to learn from…   Pierre: Get your free consultation.   Tom: Exactly.   Michael: Love it. Awesome. So as we all know, life is very time consuming. And especially for those of us that have a nine to five or that are working day jobs, and then piling on kids and family responsibilities, and then adding on this layer of real estate investing. And for those who who are just learning that can feel like it's really time consuming. So we're going to walk through some strategies today that a lot of us have used personally, and so we can add some commentary into how it's been going. what's worked well, what hasn't worked well. But so we're gonna break this down in a couple different chunks. So, Emil, do you want to kick us off with the first strategy that folks can use to help manage some of their time?   Emil: Yeah, I'd love to. So I've actually tried a lot of the other things that we've outlined in our doc here that we're going to go over. But the thing that has really stood the test of time for me has been planning out my days in advance. And the biggest actual, like action item from that is putting things in my calendar. So I find that whatever I need to get done that day, if it makes its way onto my calendar, I have a much, much higher likelihood of getting it done, than if it's just kind of floating around on a to do list or floating around in my brain. So it's like some psychological thing where I've put on the calendar, I have this accountability to myself, it's sitting right in front of me that notification comes up.   So for me that's like, what I found to be one of the most helpful things and actually blocking things, setting aside a specific time to get them done. And getting them done. I think you can do there's a lot of stuff, I don't think it's just work, I think it can be, you know, in the context of real estate investing, if it's 30 minutes in your morning, right at 7:30am. Before you start work, whatever it is, to review properties or to read a real estate book, or a course you're in or whatever it is, whatever that action item for you is to keep progressing in your real estate investing, just blocking out that small chunk of time every day, I think is one of the best things I've found in terms of time management.   Michael: So Emil, I've got a question for you because it's something that I know you and I have talked about in the past and I've been trying to get better at how far in advance do you set the time block? Or do you schedule your day? Is it a day before? Is it day of the week out?   Emil: I used to be really good about like day before and I've slipped a little bit i think you know, as this is a bad excuse, but as more responsibility piles on I think it's like easier for those. It's just a habit I don't have anymore so I usually wake up I have my to do list. I'm like, What are the things I need to get done today? And then I'm usually just blocking them off throughout the day. But there's certain things and we're going to talk about it later than I've actually just become habits right like the first 30 minutes This is what I'm doing in the day. I don't even need a time block it. It's like those things that are happening every day become a habit versus a time block for me.   Tom: Oh, do you set like recurring schedule? Or do you know when you're setting those time blocks any advice in the way that you're setting up?   Emil: Yeah, so it's usually okay let's say I'm tackling things from my day, right? I need to whatever have some marketing campaign I need to get out the door that day. It's usually just like I'm blocking off Whatever chunk of time and I actually, I don't like to give myself gonna realistically take an hour, I'll just block off, usually try to block off 30 minutes, I've noticed that the longer the timeframe that that thing is blocked, you kind of just expand the time that it takes to get it done. So I like to keep things in like in small blocks, as well as one thing I found useful.   Michael: Is that a humble brag for that you're really efficient.   Emil No, a lot of times it goes over, but at least I'm like, it has a name. But like, whatever time you give yourself, you expand that fast. Yeah, whatever to just fill that time. There's plenty of times where I go past it. It's just I think more helpful to try to, I don't know, put less time than you think it'll take. And then if you need more, it's all good.   Michael: Yeah, that makes total sense. All right, we move on. We want to tackle anything else.   Emil: Yeah, that was it for me in terms of my biggest time management tool.   Michael: Awesome. So moving on here, Pierre, you had this really killer name for what you're going to be talking to us about? You wanna jump in here?   Pierre: Sure, yeah, I'm not going to be super innovative here. But it's just something that I find that works really well for me, and kind of every level of planning, say, like life goals or specific projects, but it's reverse chronology. It's where you identify what your end goal is going to look like, and then make a schedule working backwards from there. I feel like a lot of our strategies would overlap quite a bit. So I would use a meal strategy as well, to implement this reverse chronology. Say I have a project due by the end of the year, I know all the tasks that need to be done to make that project happen. So I'm going to plug in those time slots on my calendar to make sure that I have the time allocated properly to be able to achieve that goal by the end of the year.   Michael: Awesome.   Tom: Love it.   Michael: And how incremental? Are you breaking down those tasks that have to do is it a quarterly monthly daily, hourly kind of a thing?   Pierre: Dependent on the size of the project, but say, it's like a deliverable for the job here, I would break it into kind of manageable tasks like I like a meal, I get pretty distracted after about an hour of working on the same thing. So I would say kind of hour in less chunks. And with my job here, too, I got I wear a couple of different hats. So if I just spend too much time on one thing, I'll fall behind on another thing. So say time blocks of about an hour or less.   Michael: Cool.   Tom: It's great. I think so many times it can be intimidating if you're looking at a project. And it's it's almost as kind of like white paper, you know, I love that concept that you're talking about reverse chronology and sort of chunking it down into individual bits and having you know, clear deliverables on each stage of that. That's love it fantastic.   Emil: This one hits home for me, because I actually now despise yearly goals I think they're just too long of a timeframe. And it's, for me, it's like quarterly. And that's it, right. Like, I think it's good to have what's that big picture goal, whatever it is, but like, unless it's in a shorter time block, I just don't think your mind can like, get to the next action item. And just like, Alright, here's this short window of time, here's what I need to get done here, the outputs I'm going to do, versus like a year, I think is just so much time. And I don't know, I personally, the max thing I'll go for is like a quarter at a time.   Pierre: Totally. And there's this kind of psychological thing about getting small wins all the time. If you can just rack up a bunch of tiny wins, you can get momentum going. And that helps a lot.     Michael: Totally,   Pierre: That helps a lot with just feeling like not burnt out at the end.   Michael: So Pierre, I got to put you in the hot seat here for just a second because I think you're the perfect test case for talking about reverse chronology. So you and your brother working towards investing in real estate, you have this big lofty goal. What if somebody doesn't know what action items they need to take to get to that end goal? How can they use reverse chronology to kind of set up times and action items? If they're not sure what that path looks like?   Pierre: Sure.  That's exactly where we're at right now. So we don't know exactly what's our next step. You know, we hear Michael Zuber when we had him on he was talking about just 15 minutes a day get to know your market. We're like, what does that mean, get to know your market? like do I go just browse the MLS and just see what's available on that market? Is that getting to them your market? Do I get the newspaper from a particular market? Like what does that mean? So I think there's a lot of gray area in between now and the finished product. But the finished product is pretty clear we want to buy a house, at least the end goal is a definitive goal. And so we're thinking, Okay, we want to house by June next year. So how long does it take to close a property? Maybe I don't know how long you guys like 30, 30 days, 30 days to do that. Okay. And then so we're giving ourselves about two and a half months, about 10 weeks back from the point that we want to close that property. So if we want to close on June 1 around that time, we're going to subtract 10 weeks off of that and so that by that point, we should have a market chosen a pm selected, maybe some opportunities or some options for a lender kind of planned ahead. So right now it's just we don't know what to do. Maybe we'll call Michael at Roofstock Academy and get a coaching session.   Michael: I think that's such a good point to bring up that. So often that path isn't crystal clear. We don't know all the steps, and especially for real estate investing, and especially for new real estate investors, what that looks like, and there's so many stumbling blocks, but I think like you and your brother are doing is taking one step at a time, all in the right direction, knowing that you're headed towards that end goal. It might be a little bit sideways, one day might be a little bit, you know, 45 degrees off the path, but still headed in that direction. And that's okay. Right? You don't have to know everything before getting started in order to get started, right.   Pierre: Yeah, so we find tasks to do, but we're looking forward to maybe sit down with you, Mike, and just get a more clear, step by step where we're going   Michael: Totally yeah. I'm really stoked for it. I think it's gonna be a lot of fun. Alright, so moving on. Tom, can you talk to us about some strategies, tips and tricks that you've used in the past?   Tom: Yeah, so the theme that I'm going to talk about is make a system out of it. So there is a science around project management and task management. And there's a lot of tools out there. So using specific tools, some things that I like to do is I use Asana as sort of a day to day task management tool, and you can create templates. So if there's like types of tasks or projects, you can create a template and then clone it. So it's real estate related and analyzing, you know, a property or closing, you know, I have this checklists and things that I can use again, and again, there are no you don't have to everyone doesn't have to use the same tools, I think everybody is unique, and what makes them productive and getting things done. Like there's times where a pen and a paper and planning things out is really effective. For me, there's times where opening up a Google Sheet is really effective.   And sometimes in this exercise of going through and planning it, you may not necessarily use that like plan sheet again. But it feels like me, sometimes when I'm writing on paper or writing in Excel, like the process of writing it, it's like I'm writing on my brain in a way. And that kind of helps move things forward. Some other specific tools, I believe it's pomodoro is like a system where you work 20 minutes at a time, and then 20 minutes off, or something like that, and again to that theme that everybody's unique and the way that makes them most productive. So I think it's worth trying out a lot of different stuff, just like a meal mentioned, you know, some things have stuck, something hasn't. And it's worth the exercise of at least giving things a go.   On my desk at Roofstock, which I haven't been there a long time I miss it because we've been pandemic, I have this thing called the time timer, which was invented by like a kindergarten teacher who's either husband or wife was a consultant at McKinsey, this, you know, top consulting firm, and this consultant is like, wow, this is incredible as a way to manage time, it's like a reverse timer. So it's like, when you you spin this clock, it turns red. And as time passes, the red gets smaller and smaller. So it's like a reverse stopwatch if that makes sense. It has this red, big, huge visual thing. Anyways, I think they started using this time timer at like Stanford GSB. And like does other you know, kids consulting firms really cool tool time timer, they're like limiting yourself just to 20 minutes. It's this cool visual for meetings, it's super effective, too. I'm starting to digress a little bit. But the point is to look at some of these different tools out there and give them a shot and see what sticks for you. Not everything is for everyone. And honestly, it's totally reasonable that changes over time and what makes you most effective as systematizing, your process of prioritizing and working through projects and all of that good stuff, just don't be afraid to try stuff out on that front.   Emil: I use to use the Pomodoro Technique religiously for like a year or two. If your job involves, I think a lot of like project or task completion and you don't have a ton of meetings. Fantastic, fantastic way to just like, get through a lot of different tasks and just work with rhythms. You know, it's really hard to spend two hours straight focus on something. But the Pomodoro Technique is like an awesome way to just stay in focus, give yourself a break in focus, give yourself a break. So I was a big fan of that one for a while.   Tom: Yeah, the last kind of just two elements I wanted to mention is, is make it a ritual. So Michaels discussion is going to touch on a little bit more about aspects like this, but protect that time, the more that you do it, the more that turns into habit. And you might find that you stop using some system that works really well. And sometimes you stop for not a good reason. Like, perhaps for I don't know, whatever reason, like you just can't find your clock or whatever, and you don't use it. And then you realize a bunch of time passes. If you found it helpful, like go back and use it again. But you know, and don't be hard on yourself in the process. So make it a ritual, make it a habit systematize it,   Michael: I think that's so great. And you can also gamify it too, and kind of that systematize it challenge against yourself, see how you do and keep logs of stuff, too. I found to be really helpful.   Pierre: The program that my brother and I are using to organize our project is Trello   Emil: Trello is awesome.   Michael: Yeah, I like Trello, Trello is great.   Pierre: It's pretty cool. It's like a series of tabs that you can organize your tasks in. And so you can have like hierarchies of different things that you're working on and comments and links and more When you finish this particular task, you can just drag it over to the complete tab. So let's   Michael: Get that hit of dopamine. Yeah. Nice.   Tom: Other ones is a monday.com is a project management software. Right. Trello. So I like Asana. Yeah, a lot of good ones out there,   Michael: Right on. Were you going to say something?   Tom: I was gonna say, go ahead, Michael.   Michael: Awesome. So I gonna be talking about kind of the high level, how to put yourself in a position to be successful. So I think one of the biggest things here is, is first and foremost, determining when you're most productive, whether that's the morning and the night, midday after lunch before lunch. I think everybody has kind of a hot zone, so to speak of when they're most productive, and for each person figure that out, because it's not going to be the same for each of us. I'm curious to get your guys's hot zone. Tom, what are you most productive   Tom: Early bird worm, not midnight oil guy, early bird worm for sure. I'll even like something about like getting up extra like, weirdly early gives me a little bit of adrenaline like but getting out of bed sucks. But like, once you're up, it's like, oh, man, like, let's do this, you know? Yeah, let's say I have something do like in the beginning of the day, I'm so much better suited to just Alright, I'll set an alarm for 4am go to bed relatively early, and then get up and do it versus just trying to grind. I mean, there's some situations where you'd like have to stay up and grind but a definitely more of an early bird worm. That's where my creative juices are flowing best.   Michael: Okay, Pierre, what about yourself?   Pierre: I like the morning before people start bugging me. I think like around 9-10 people start sending me requests for things. And so I like getting to work early to get a lot of those things that I need to focus on done before people bug me.   Michael: Awesome. And Emil?   Emil: I have like three spreads throughout the day that I've kind of realized are like my natural most focus, so nine to noon, three to five, and then like nine till 11pm.   Tom: Multisport guy Nice.   Emil: Yeah, I don't know. It's like, all the other times I kind of just try to block with like meeting or admin stuff, but for some reason, like those three points in time, or when I feel the most creative or like focus, so try to work, try to put things around those hours that require like, different focus or creativity.   Tom: How about yourself, Michael?   Michael: I'm kind of like Emil. So like 4am to 7am is really good. And then like 7pm to 10pm I find I can get a ton of stuff done. So kind of like me. I was mentioning and Pierre was mentioning those…   Emil: You wake up at 4am?   Michael: Occasionally, yeah, sometimes naturally   Tom: Catch the surf man. That's when it's empty.   Michael: It's when the tubes are curling man.   Emil: Okay, surfing doesn't count, right? Sometimes I'm up at 5am to go surfing.   Pierre: Yeah, I left out all of my other ambitions.   Michael: I mean, I'll occasionally wake up at four and just crush you know, just do some deep work as they call it and just get a ton of stuff done because of everything you guys just mentioned. No one's disturbing you doing some kind of real estate stuff in Portugal. So that's also a good time to be in touch with people out there as well as on the east coast. Some contractors out there so sometimes I have to do sometimes it's just for fun. But it's kind of sick thoughts for fun waking up AT 4 am.   Tom: I think there's like some adrenaline bit to it. I mean, I'm not like regularly But no, no, but I ride with you, man. I'm right there with I mean, getting getting out. getting out of bed sucks. But I think once you're like in flow, yes. In flow. Yeah. It's kind of a related question. Is there any type of tasks that just makes you cringe like you just hate doing it? Like so much?   Michael: Recording podcasts?   Tom: Oh, yeah, me too.   Pierre: I have to say editing podcasts?   Michael: The worst.   Tom: Yeah, go first. I hate returning things. Like if you order something that's broken, and it's like, you need to return it. I like literally can't I probably have $200 worth of returns that I just couldn't be like, just like makes me mad. It says it's like boxes of things that either have like something broken when it arrived. And so as soon as I situation comes up, I might get some dread on me. So not a good returner of packages. It's my anti superhero power.   Emil: Tom, what are your greatest weaknesses? I just can't return things.  I seize up.   Pierre: I feel you Tom.   Michael: I don't know. Do you guys have anything that makes you… I'm just kind of thinking   Tom: It's hard being perfect, isn't it Michael?   Michael: Yeah. It's   Emil: emails, emails that have like, mountains and paragraphs of text. It's like, Nope, I do not want to write a sonnet back to you like,   Tom: Yeah,   Emil: Can we just have a five minute conversation? I don't want to write a book right now. That's I just kind of… like   Pierre: Certain admin tasks. Oh, yeah. Just a little dry.   Michael: Yeah, though. My last good Mother's Day my wife will attest to this but like filing like filing stuff like paperwo rk stuff because we can just get so much so much of this stuff is still snail mail that we get an old civil paperwork. So converting that to digital or just file like filing stuff. away. I've got papers on the on the windows. So right now and I Paris like really Michael? Really? We have fun like I got you filing cabinet specifically for this like, Ah, no, but it can't just live there.   Tom: Yeah, it looks happy there.   Michael: Right? It's getting some sunlight in the growing.   Tom: Alright, let's get back to this.   Michael: Alright, back on the rails here. Yeah. So another thing that I think can be really helpful that I've used in the past is removing distractions. And so so I used to work at home in my last job, it was half in the field half from home. And I would always have buddies asked me like, dude, like, how did you just not watch TV all day? Like, but just turn it off? I don't understand the question. So hiding things from yourself if you need to, whether that's the remote control, or passwords to stuff or just like things that distract you golf clubs, for you, Tom, you know, out of sight, out of mind kind of a thing. And then also identify, what's that   Tom: Phones, man phones.   Michael: Yeah, turning your phone off or on Do Not Disturb or just putting it away, can be super helpful. Because I think I'm guilty of it. If I see it buzz or light up, I'm tempted to look at it. And that's a huge distraction. So essentially, I was listening to this podcast, the BiggerPockets podcast the other day that came out. And they were talking about identifying what is and is not a distraction. And so people always saying like, oh, man, I like went on social media for an hour. And it was so distracting. And now that hour is gone. And that added up. But they were talking about in the episode as well. What were you planning to do in that time? Let me see your calendar. And so if you didn't have something planned for that hour, anyhow, is it technically a distraction. And the argument they were saying is no, because it didn't stop you from doing anything, it didn't prevent you from doing something. So look to identify what it is you're trying to accomplish. And then try to identify the distractions. And I think using time blocking can be a really good way to do that. Because then you'll actually have set times, but also be gentle with yourself. If you didn't have something planned, who cares? like whatever, go do it.   If it makes you happy, do it. And I think kind of giving in to those urges can help you not feel so distracted. I mean, if social media is your vice, you might constantly be thinking about it while you're trying to do other stuff while you're trying to focus on something else. And so if you need to go check social media for 1520 minutes, set time aside in your day to go do that, enjoy it and then go back to what you're doing. You can stop thinking about social media, you know, or whatever that vice is   Emil: Social media is the devil.   Michael: Social media is the devil   Tom: Was that Netflix documentary?   Michael: Yeah.   Emil: The social dilemma associate. There I was very, very interesting documentary   Tom: PhDs trying to mess.   Emil: That is really what's going   Michael: They were talking about on this podcast episode how the host was totally in disagreement with it. He said, because the movie missed an opportunity to tell us what we can do. And it's it's like, oh, it's your there's nothing you can do your sucker to social media. It's like, Yeah, but also not really like you can you can turn it off, there are tons of things you can do, you can time block it so you can go get that fix, and go spend your time doing it. And then you don't feel bad for having done it. I got the itch man,   Tom: I got a fun tip for with related to social media, you can turn the color off of your phone. So it goes black and white. They call it moto or is their turn   Pierre Monochromatic.   Tom: Monochromatic. So it makes some of that, you know, sizzle in red Heller. Yeah, you don't have to look at it. And it makes it black and white. And I have my phone like that, too. If I feel I'm getting a little too stuck into it. I tried to see if a black and white.   Michael: Yeah, nice. I think it's probably easier on your eyes to especially like in dark rooms. All those vivid colors can be really harsh.   Tom: It's like social media methadone. Good.   Michael: That's exactly what it is. And then so kind of moving on here talking about Tavella, there's no Popeye needs his spinach. So figuring out what your spinach is, you know what juices you up to help you get focused to help you do work. And so for me, a big drink of water in the morning is super helpful. I try not to drink coffee, it just makes me really jittery. But occasionally if I really need a big boost, I'll have a little bit of coffee, and then I'll feel it all day. So figure out what helps you get going or kind of get into that proper headspace. And then do that use that regularly. And it's interesting. Emil, you were talking about, you know, not being able to sit for a couple hours and do stuff and how so that pomodoro style was really helpful, you know, kind of 20 minutes on 20 minutes off. I'm so the exact opposite. I can sit for three, four or five hours and just like work and do and accomplish. And again, this is totally not a humble brag and says it needs to be my own horn. But.   Emil: Uh huh.   Michael: I think figuring out for each individual person what works best. what works best for you is super great.   Tom: Toot toot.   Michael: And so if you are someone that can sit for hours and do work, great, but don't mistake being at the computer and doing stuff with accomplishing stuff because you can be busy and not accomplish anything. So look to make sure that you're actually getting some traction. And that's something that a theme in the episode they talked about is that bigger pockets episode is traction versus distraction, so I won't spoil it for everybody. Any thoughts there before we move on team?   Tom: Love the busy versus productive, be productive Don't be busy. And also the Popeye needs a spinach. I know for myself I sometimes a little bit of a snacker. So trying to get something reasonably healthy but if I know that I would ever work better with Cheez Its and it's really important for me to work really well. Maybe just have a little a couple of visits or I'm feeling special. I can add some walnuts or goji berries. I don't know. I'm just throwing some buzzwords out there. Anyways, so if you're a snacker like just yeah, know what your know what makes you tick.   Michael: Have you ever had the Tabasco Cheezits?   Tom: No, it sounds great.   Michael; Oh, they're so good. They're so good. Alright, so moving on here. Just some other rules that I try to abide by. I'm curious what your guys's thoughts do not multitask. I'm going to come out and just say it's a fallacy. I think it's a really good way to do a bunch of stuff poorly. Not a fan of multitasking. If you can do it great. I'm not a believer in it. your guys's thoughts on multitasking,   Emil: I'm with you, my wife. And I always have this argument. My wife's a nurse. And she's like, if I couldn't multitask, I could never do my job. And I say, you know, power to you. I am like one thing at a time, or else I just do them all terribly. So I think some people can do it. I just, I don't know, I don't know how doesn't, does not compute for me.   Tom: You can see you're doing it. But what's probably happening is you're doing one thing, and then quickly switching it   Emil: Switching. It's not multi, yes, it's switching. But I'm terrible at that even right, I need like singular focus. Personally.   Tom: same   Michael: Pierre, same for you? Pierre: I think you guys are right, and that it's switching a bunch of tasks, but it's keeping kind of a big picture of a lot of things you have going on, so you can switch efficiently between them. So I think that's kind of my version of multitasking, because I do like my position here is not one thing. So I do have to keep a bunch of tasks in my mind at the same time with my goal where I want to get you at the end of the day. But I think you guys are right in when the rubber meets the road. And I'm acting, I am only acting on one thing at a time.   Michael: So it's like on an iPhone when you up, swipe and hold it to look at all the applications you have running and just grab the next one?   Pierre iPhone what? We had this conversation Mike.   Michael: I know, I know. You're the green bubble when I text. So there's something else that I will be the first to admit I'm terrible at and that can be really helpful for time management is learning to say no, I There's something I've been trying to work on over the last couple of years, saying no can be one of the most empowering things you can do. And it can also be one of the most beneficial things you can do in your time management realm. And so there's a polite way to say no, and I think doing so can be really helpful and really open up your schedule. Because if you become the yes person that can often become cyclical and habitual. And people know Oh, great. I can go to Emil because he said yes, last time. So he's gonna say yes again. And you can be pretty quickly salad bagged with a lot of other people's stuff that isn't necessary for you to perform whatever it is, you need to.   Emil: I am a huge, huge fan of saying no, I feel like I used to suck at this and would say yes to everything. I think there's a time in your life where it's good to say Yes, a lot. I think if you're early in your career Early in whatever you're doing, I think saying yes, and being like, super open and liberal with your time makes a lot of sense. I don't think saying no, when you're early makes sense. I think you'll you'll be at a deficit. But as you know, some things start to fall in place or whatever and you're growing. If you don't learn how to say no, you're just gonna be doing a lot of stuff that's unnecessary. And I think with time you start to learn that a lot of things aren't going to move the needle, it's just like the nature of the game there's, you know, the 80-20 rule, where 20% of what you do is going to make 80% of the results and so I think with time you just get better at that and it helps flex your no muscle to be like okay, is this really going to make a difference?   Michael: So question for you Emil for the new people who are maybe just starting out their career How do they balance learning to say no with setting boundaries and line setting expectations because I could very easily see you're the yes person at the beginning. Everyone's like cool Emil is easy. And then all of a sudden five years down the road someone else used to be like no, like whoa, meals kind of a jerk all of a sudden.   Emil: I don't think people perceive it that way. I think if you're polite about it and just say man I have these things going on I just I don't have the capacity for this right now. Thank you for keeping me in mind or whatever. I think there's there's a nice way to do it and not right like if people know you're not just like saying no so you can kick your feet up and do nothing. right it's I think people will respect it if you're polite about and you know, give a reason people always appreciate a reason even though you're not obligated to give one.   Pierre: That's right saying no to something and saying yes to something else. So if you struggle saying no, just tell someone that you've said yes to something else already.   Michael: Oh, Mic drop here. Exit stage left, episode over love that. Yeah,   Tom: I'll add a couple of more points. So I love the point that Emil said about you know, being a little bit younger maybe was Michael said but being younger in your career. Like there's something to be said for grinding super hard. My wife, one of her earlier job, she was at PwC for a couple of years. And she had a manager who would joke that Yeah, you know, if you're working 100 hours a week, it's like you're getting two years of experience. And just one year, I thought that was like a funny way to think about it kind of disgusting. But you know, but it's, it's, I think there's a time and a place in your career for gain that value.   The other thing, I think in that saying no, is really important. I would always put it into context into who is asking you to do someone? Is it someone who's kind of like constantly just trying to delegate all their work to somebody else? Who or is it someone who like, wow, this is someone I should, like, impress and be awesome with. So I think it's all contextual. And also, the type of work is this type of work that I'm going to be building some muscles that I can use later on in my career is this type of work that's going to make an impact to revenue or expenses and directly touch that kind of stuff. So it's all contextual. And I think what happens over time, as you get better to say, No, you get better at reading in between the lines of like, is this something that's valuable for the company? Is this valuable for me? Or is this just someone offloading some some random busy work? So I think that's all important to understand. And also, you'll just get better over time. And being able to read between the lines as stuff comes comes across.   Michael: Yep, I think that's super great. points, Tom. And I think also segues nicely into the last thing I want to talk about, which is learning to delegate. And I think so many of us, especially in the real estate space, again, I am so guilty of this, but trying to do everything yourself, because no one can do it as good as you can. So if we're investing remotely, a lot of us will be relying on property managers. So being okay, letting go a little bit and saying, hey, I need you to do this. For me making phone calls, you know, delegating tasks, your time is better spent elsewhere. And I think a lot of people have a really hard time paying for services, or paying to have someone do something. But at the end of the day, if I can pay someone 20 bucks an hour to do something for me, and I can go make $100 an hour or $1,000 an hour doing something else, because that's what I'm better suited for. That's a really great use of my time and a really great use of my money. So a lot of people, again, have a really hard time doing that. But look at the actual cost, versus what your ability to earn is for that time.   Emil: Very good point. It's why I don't mow my own lawn.   Tom: Yeah, all the great resources out there for help extra stuff. So mowing,   Emil: You know, family time, you know, it's just like, you start to, I don't know,   Tom: yeah, there's a lot of good websites on helping to delegate or bringing in people to help out. So like Upwork is a good one, I had a great use case where I was at a friend's wedding, I was the best man, I had to write a best man speech. And I put together like, kind of like spilled my guts on a page, and then brought in a professional speech writer who actually wrote for cash flows that show drunk history. He was like, he was like a producer for that show. So he's like, super funny, like stand up comedian. And I best use the mice, I paid 100 bucks, and he basically took rearranged my like, gut spilling into a really well put together speech. And it like brought down the house, you know, using and what I want you guys to take away from that story is just test it, like create an account on either Upwork or one of these other platforms. Fiverr is another one, and you know, have some small tests, and then do it like, just bring someone in, it's, the more times you do it, like the better you're gonna get at it. And then you're going to bring down the house at a wedding. So it's worth doing.   Emil: That's so smart. I never even thought about that. That's a really smart idea.   Michael: The last tip I'm going to share on this is I got it from somewhere else, I can't take credit for it. But right for like two weeks just write down everything that you do during your day, task wise. And then look to see at the end of that two weeks, what could you pay someone to do? Did you hire a virtual assistant? Could you pay a TaskRabbit? Or someone on Upwork? Could you pay someone else to do some of these tasks, and essentially like to buy back some of your time. And I just thought that was really interesting exercise because I think so many of us do things that without even thinking about without even realizing what we're doing. And when we really stop and lay it all out, it can be pretty eye opening to see how we're spending our time.   Pierre: It's a good accountability mechanism as well. Let's see how much you know, write down your bad stuff, too.   Tom: So love that audit, do the audit exercise of your two weeks. All right, I'm gonna add in some final thoughts that I have here. One of them is Be sure to charge your battery like these systems that you run or these you know, it's all a little bit of extra work. And it's really important to know how full your balloon is because the worst thing you can do is continue to take on more stuff and you just end up doing like doing badly poorly. So charging your battery take time off. Like if you work at a job that has time off like know how much bandwidth you have no one you're you're gonna blow and just be open honest and constructive with everybody about when you need to charge that battery.   The other one is continued to evolve. It's not a one size fits all. And it's also not a one size all the time. I don't think I said that right but often too. Your systems and the way that you do things are going to evolve over time. So be okay with that. And what works for you now may not work for yourself in six months, but just continue to try new things out have that spirit of keeping the pistons going. And then lastly is to not be too hard on yourself, if you're, you know, not being super productive, or you're getting whatever lost in social media or you're just you're not where you want to be. There's this parable about getting hit by two arrows. So like, one of them is the first mistake. And the second one is just kind of shaming yourself for feeling really bad for not doing great. So get hit with the one arrow be okay with it, and then get back on the horse. So that's my Don't be too hard on yourself and pistons going. Yep, that's those are my final thoughts.   Michael: Oh, love it, love it. I think that's just to echo what you said, Tom, being gentle with yourself, I for sure have beat myself up really good for decisions I've made, especially when it comes to real estate investing. And you know, either biting off more than you can chew or just making a poor decision rushing into making a decision. And so I think it's so important to pick yourself up, dust yourself off and realize that, okay, the decision has been made, it's time to move forward, there's not you can't change that unless you can well then go back and change it but just continually moving forward. And try not to dwell on the past, which is so much easier said than done. And I know that but I just a reminder to everybody listening it be gentle with yourself, this is a you will make mistakes, you will learn the hard way, I will promise you that. So just know that and kind of move forward from it. Emil and Pierre you want to take us home?   Emil: My final thought, try to keep this stuff simple. Don't later on 12 of these things that we just mentioned, Pomodoro Technique, adding things to your calendar, blah, blah, blah, blah, blah. You're just like, I know people who do that. And they're often the least productive people I know. Because all they're doing is juggling tools and techniques and strategies and stuff, I would say try to just hone in on a couple things and just get good at those.   Pierre Yeah, I'll echo that you can read a ton of books and just learn a ton of different methods for keeping track of time but then that's time being lost to if you haven't put any of it into action. So just choose one thing. Start with that. Get Started.   Michael: Do you have any resources books that you'd recommend Pierre?   Pierre No, don't read any books. Just do what we just said.   Michael: Audio books only on your way to doing other stuff.   Emil: I have one because I think the biggest thing here is making these things habits. It's called Atomic Habits by James Slear that was that was one of the best books I've read on forming habits.   Michael: Awesome. Yeah, Tom give any book resource recommendations?   Tom: Classic one, Seven Habits of Highly Effective People. Stephen Covey wrote it, it's a classic classic, it's talks about sharpening the saw, a lot of stuff we're talking about, but I love audiobooks when I'm like doing dishes and just like kind of thing and but not really. So that's in my regular queue of learning and doing better. So that's my that type of productivity hour is cleaning or dishes or whatever. Poppin an audiobook   Michael: So is it almost like you're multitasking?   Tom: Shut up Michael. Well, no. Those are that's a good thing to multitask with.   Michael: You can walk and chew gum. Absolutely.   Tom: Yeah. with you. I take back my shut up Michael.   Michael: A book that I would recommend that people check out if you're interested in implementing some more of this stuff. We talked about his Miracle Mornings by Hal Elrod it's a really great book. I implemented a bunch of stuff and kind of fell off the wagon a little bit, especially with regard to waking up early, but I think there's a lot of really good useful tips tricks in there as well. Alrighty, well guys, this was a lot of fun. And hopeful that people got a lot of useful stuff out of this and know that everybody's human Everybody makes mistakes. So figure out what works best for you and then truly go look to implement it and not just for a day or a week or a month you know, really give it a college try. Give it your best. And it doesn't work move on because not everything will work for you.   Emil: College try I didn't I don't know.   Michael: Isn't that isn't that isn't the thing   Tom: Its like a 20 saying like, like a 30 like “the good old…”   Michael: Yeah. prohibition just around the corner give it a college try.   Emil: A sincere effort or attempts at performing a difficult or seemingly impossible task.   Michael: All right.   Emil: I stand corrected. Continue, Michael.   Michael: Awesome. For once. For what yeah, that's my one for the month guys.   Emil: Check it off.   Michael: That was our episode. Thank you everybody so much for hanging in there with us. Really appreciate it. If you'd like this episode, please feel free to give us a rating or review and subscribe wherever you listen your podcasts and we look forward to seeing you on the next one. Happy investing,   Tom: Happy investing.   Emil: Happy Investing,   Pierre Happy time management.

In this episode, we bring back the showdown! Tom and Michael debate whether you should maximize rent growth or minimize vacancy.   --- Transcript   Emil: Hey everyone. Welcome back for another episode of The Remote Real Estate Investor. My name is Emil Shour and my co hosts are,   Tom: Tom Schneider,   Michael: and Michael Albaum.   Emil: And in today's episode, we're going to be doing an old school style showdown episode. And today's showdown topic is going to be rent growth versus vacancy.   Emil: All right, before we get into this episode, guys, we mentioned that we were doing a little giveaway to help us get over 100 reviews and we are now at 103. So thank you everyone who answered the call there and left us a review. We're going to choose two people at random here. And if you guys just reach out to us, we'll get you some some goodies. So first winner, drumroll please. First winner, Big Red 13 Thank you big red 13 for an awesome review. And let's see here. Our second winner is going to be drumroll again please.   Tom: Papa, papa, papa. Boom.   Emil: All right. And our second winner is Bobby tonsils. Bobby tonsils. Thank you for an awesome review as well. So if you guys just want to reach out to us, I'm at eshour@roofstock.com, Michael is malbaum@rootstock.com and then Tom is just tom@roofstock.com . Just reach out to us. Let us know we call your name. Since these are kind of like usernames, we don't know your first and last name. So just reach out to us. And we'll use the honor system. And we'll send you some goodies. Thank you guys so much. So let's hop into this episode. Alright guys, so today's showdown is going to be rent growth versus vacancy. And this is a good one because I think it is well debated. And there's good points to be had on both sides.   Michael: But there's better points to be had on my side. So let's go That's right. Well,   Emil: what is your side? Michael? What's that? Are you taking on this showdown?   Michael: I'll take the stance of rent growth because I think that's the more difficult position and I want to be a gentleman and give these your position to Tom to start.   Tom: A lready handicapping himself already sowing the seeds of defeat. I'm gonna reap a lot of failure harvest, okay, go ahead.   Michael: Good thing I studied Agricultural Engineering. I'm the best harvester in this group.   Tom: Oh, yeah.   Michael: That's like such a tough comeback. Like, Oh, yeah. Yeah.   Emil: So Tom, you're taking the side then of vacancy?   Tom: I'll start with vacancy. And then in tradition of the showdown, we'll switch it up.   Emil: By vacancy, we mean, making sure are trying the best you can to not incur a vacancy. Right.   Michael: Yeah, I guess that's good. Clarify.   Tom: Yeah, well, let's clarify the bait first. Yeah, they can see versus rent growth.   Emil: Yeah, like, We're not saying we want vacancy, we want to not have vacancy. So the question is, do we do all we can to keep the tenant in place, and maybe not charge higher rent, lease renewal, or we always go in for rent growth. So who wants to kick us off?   Tom: Well, in format, right, one side starts the other robots, and then the initial side gets to go again, Michael, why don't you lead us off, just cuz I feel like, you know, there could be some upfront bias on both sides. So sure, go ahead, lead the way. And then you'll then we'll change the order next time around.   Michael: I appreciate you baiting me now. So that's great…   Tom: Gentlemanly move, just trying to…   Michael: Humble brag. So I think it's so important to maximize rent growth, and really prioritize that over vacancy for a couple of reasons. One is when it comes to property performance, if we're maximizing rent growth, that's gonna have an immediate impact on the property's performance. And, as a lot of our listeners know, I'm a big fan of multifamily investments, I own a lot of multifamily investments. And so, minor incremental rent increases on a property on a per unit basis can have really profound impacts on the noi of a property and the ultimate value of a property.   So let's just walk through a quick mathematical example, if I can increase rents $15 a month on a 10 unit building, so that's $15 a month across 10 units at $150 a month in additional noi, if I multiply that number, then by 12, that's 1800 over the year, if that building is valued at a 5% cap rate, I'm going to divide the increase in noi by the cap rate to get my additional value added to the building. So when I take 1800 divided by point O five that's $36,000 in value I've just added to my building by increasing rents $15 a month per unit. Now that's mind boggling when you think about that and the power to do that is also mind boggling.   So when we Think about rent growth, it's in addition to having a profound impact, potentially profound impact on the value of the property. I think it's also important to just be reasonable and fair with your tenants. And so if you can increase your rents incrementally year over year, as opposed to keeping them stagnant and then having to hit tenants with a massive rent hike down the road, I think you're treating tenants a bit more fairly. And I think a lot of people expect minor increases, as they do with just average inflation, the cost of living the cost of goods and services costs more year over year. So of course, why wouldn't the rent keep up with that year over year? Mike, drop exit stage left? Tom, you have the floor?   Tom: All right. You know, before I like to talk about stuff, just quickly, defining our terms, right. So this is a debate about do you want to be penny wise, pound foolish and what I mean by that, if you are 100%, about rent growth, you're going to be pound foolish, you know, you may try to increase and jam on your tenants an extra 10 bucks, 15 bucks, 50 bucks a year. But ultimately, you're the one that's going to get jammed, because that tenants going to be like, No, thank you, you are jamming me, I'm gonna move somewhere else. Like, it's, it's stress. I don't if you guys ever rented in a place and every year, your landlord jamming you 25% I got out of there as quickly as I can. So that's the Pennywise great, you're earning an extra 10 bucks, you know, hundred and 20 bucks a year awesome pound foolish, you're going to run into vacancy, you're going to have people get leave, you're going to have people basically have the house open, where you calculate how much it costs to do a turn, versus those incremental increases in income that you're getting by raising the rent, the math speaks for it self, you're going to want to be have that occupancy, the weight of the costs that you have on a turn greatly, greatly are going to exceed those marginal benefits that you're going to get by raising the rents a little bit.   And also, if you have a good tenant that is paying on time and keeps the house in great shape, what a great way to mess up your investment by just continuing just poking them with needles with little increases in dollar rent, you know, do you want to be a needle poker, I don't think you want to be a needle poker I think you want to be an effective investor who is making sound decisions. And being Penny dumb, pound smart by really thinking having the big picture and making it work.   Michael: I love that you use this analogy of poking holes in the tenants because I want to come back to something that you've said over the years and that's being long term greedy. And as your expenses increase year over year, your property taxes might go up incrementally the cost of goods and services is likely to go up incrementally, your returns are now getting those same pin holes poked in them poke, poke, poke the return, poke, poke, poke your return, and you're going to start bleeding. And there's a phraseology out there death by 1000 cuts. And so how do you reconcile with yourself or with the potential return that you keep your rent stagnant while you then have to eat those additional costs year over year?   Tom: You as a savvy investor, you know, there are ways that you can look for more competitive rates. Because a lot of those costs me one of the beauties about real estate investing is you get these fixed costs, right, you lock in a lot of things, you fixed financing rates, taxes may move a little bit. But if you're proactive about them, you can make a case to the county and keeping those nice and low. So win win situation, you manage a few of those costs that might move a little bit of time. And you manages the expenses that related around terms by not incurring them by keeping your tenants in the house by keeping that vacancy number low.   I mean, every investor needs to look at the balance sheet of their property. And what's going to come up quickly come to the conclusion that you know, there's two ways to make money as in business as an investor. In any case, minimize your expenses, maximize your gains, and sometimes there's a little bit of trade off and in this question related to keeping your vacancy low or increasing your rent growth, it's a pretty simple equation, keeping your vacancy low you're gonna win.   Michael: Yeah, I agree. The equation is pretty simple, but $36,000 in additional equity is a pretty amazing. Emil care to step in here?   Emil: All right, guys. Yeah, you guys are starting to throw haymakers. So I'm gonna step in here.   Michael: It's a bloodbath.   Emil: Yeah, it's there's there's blood everywhere. You guys both bring up good points. Michael, just to clarify your example there, increase in value that will typically be seen only on a commercial property. So in our case, talking about housing, that's a five plus unit building, right? If I own a single family up to a four unit building, increasing the noi doesn't really have an effect on the value of the building because it's not valued on cap rate is valued on sales comp,   Michael: Well if you sell it to an investor, but when if someone comes in to buy that building the bank with a mortgage, the bank is likely going to still make them get an appraisal and the appraisal is going to be based on comps.   Emil: Yeah, that's a good point. If you are able to raise the rent you are making it a more attractive investment for another investor right? So if you're selling it Yes, as an investment, you're right. It will be attractive even if it's not valued on cap rate. So good point there. And then Tom Really good points in turn costs, right? Like anytime you have a vacancy, those are one of the biggest of the like times where you have the biggest expenses or you can write, especially if the tenant has been there for a while, there's been a lot of deferred maintenance. I know personally, like whenever I've had a turn, that's when I have the biggest R&M costs. So and that's not even account   Tom: Plus no income. What's your sorry, I just took it right out of your mouth. I saw it in your mouth. I took it right out.   Emil: Come on, man.   Tom: Go ahead.   Emil: You're in your corner Tom. Is the referee speaking? The bell has rung. You guys both bring up various solid points. One thing I have this one property manager who every time the lease comes Do they have these three levels of rent increase, right, so they'll have like, aggressive, normal, and then do nothing. And so aggressive is like, Hey, we're gonna raise rent X amount. To get right up to market, the standard one, which I always go for is like a smaller increase. But what they say is that if the tenant looks like they're going to leave, because of the rent increase, they'll work with them to basically either keep rent the same, or maybe only increase it half of what they were going to do or something. So it's basically they're going to propose it and be flexible, obviously not going to say it up front. But when push comes to shove, they're going to be flexible with the tenant, versus instead of just saying no, this is the rent, increase, take it or leave it, that kind of deal. So I've always actually appreciated that what we're doing these consistent rent increases, but they're small, and we're willing to work with the tenant. So we don't have a vacancy. So let's switch roles. Tom, you're going to take the rent growth side. And Michael, you're going to take the reducing vacancy side. And hopefully let's let's not try to touch on anything that the other has already said. So better rack our brains for four cases. Michael, you started last one, Tom, kick it off.   Michael: Let's touch gloves, Tom.   Emil: Ding, ding.   Tom: All right. You guys feel that? It's the winds of change. Historically real estate, as an investment, at least in the single family space has been limited to sales comparables. But it's a really flawed system for a variety of reasons. It's why commercial uses return base. And I think the winds of change is single family rental is going to go in that direction too. Just because the value of an investment, it shouldn't have to be with some arbitrary value of what the home's next to it is. It's it's what are you getting on that return? Right. So I think that over the next five to 10 years, there's going to be a dramatic shift in the way that valuations are done with single family rentals and being able to get debt based on what kind of returns you're getting. Because you know what, this is an investment and you know what the value of an investment is what kind of returns you're getting. So in the ability to increase the value of your home by continuing to push up that rent, it's really impactful and just playing defense and not necessarily pushing it up, you're leaving money on the table.   And I think this is going to be the shift that's going to be happening over the next several years with single family rentals, and the ability to get that in the same way that you're able to do with commercial stuff kind of a little bit repetitive, I'm going to say this is a Gandhi quote, Be the change that you want to see and the kind of change that I love to see his rent increases. So to that point I was talking about earlier, generally speaking, it's pretty fixed costs. So you know, say I am getting a return on a property like a cash on cash, like whatever 10% or something when those rent, when that rent increases, Ooh, baby, that's just like going directly to my net operating income. So be the change that you want to see. And that change that you want to see is rent growth and more annual increase in the rent that you're collecting.   I think also to not really piggyback but there's a couple of other values in increasing the rent. By doing it, you are creating general market pressure that other landlords are going to see. And it creates sort of a wave effect, or that's not the right word to use wave effect. But it has a bit of a compounding effect in that when you increase your rent, it creates a market comp for every other landlord to continue to tweak up just a little bit. And over time, you are helping that market rent increase by increasing your rent just a little bit. Now I'm not saying you want to necessarily jam it up, and it should be reasonable. But by sitting back, you're letting the market rent as a whole stay stable when you could be contributing to comps that is going to raise pretty much all market rents. So are you a market leader? Are you a market follower? I don't know. saw me someone pulled my mic. Oh, my mic.   Emil: All right. All right.   Tom: Those are all really great points. And clearly, you're going to be the Pioneer with the arrows in your back. The first one's always are. I never want to be the first one to do something in a market because there's a high degree of failure that can occur. So, you know, I think that's a really interesting point you make about being the comps are typically based on numerous I think are based on numerous indicators, not just a sole or single operator owner. And so I don't know if we can say that one, your rental being higher than the others is going to increase and raise up some of these other rents. And I just think that they can see is the fastest way to kill your returns on a property. And so like you were mentioning, if you are juicing your returns by increasing the rent, and your fixed expenses stay fixed, that the return is only to increase, if we have a month of vacancy, I mean, that could just decimate an entire year's worth of cash flow.   And to make an extra hundred hundred and 20 150 bucks annually, the risk reward is the risk is a full year's worth of cash flow and the reward is an extra couple hundred bucks maybe just doesn't seem worth it to me. And then, as you mentioned previously, this is when you have to take care of all your turn costs. So not only are you losing out on all of the income, but now you're forced to reckon with all of the repairs and maintenance issues that are needed. In order to get a new tenant in place, you're also going to be slapped with a new tenant placement fee. If your property manager charges one, you're also going to have to pay for any utilities that are associated with that property while it's vacant. So I think a lot of people don't really tally up all of the totals associated with losing a tenant and placing a new one. And I just think the the risk reward scale tips very heavily and very rapidly in favor of keeping a tenant in place even at a slightly lower than market rents.   Emil: Tom, you get final rebuttal.   Tom: You know what Michael? I agree. Wait, hold on, come on. Come on, Tom, get your face on get your game face on.   Michael: Get this guy some coffee.   Tom: Yeah, you're you're either making plays Michael or you're getting played? Right? Way. All right, Tom. Okay, we're not talking about Armageddon. We are not talking about raising the rent, you know, over the market rate, we're talking about just slow, steady, incremental, I think being reasonable with your tenants. But what I'm advocating with increasing market rate is not, you know, throwing a hail mary and increasing it to the tippy top of the market, I'm talking about just incremental steady increase in rent. And over time, if you make these steady, reasonable things, you know, increases, not only are you going to see your returns increase, you're going to increase the value, not only the immediate income, but also the value of your property, as we talked about the winds of change, thinking about the value of a home on a valuation basis, which, you know, I'd say, to be honest, isn't really the status quo now, but I think over time, it's going to be going that direction.   But my final point is, it's not about these huge rent changes, it's about just being putting a little thinking about it. And subtly making continuing to make those improvements over time, and not getting so below under market and just kind of keeping up with the times right with what the rent growth is. If you can increase the rent less than the cost of move, you should know what those values are, and you know, have an open discussion with your property manager about what they think. And really, that's the best way to go about is to have an open mind. But Michael's here old, don't ever change the rent strategy. Now you're just leaving money on the table. I wouldn't want to leave money on the table, would you?   Michael: I'm going to speak on behalf of all renters because I was one for a very long time and we make impulsive emotional decisions. If you raise the rent on me out, you just solidified a way to lose every single one of your tenants every single year. Congratulations.   Tom: You sound like a renter I don't want, good news. I just put in built in laundry, you don't get it now.   Emil: Back to your corners back to your corners. Gentlemen, a great show, please cut me I don't really have anything that I think we hit the pros and cons of each. I want to dive deeper with a couple questions. follow up questions for you guys. What about when you buy a property that already has tenants in place? And they're like, a couple hundred dollars under market rent? What do you do there?   Tom: First off, that's such as a great way to find deals or properties that have undervalued rent. I love that as a strategy. And to answer the question, I don't think first you're honoring the lease, it's their, their lease that they have, I would gameplan it with my property manager, I would first get an assessment of the house and of the tenant and if they have a long track record of paying on time and the property is still getting like reasonable returns, I know that I have a big pop in rent growth at some point in time, I wouldn't see necessarily see a reason to move it like immediately. I mean, there could be some states like California where you you know there's rent control and there's nothing you can do about it but even in an area if it doesn't have rent control if the property is continuing to operate well, you know, as they're paying their rent and isn't really bad repairs and maintenance. I'm okay just floating on that lesser cash flow, knowing that there's this big pop at the point at which the tenancy ends.   Michael: I think it's a super great point, Tom. And I would say it depends too, on how you bought it. And so if you're buying it, and it's performing well, like Tom says, great, if versus if you're buying on pro forma. So let's say the rents at 1000 bucks and investment only makes sense that you can get 1200 bucks for the property and market rents call it 13. So you think it's very realistic to be able to achieve that 1200? Well, are you forced to move it to 1200 in order to make the returns work? Or is it okay at 1000. And you can wait until like Tom mentioned, the lease ends, and then we can bump it to 12 or 13. So it depends on how you bought it, I would argue that you should be buying it based on today's performance and recognizing future value add opportunities, like raising the rent.   Tom: I'm nodding my head over here a great point, I think in evaluating it and buying it, you shouldn't put on pink rosy glasses, you should just assume that for whatever reason, the 10s are gonna be there for a little bit, and just have the Yeah, today's rates in the way that you're evaluating it and knowing that there's some pop on the other side.   Michael: And also, if you keep the current tenant in place, or tenants in place, and you're getting some cash flow, you can start to build up your reserve for when you ultimately do raise the rents if that tenant or tenants ultimately leave. So you can align your pockets a little bit, so to speak, for that inevitable expense for that vacancy expense, and all those other expenses that we talked about in the episode.   Emil: Awesome. I like that I bring this up. Because I mentioned on a previous episode, I'm in contract for a three unit building. And it's definitely way under market rent on two of the three units. And I'm going back and forth on this personally, right? There's there's one tenant who their lease comes up in February, there's another one who's month to month, and I'm asking myself, Well, should I get it to market rent right now? Or do maybe something a little bit lower, wait till there's like a natural vacancy. It's still cashflows at the current rent, but obviously, I want to get it to market but I'm also trying to buy other properties, I wouldn't want to have a turn that is expensive right now. So it's like, Do I go buy more property and kind of just sit and wait on this one a little bit to raise rent, and have turns, or do I just do it now? So some of them I'm debating myself   Michael: Something to think about that I've used in the past as a stair step increase, where there are $200 at our market rent, you raise it $25 every other month, until you're in line with where you need to be keeping them month to month, so they can leave at any time, you can raise rent anytime, but you kind of talk about that or you know, $50 a month or whatever it is, but just in a way to ramp up into it. So it's not such a drastic increase. Because I think there's there's a pretty sure fire way that most of your tenants are going to hate you because you're the new owner jacking up the rent now, like Tom was mentioning, and so if you can just tell them, Hey, this is how this is going to work this, you know, this is why we're doing it and just have that open dialogue with your tenants. I think that makes that a much easier pill to swallow.   Tom: We are in a super weird time, like in the middle of a pandemic. So, you know, I'm not going out of my way to jamming any tenants on on rent, like if they have a place that they can live in. So I think that fits into an a broader discussion at least, which is like specific to now like a human being human about it. Like it's my last little tidbit.   Emil:  100%   Michael: No, it's such a good PSA.     Emil: Yeah, absolutely. That's another part of it, right? Like one of the tenants has a daughter. So it's a family there. And it's like, okay, we can bring the rent out. But a lot of people are going through some tough times right now. And it's like, again, property cash flows, can we do some, you know, solid by the tenant and wait till things kind of just get better as a country and do it then?   Tom: I think it's a misnomer that as an investor, you need to like jam everything.   Emil: Yeah, one last thing to say here. I think this is where your property manager is so good to lean on. They've done this a million times, right? Like they know, how much can we raise it? What are some good tactics to potentially keep them but raise it. And so like just having the conversation with the leasing agent, whoever your property management team to like talk this through and figure out what's a good strategy. Any other tips you guys kind of have in terms of when you decide to raise rent versus keep things that steady?   Tom: My tip would be to know what market rent is. So you know, you may change it, you may not. But you should know what that value is kind of in the same way that you know what the, the value of the home is, you should know what the value of the rent the market rent is, it may not necessarily be actionable. But just to kind of know where you sit is an important value. Even if it's not the current round, knowing what that market rent is, I would say to know that at any point in time.   Michael: Absolutely. And also if you are going to be raising the rent, if you can raise it and you're okay with being a little bit under market rent, that can be a really great way to go to because if folks are going to move they're likely going to look to move in the same neighborhood. And if all the properties are more expensive than where they currently are, well that's a really great reason to stay put. So again, just being aware of what's going on in the market. What the markets commanding.   Tom: My last tidbit is had calls with respect khadem II with with members talking about properties being vacant, it's like well, your rents probably too high. You know, like it's a pretty simple equation with if your property's not getting rented and it's a safe capital property. Take a look at what your rent is that look at market rent, look at how your property can be hairs and work with your property manager and you use one where it may make sense to adjust the rent just because as Michael was alluding to earlier, like vacancy kills like as an investor you it's hard to make money if you're not have any income coming in the door and paying off all those costs that the drums beat every month, mortgage payment taxes, all that stuff. So really thinking long and hard if you do have vacancy, changing the rent to lower it.   Emil: And even the inverse right like let's say you list it and day one you have like 100 applicants or something that probably means you're on our market, right? So it's it's the same vein and the inverse, maybe you're under where you should be. If you're just getting flooded when you first listed.   Michael: Something I'm worked in through right now is I've got this multifamily building I just process a finishing rehab and we're getting units online slowly but surely getting them listed and they're sitting for a little bit longer than I would like and so knowing Okay, well this is how much I spent. This is how much we projected we could get for and rents. Do we lower that and take a lesser rent or is it just kind of a weird time in the universe right now we just rent is taking a little bit longer units are taking a little bit longer to get leased up knowing where that balancing act is is so tough, because you definitely don't want to take you know, a real haircut on your rent after you just spent a ton of money on rehabs. It's a balancing act for sure.   Emil: Guys, this is probably a good spot for us then this one. Thank you guys again for bringing everything to the table leaving no punch on thrown on thrown is that a word? I don't know. We say a lot of things that were like is that word is that a phrase? That's kind of just like our mo on the show.   Michael: just own it. Just say it like it's a word.   Emil: Just make up words and don't even correct yourself. Alright guys, well debated episode. Hopefully our listeners got a ton of value. And we will check you guys out on the next episode. Happy investing.   Michael: Happy investing.   Tom:  Happy investing.

In this episode, Tom, Michael & Emil answer questions from our last webinar.  --- Transcript    Tom: Greetings, and welcome to the remote real estate investor. My name is Tom Schneider, and I'm joined by   Michael: Michael Albaum   Emil: And Emil Shour.   Tom: On today's episode, we are going to be addressing questions we recently received in a webinar. We got so many great questions within the webinar. So we decided, let's roll that right into the AMA, or an ask us anything? So today, we're gonna be going from the wonderful questions that we got. So here we go.   Theme Song   Tom: Before we get going into it, Emil and Michael, what is going on?   Emil: I have some exciting news. I got under contract for a three unit property last week. So nice. Yeah, it's been a while since got something under contract. And moving forward. We actually had actually, we had another three unit in contract right before it, but we needed to because there were like no marketing photos. So we had to have a signed contract to even look at it got in there. It was a total mess, tried to negotiate with the seller, and he wasn't willing to go lower. So we got out of that one quickly. But this one's looking much better. And we are, we got inspections coming up this week. So moving forward.   Tom: What a horrible like that seller making you get into contract before showing you anything What a waste of everybody's time is he like just trying to pull a fast one like that's.   Emil: I get it in that like, Okay, if you have, you know, multifamily, and there's tenants, they don't want people coming in just like disturbing tenants and being looky loos, but to not have any pictures or any type of like real information for the buyer. It's basically just like, submit an offer. And what's behind door number three, right? Like, that sucks. So   Tom: Well, congratulations, man. Awesome. That's great.   Emil: Thank you. Yeah, so inspections go and everything like that, but excited to hopefully be picking on my first small multifamily.   Michael: Right on man. Super cool. Yeah. So I just got off the phone. That's why I was a little bit late to this recording here. I just got off the phone with both the city and county out in Kentucky around a couple of properties. I never received my tax bill for I get a city bill and then a county bill. And I never received either of them. But I had for other properties in the area. So I was like, hmm, something's going on here. Let's see what's going on here. So I called the city and I was like, Hey, I never received my tax bill. And they go, Oh, that's because it was requested by this company that I never heard of. And I was like, well, that's weird. Why like so I just don't get one. They said no, it goes to their maybe your lender will pay your impound account or your escrow. You pay your property taxes.   I was like, that doesn't sound right. So I called my lender and I was like, hey, do you guys pay account for this property taxes? And they go, No. I said, huh. So I called this company. I was like, hey, what the hell guys like, You're the reason I didn't get a copy of my property taxes, like, What's the number? What's the parcel ID? And I told him, they said, and who's the lender? And I told him to go, that's not who we have on our end. I was like, wait, okay, so wait a minute, let me get this straight. So you input an error, the county and a parcel number, and now requested my property taxes for this property, which is why I never received them, meaning my property taxes are going to get paid late this year. And they go oh, well, I mean, maybe I can you send me something that says, We are this company and this is what we've requested? An they were like Oh, no, for privacy reasons we can't, you've got to be kidding me. So every word to the wise out there know what your property tax bills come out knowing they're due and keep an eye out for him because you can totally just get shafted by companies for no wrongdoing of your own. So I'm going to be having another strong follow up conversation with that company.   Tom: So a pro tip here related to dates is within your Google calendar or whatever. calendaring systems you use, create a new calendar, label it rental properties, and then add in any relevant date. So an example would be the lease end date. Perhaps you can put a reminder 90 days in advance, you can poke your property manager to say, Hey, what are you thinking about renewals, adding your taxes due dates, specifically, if you do not have those taxes impounded with your lender, if they are impounded, your lender is just going to manage it and pay them. Ooh, another date is you can actually appeal the tax value of your property. So if you want to try to lower your property taxes, there are deadlines based on the county on when you can submit an appeal to lower our taxes. Let's do an episode on that, guys. I've been meaning to research a little bit more and the best way to learn about is to talk about it and get into it. So anyways, protip adding a calendar, having your lease end date, taxes due date, and that good stuff.   Michael: Yep. super great point.   Emil: Michael. Doesn't the county usually have your address as like the address to send property taxes? So what even if someone else, like requested it? It's so weird that the city doesn't just like default, also sending it to the address on file or whatever?   Michael: Yes, yes, I am so frustrated. And so confused.   Emil: Makes no sense.   Michael: I have no idea why they just wouldn't send two records like oh one to the owner and one to this other random person that I've never spoken to before that has no like, no claim to this property, but we'll send it to them and not the owner.   Emil: Right? Like they've been confirmed like, Are you a member of this LLC or whatever, whoever's the owner?   Michael: No at all. No.   Emil: That's funny.   Michael: It seems a little too loosey goosey for me.   Emil: What city is this?   Michael: This is in Covington, Kentucky.   Emil: Shout out Covington. You guys are doing really well out there.   Michael: Just putting the entire city on blast.   Emil: I'm kidding. I'm kidding. Just, you know, sometimes local governments can be interesting.   Michael: Yeah. Yeah.   Tom: My update today is my closing date for refinancing on my personal house. So crazy rates. So I did this through loan depot, which I'd never heard of before, which, to be honest, sounds a little bit like interesting, you know, loan depot. But anyways, like 2.85%, like crazy low rates. So as it relates to real estate investing, finishing this refinance, then pulling out a HELOC to have that nice delta between the value of my house and the loan amount. And that will provide me some some buying power to get after it to build, build, build.   Michael: Did you have to buy down that rate, Tom, or that was that which is what they were offering?   Tom: No. And I'm glad you asked that question. I'm about to say they initially had some points. And I listened to the little Michael Albaum on my shoulder and a little Michael Albaum, my shoulder said, Hey, Tom, you should ask for them to not charge you that. Why not ask nothing to lose, ask? Right? Just as Michael Albaum would say. So I did that. And they took they took, like 2000 bucks off my closing costs, like 2,000 bucks off my closing.   Emil: What fee was that?     Tom: It was like a couple of points.   Emil: You just said can you not charge me points but give me the same rate? And they're like, sure.   Tom: Yeah, yeah, pretty much you know what I dangled in front of them. It's like hey, you know, I have this a bunch of rental properties that I may refinance to, you know, I perhaps we could do some stuff later, which I probably will I mean, if they're like having such crazy rates, and they're able to have a lot of leeway with regards to taking away these extra payments, so yeah, just ask for it. And you cannot get it. Don't ask for it. So yeah, it's got like a couple thousand bucks off my quote.   Michael: Good for you.   Tom: Thanks, Michael. on my shoulder and the real Michael,   Michael: No problem. I only charge at a 10% Commission. So when should I expect to see my check? I'm reasonable.   Tom: That's right, you know, yeah.   Michael: That's super exciting, man. Good for you.   Tom: Yes.   Emil: I want a HELOC so bad. I need our house to appreciate a little more.   Michael: Tom, where are you getting your HELOC through also through loan depot?   Tom: I'm planning to do it through 3rd Federal and they have you know, just crazy rates too. I think they're like two and a half we had an open and then we had to close it for the refi right so now we're gonna open it up again. And 3rd Federal, it's my wife's name is on the HELOC because they don't like people that own a bunch of they have a bunch of loans on their name. So just going through that this rigmarole right now. So as soon as this free five closed and will reopen a HELOC my wife's name and then onward and upward.   Michael: And what LTV will they give you on the he lock up to? Do you know?   Tom: Yeah, they'll give up to 80% Okay, but you know, we recently did some we added a bathroom, so I'm hoping we can get a good good jump and what they value the property at which would be pretty cool.   Michael: So did you have to get a new appraisal done for this refi?   Tom: No, they just like looked at their computer. And with refinances lenders are way more, less strict around sending an actual appraisal of the property. So if they just did a desktop appraisal and then came to the value, and again, no problem. And I assume it'll be similar for the HELOC the way that they do the appraisal. But on your question on percentage on what the HELOC went up to another lock provider that I was looking at is the it's like the San Francisco fire credit union, San Francisco for anyways, they go up to 90%. So their rates were a little bit higher, and I didn't necessarily need that extra pop of equity to take out. So I was okay with less of lower credit line and doing it through,   Michael: Because you're making 100,000 passive already.   Tom: Tom: There you go. Yep, there you go. There you go.   Michael: That's awesome. And so is the rate fixed as an introductory rate or is it it's floating fluctuating?   Tom: The refi is fixed 30. Man, it'd be so interesting to see what happens with rates, you know, in the next six months or four months, it sounds like they're gonna stay low. But with the HElOC it's going to move around based on what the rate is and…   Michael: The lightboard plus a spread or whatever,   Tom: I think it's reasonable to assume that it's going to stay pretty consistent, at least as the economy kind of chugs through the pandemic, that they're not going to be, you know, increasing that too much so but you never know, got to have good reserves. Gotta be mindful of your loan to value ratio and being able to service for that. But yeah, excited about it, though. So it's taken a little bit of time to get that done, but onward and upward. Alright guys, shall we get into the questions we got?   Michael: Totally   Tom: First question. We have, what is portfolio levered? And, and I think this question is really speaking to, you know, the concept of being levered and, Michael, do you want to speak to portfolio levered income?   Michael: Sure. So portfolio levered income. There's a bunch of different terms that get thrown around in the real estate space, I think to make the industry sound more complicated or sound fancier than it is. And I think most people are able to wrap their head around what portfolio income is just how much income is a specific portfolio generating, but the term levered in here kind of throws people for a loop. And what that really means is levered is just talking about the use of leverage, or debt, or a mortgage, all three of those words are synonymous. And so if someone has an 80% mortgage on their property, they put 20% down, they now have being detracted from the income, a mortgage to pay on a monthly even annual basis.   So the income they're gonna be generating on that property is going to be from $1 amount perspective, less than if they didn't have a mortgage. So portfolio leveraged income is just Hey, we have a portfolio, we have a single property, it has a mortgage on it, it has debt on it, how much income is that property, or that portfolio making? That's all portfolio leveraged income says. And so as again, as we scale properties from one to two, three to four to five, and now we have a portfolio, we're looking at the global portfolio, the summation of all properties together that all have mortgages and all of their incomes, how much revenue how much income? Are there? Is that throwing up?   Tom: Awesome. Another lending related question, as far as lending goes, is there a minimum you have to borrow to obtain a loan, don't you generally get a better rate, when you borrow more money, I can take a first stab at this one. So, many lenders will not loan below a certain dollar amount. And the reason for that is just the the amount of work isn't necessarily worth it, what I've seen is a common line in the sand with at least some of the larger lenders is if the size of the loan is below $70,000, or $65,000, it's not worth their time, I'm positive, there are private lenders that will do much smaller types of loans. But generally speaking, the larger lenders put that line in the sand around 60, or $70,000, of the size of the loan. So if you're buying a property for $90,000, just multiply point eight, that's the loan to value ratio that you're trying to get.   And on the question is don't you get generally get a better rate when borrowing more money, that's not necessarily true, you'll get a better rate, if you actually if your LTV if the amount your down payment is larger. So if I'm buying a house, and I'm paying 50% of it with my own as a down payment, and then 50% of the debt, you're going to get a better rate with that type of a down payment versus if you're only putting down 20%. In my experience, it's not necessarily the size of the loan, but the ratio of the amount of money that you're putting in relative to what the bank is putting in in the form of a loan.   Michael: Although I will say just to kind of pepper this in and piggyback off that in the commercial world, that can often be true. So commercial residential real estate is five units. And up as soon as you get above the million dollar threshold in terms of borrowing, you have a lot more power as a borrower, you also have access to other products that aren't available in the traditional world. Everyone's probably heard of Fannie Mae and Freddie Mac, as kind of the mortgage backed securities industry, they also lend on what's called Small balance loans. And those are anywhere between I think, 750, they can go as low as 750. But typically, they're a million up to 5 million, and you get to some amazing, amazing rates in that space. So definitely something to think about if you're going commercial. But as far as residential, I think I would agree with you, Tom, that the dollar amount doesn't really matter, you get into what's called jumbo loans above a certain threshold.   Tom: Good point, good point   Michael: And the rates can change a little bit there. So just kind of keep that in mind.   Emil: While you guys were chatting, I looked it up in the background. So jumbo loans, as of 2020, start at $510,400 for a single family home in most areas of the country. And they are the rates are usually a little bit higher. Once you get into jumbo, I experienced that on our on our personal residence when we did a refi. So the rate goes up a little bit. It's not like it's not drastic, but it does go up a little bit. And then I think when you go above a million it goes up again, is what I think I remember hearing or reading.   Tom: The upside down world of residential versus commercial lending. Just as a heads up, my computer's about to die and I don't have power here. So if I run out guys, continue to power through without me. Go on without me!   Emil: Okay, no worries, save yourselves.   Michael: The next question we have is can I refi a property and use those proceeds in a 1031 to pay off the mortgage of another property. So the good news is about refinancing a property is that that cash you get out of that process is actually tax free. And so you can absolutely use those proceeds to pay off another property, you can go buy another property, you can really do whatever you want with those proceeds, they're yours to use in cash. And so a 1031 isn't necessary when you do a refinance. Again, because That money is already tax free. So a temporary one wouldn't get you any benefit. Additionally, 1030 ones are typically reserved for selling a property and then buying a new property. And in the case of refinance, you're actually not selling any property, you're just tapping into some of the equity. So hopefully that answers that question. Emil do you want jump on the next one?   Emil: Alright, so next question, how do you finance so many, if you're only able to take out a max of 10, conventional Freddie, or Fannie Mae mortgages, so government back mortgages, Fannie, Freddie, you're allowed to take out 10 in your personal name. And that is where they cap out. I think if you're married, your spouse can take out an additional 10 in their name, that's one creative way people get around the 10 limits. But then once you're tapped out, you personally or you and your spouse, you basically have to move on to either private money, hard money, or commercial loans, like Michael was recently talking about.   So private money is private, it's friends and family, it's different investors, people who want to invest with you, you know, you can do interest only type loans, you can do something like what Michael Zuber on previous episodes has talked about, where he gives people some equity in some interest, you can just set it up however, you feel. Hard money is typically correct me if I'm wrong, it's not going to be long term, right? It's usually like 12 months, maybe up a little bit more, but it's not like long term debt that you can take out on a property.   Michael: I don't know if we can save that all hard money lenders won't lend long term. I think most people don't use it long term, because it's so expensive. Yeah, I mean, if I was a hard money lender, I would love to have someone use it long term, because that's one deal. I don't have to keep moving that money around. So I think most people use it for the short term. And in the interim, I don't know what every, you know, loan agreement actually says from every hard money lender that's gonna be lender specific.   Emil: In most situations, hard money is better for short term either fix and flip or different type of projects where you need a bridge loan for a short period of time. Otherwise, you'd probably just go to a commercial lender and get a loan that way where they are, instead of just evaluating you, like you do with your Freddie Fannie loans there, they are evaluating the asset as well as you personally. And in some cases, just the asset.   Michael: There are also private lenders above and beyond just friends and family. There are companies that do this that are backed by investors, so I was just chatting with one the other day, their rates are going to be higher than the Fannie Freddie type stuff. But there are much easier, more flexible lender, you don't have to jump through all the rigmarole typically for the qualification process. So it can be a really great way to go. And then I found just most people that I worked with that time you get to 10 properties or before you get 10 property, you could get properties eight or nine, you're going to be doing either a different kind of deal or structuring things a little bit differently. You could also look at wrapping multiple properties under a single note, depending on if you can work with a lender that'll do that under a single portfolio. And that'll technically be a commercial product. But that's a way to erase or get back whatever those Fannie Freddie mortgages you have outstanding.   Emil: And if you guys want a little bit more background and info, we did an episode on private lending, it was Episode 30, called how private money lenders can help you close more deals in less time. So if you guys want to learn more about private money, great episode to check out. One last thing I want to just make a quick clarification of here. So those 10, Fannie Freddie loans, those are only on single family, which most people when they hear single family just think of single family home, but it's actually one to four unit properties. So any of those properties are you can get a Fannie Freddie loan for, and that's what the up to 10, qualifies for.   Michael: Sweets. Another question we got is some properties that were sold for less than 20,000, a year ago are now available for 100,000 on Roofstock, this still makes sense to buy those properties. So that might have been part of a portfolio. And so if someone's buying a portfolio, and then chopping it up after the fact, on the purchase side, they'll likely get a better deal because it makes it easier for the buyer and seller to just do one transaction things are less expensive things move faster. And so if they were bought as a portfolio, and then we have work was done, and then now they're being sold as individual properties. Yeah, I can absolutely make sense.   So I'm often more concerned about how does the property perform today? What are the numbers look like today? What are the comps look like today, just because somebody got a great deal a year ago or a screaming deal a year ago or two years ago when they bought the property doesn't mean that I can't also get a great deal, even if I've got to pay more money for it. I've talked about this a number of different episodes. I bought a 5-plex from a guy who picked it up for just a song like four or five years prior. And so if we looked at what he paid for it versus what I paid for it, yeah, I paid way more for it than he did. But he got a great deal. He got screaming, yelling He bought it, I found a really good deal when I bought it. And so the numbers made sense. And I wasn't really going to compare myself to him. The previous buyers said, Does this make sense for me? And my goals? Yes, it does. Okay, great. I'm happy to pay what the asking price is or what the ultimate price was.   Emil: The other thing that might be happening there is let's say someone bought it for 20 K a year ago, they they may be also or flipper fixing flipper, right so they bought it and just absolutely terrible condition and then put in a bunch of capital expenditure to fix it up, right, maybe you own new floors, new paint, new appliances, new HVAC new roof. So they were they're making their money is on sale, where as you as a buy and hold investor, you're making it on the cash flow or equity and the total return over time, right. So they're playing a different game where it's just shorter term, and that's how they make their money is whatever they buy it for. And then they fix it up, and then that delta from sale price, so they put in the sweat equity, that could be another reason why they were able to buy it so low   Michael: Good points.   Emil: Alright, so this is a great question. What are some of the assumptions you're using for maintenance and repair expenses? Michael,   Michael: There's not gonna be any maintenance and repair.   Emil: Yeah, there is none. Right?   Michael: You're Buying a turn key property.   Emil: So Michael, this is this is one that you kind of changed the way I looked at it. I used to, like most people, and most calculators take maintenance and repairs as a percentage of rent. When if you really think about it, fixing the toilet, fixing a broken refrigerator, whatever it is, they cost what they cost, they're not a percentage of the rent, right? Whether it's a two bed, one bath house, yes, you may have more expenses and maintenance in a bigger house than a smaller one. But still a lot of things that need to be repaired, they cost the same amount. So instead of using percentages, I have converted over to just a fixed amount per unit. So for single family, what I use for maintenance repairs is $75 a month is the flat amount. And that's probably pretty, I would say pretty conservative. I don't think a lot of people use that amount. But I like to when I'm evaluating properties really look at like my worst case, I don't want to paint a super rosy picture and say if everything goes right, this is what it's gonna look like. I'd rather say, okay, we're having not a great year. What is this thing perform that now?   Michael: I think I think you nailed it. No, I concur. 150%, I think using a percentage of the income, like you said is the wrong way to go about it. Because there are just minimum expenses associated with a property, whether it's a four to like you mentioned or to one, a fridge is a fridge, a roof is a roof. And of course, there's going to be differences in labor and material costs in different parts of the country. But you take a small house in a market and a small house in that same market to repair the roof is still going to be whatever, 50 bucks a square foot or what have you. And so there are just expenses associated with owning a physical property that independent of the rental amount needs to be paid for and accounted for.   So I'm the same I like 75 to 100 bucks a month depending on where the property is geographically located in harsher climates up that number. And for bigger properties up that number to be on towards the higher end of the spectrum have the hundred dollar range. But I think between for most single family home 75 200 bucks a month, I get you there, as long as things are in pretty good working order to begin with. If it's falling apart, well, yeah, that number is going to be higher, and it's going to be death by 1000 cuts. But if the property can sustain itself, great, not that doesn't need to be a problem.   Emil: And we're talking about just repairing maintenance, right? Like you have a separate line item for capex reserves.   Michael: Correct? Correct.   Emil: Yep, same. The difference is capex reserves. You'll hear us in different real estate investors talking about setting aside reserves for when you have these big things like the roof, like the water heater goes out, each vac needs to be replaced, right? If you're buying a completed turnkey property where a lot of these things were recently rehab, you may not need to put aside as much in reserves. But it's always good to just factor these things in because if you're planning on holding for the long run, they're going to need to be replaced in whatever, 15 years instead of two years.   Michael: At some point.   Emil: Yeah, exactly.   Michael: Alright, so moving on. So the next question is one that I love. So is it possible to make a full cash offer to get a discount over the asking price, and then refi afterwards to get leverage for the next deal. So I love this strategy. I tell it all the time. It's an amazing, amazing thing to do. If you're able to make all cash offers and all cash purchases, in a lot of these markets around the country, all cash carries a lot of weight. And so if you can make an all cash offer, you can often beat down the purchase price, which can often have positive implications for your property tax rates as well. And so if you can get the property for a discount, great, then you can go refi it and get 80% of your cash out and go on to the next deal.   Now a couple things to keep in mind is you definitely want to be well aware of what the lender that you're going to do the refi with is going to require both in terms of you personally as a borrower, what kind of documentation do they need any paycheck stubs, tax returns, all that kind of good stuff. And then how long do you have to own the property before you can do this refi The last thing that I would ask is how long you need to on the property before they will give you a new appraisal or are they going to give you the purchase price. So the differences. If you buy a property for, let's say it's worth 100 grand, you buy it for 80, you go through your cash out refinance, say six months is the lender going to give you 80% of the purchase price at 80 grand, or are they going to give you 80% of the appraised value, which is hopefully 100, maybe even north of 100.   Because the difference between the two is you might end up with all of your money back, if they're going to give you on based on the appraisal, because the property is worth 100, that you bought it for 80. So they're going to give you that full 80 grand back, which means you just bought that property for zero money out of pocket, or they're going to give you 80% of the purchase price of the ADK. Which would be what is it like 65 grand, I think, so you'd still leave some money in the deal. So people talk about BRRRR strategies all the time, which is buy rehab, rent, refinance repeats, in theory, there's a way where you can do that, without ever having to do the rehab part of the middle arc, you can get a good enough deal with an all cash purchase. So something to be thinking about. But again, it's really, really important to have the conversation on the front end, prior to purchasing the property about what the lending side looks like after the fact. And also, as you're running your numbers, make sure you you understand it with cash purchase, what are your dollars doing for you. And then also on the financed purchase. Okay, after you pull off, you have to put debt on this property, how does that property perform? Can it still sustain itself? And is it still cashflow? depending on what your goals are, that may or may not be important to you.   Emil: Solid. Great advice. Only thing I want to add here is I think it also depends on the environment you're in. I think a lot of times you'll think, Oh, just because I'm giving an all cash offer, for sure go out and get a discount, right. And let's say you're going for a turnkey property and you you go put an all cash way under asking I mean, you can you can always put out offers, there's no harm in putting on offers, right? We talked about it free, go for it. But a lot of times, you're not going to win those, right. And especially in an environment like this where interest rates are very low, it's very easy for people to get financing right now, it's a little bit tougher unless the property is almost in that state where a bank won't even finance on it, right? It needs to be major rehab or something like that. It's going to be even harder to win with a with an all cash offer just something I've seen personally in trying to go and throw out cash offers to get discounts. It's not saying not possible, but just also factor in the environment you're in, in terms of your expectations.   Michael: Totally. I was looking at a house hack a couple years ago in the Bay Area, California. And I was looking to make offers on properties. And I was getting laughed out of the room because I wasn't bringing 10% over asking and all cash. It's like all cash was the bare minimum just to even be considered. And then you've got to be above asking. So it's really important to kind of know your audience their demographic and also under try to understand if you can with the sellers motivation is if you're doing deals on RooFstock, that's a bit harder. But if you're doing deals off rootstock, go talk to your agents, hey, go find out why this person is selling. Oh, because they're in the middle of divorce. They need quick cash. Okay, well, all cash might play better than, oh, they just rehab the property. They're trying to sell it and get top dollar. Well, they might be waiting and holding out for the best offer and you're all cash offer might not be as strong as you might think it is. So understand the environment, understand and know your audience if you can.   Emil: Awesome. All right. Next question I want to take is, this is a good one I've been thinking about a lot lately. Is it common for renovations to be required when buying a property? And if so, how do you factor that into your model? I like this question a lot. Because I think a lot of us are trained to say I have to get a deal. Right a deal. I have to get it under a certain amount. So I can walk in with some equity. Obviously, that's what we all want. Obviously, that makes a lot of sense. Right? buy the property get it for a good price. Totally. Let's say you buy 100K purchase price. Yeah. And you're putting 20% down, right, right. So you put in 20 k Yeah, plus closing costs. We'll just make it 20 k for ease of example here. And then you walk in, you realize you have to put 20 grand in renovations to be able to rent it out, right? So you're 40 k out of pocket on this property, and you do your cash on cash, you look at your different returns and you're looking at your return it's going to be let's call it 7% because you had to put 40 k down, versus maybe there's another property that was 120 K, and it's turnkey.   And so you only have to put 24 k down and it's already at market rent. And so now because you had to come out of pocket so much less your return is typically not always you have to run the numbers, but your turn can be higher, because right now your denominator in the cash on cash formula, right is 24 k versus 40 K. So one important thing to really consider is yes, you may be getting a deal but your cash on cash return may not be as good because you have to factor in all these renovations into your cash out of pocket. That makes sense.   Michael: It makes total sense. I mean, not only cash out of pocket but also time and headache. So construction always is on time and always under budget right always. So the time there's holding costs associated with Doing renovations, there's physical time that it takes to do the turns to do the rehab, do the renovation, which all needs to be considered. And if you've got a single family property, you're probably not collecting rent for that time period. And so you could be negative cash flow for several months before you end up seeing anything. So again, we need to be kind of long term greedy here and look at the full picture about Hey, is this actually worth it doesn't actually make sense? And can I afford to float all of these expenses, if in your example, Emil, you know, you vote, buy the property for 20 grand, and you're going to put 20 into it, but all you have is 20 in reserves and the rehab is going to cost you the full 20, you might not be able to afford that rehab. Because all the while it's going to take two months, you're going to have property taxes, insurance costs, utility costs, mortgage costs, that all don't stop just because you're rehabbing a property. So again, just make sure you're getting the full, full, full picture, when determining what your actual cost is, then out of both on the time horizon and on the cost.   Emil: Yep. And again, this isn't to say, don't go buy homes that could potentially need renovation, there's a lot to be said there, it's just don't take it for face value that you got to buy something well under market value, quote unquote, but not realizing that you're gonna have to put way more cash out of pocket as well. So your return may not look as well look as good. So just make sure you compare those things and and look at them side by side.   Michael: Great point. Is right now good time to buy a rental considering today's uncertainties. This is a great question. So yeah, I think if the numbers do the talking for you, there's a lot less uncertainty in the equation, so to speak. So you know, I bought properties in high, hot markets, in cold markets and everything in between. And all the while the numbers have been the talking. And I mean, the numbers and the property, but also the numbers in the greater market. So you need to go get a handle on what's going on in that particular market that you're interested in investing in. And in that particular sub market, and talk to property managers talk to agents or contractors talk to as many people as you can, in that area to try to get as best a finger on the pulse as you can.   Because a lot of times what happens on national news isn't the same that's occurring at the local level. And so when we hear about mass unemployment and mass layoffs, and all this kind of thing, well, yes, that's happening at the national level, the local picture might look very different. And so getting a handle on what's going on at the micro level is hyper critical. So I remember we did a podcast and you know, with our, one of our property management partners out in Alabama, and they were saying that, oh, they're at 98% occupancy, and they've never been at 98%, occupancy, and physical and economic occupancy. So 90% occupancy, with brick with tenants that are paying.   So if that local market, things have seemed to be maybe even stronger, as a result of the last several months, or at least unchanged for the negative. So again, I think taking the global topic, the global picture, and kind of laser focusing in and zooming into the micro level and understanding, Okay, I understand what's going on nationally, but I really need to understand what's going on hyper locally. And that's how I'm going to make my decisions. Because again, in oh nine, we saw massive price drops and roller coasters on the coasts, the middle America was a lot more insulated. And so again, nationally, they were the The news was talking about all this crazy stuff, but we need to again, understand what's going on at the local level, to really get an understanding of how much uncertainty is there really.   Emil: Yep. The other thing I always like to point out here is that if you're like us, and you're planning on holding for a 20 to 30 year time horizon, right, even if let's say you buy something, and on paper, the value of it goes down. You gotta remember this is a is a rental property, right? So maybe your net worth in you know, your, your personal finance, tracker, personal capital, whatever you use to track your, your net worth, maybe that takes a hit. But you got to remember, you're not selling the I mean, you may have to who knows what's gonna happen, but that's just on paper, right? If it's a rental property, that thing's still making money every month. So I like to look at these things as I'm on a long time horizon, do I think real estate in 20-30 years is going to be more valuable than it is now are rents going to be higher than they are now?   I believe so. That is why I continue to invest through up and down. And one important caveat, I want to just, you know, say for myself, is I've never invested through a major recession. I started personally in 2017. So I've personally only seen a bull market but I like to listen to people who have been there and done that and one of the big things they always talk about is just make sure conservatively financing that's the big one, right like right now you can't even really go and get a five to 10% loan like they were doing in 06, 03-06 right. So like you have to be 20 25% down but You know, if you're feeling a little uncertain, maybe you maybe go 25 30% that'll help you weather storm so much better. Right? It gives you more of a cushion. So, yeah, besides what Michael mentioned those additional points I'd say there, and it's so hard to have a crystal ball and say what's going to happen, right? Like, I remember in 2018 people were calling 2018 going to be a crash. And then the headlines change to 2019 is going to be a crash. And then 2020 is going to be so every year those headlines are just there and it's really hard for people to predict them but they make for very click baity headlines. And I guess somebody at some point will get to say, see I told you I was right   Michael: I was right yeah.   Emil: They just keep moving the goalposts it's not to say it's not gonna happen always happens. They'll see that cycles but I don't know I plan on investing through the ups and downs.   Michael: Well, thanks so much for listening everybody. That was our show. I hope you enjoyed the AMA or the A ua please continue to send us questions that you have if you'd like to see answered on the podcast. Also, feel free to leave us a rating and review. We have a swag bag giveaway to a couple of folks that help us get to 100 reviews wherever they listen to your podcasts, Apple, Google or Spotify. So feel free to drop us a line there. Let us know how you liking the podcast. We'll catch you on the next one. Happy investing.   Emil: Happy investing

In this episode, we wrap up our series of finding an vetting solid vendors with the lawyer. Join Emil, Tom and Michael to learn their strategy of finding a good lawyer.  --- Transcript   Emil: Hey everyone, welcome back for another episode of The Remote Real Estate Investor. My name is Emil Shour, and I'm joined by,   Tom: Tom Schneider,   Michael: and Michael Albaum.   Emil: And today we are going to be continuing our series on tips for finding and vetting different members of your real estate investing team. Today we will be covering the lawyer. Let's hop into it.   Michael: Tom, what is in your hand?   Tom: What?! What are you talking about?   Michael: Looks like you have a tail.   Emil: What is going on?   Michael: Is that a crop for like a horse?   Tom: It's this thing called an Orange Whip. It's it's actually pretty fun.   Emil: I hope you don't use it on your child.   Tom: No, no, no, it's a golf tool that I just kind of hold at my desk, and it has tons of wiggle waggle.   Michael: Mm hmm.   Tom: So when you swing, I'm kind of a gimmick guy like a golf gimmick guy so like is that they buy something you know, like a straight jacket that helps you whatever your swing, I'll buy it. I got this thing recently called. And I'm very pro Orange Whip it. So when you swing back, this orange ball that's has like a ton of wiggle waggle. It makes really good tempo and improves your swing. So you're not coming over the top, you got a nice inside out swing.   I'm funny with golf. I don't play like that often. But when I do, like, I just like, you know, go all out. And so like 10 months of the year, don't really play it. But then two months, like, oh, man, I need this gimmick. I think I figured out and yes,   Michael: I was gonna say I've known you for a couple years and not once have I ever heard you mentioned golf.   Tom: I mean, we must have not talked during that little month sequence that I was really into it. But as a shout out there, Orange Whip. This isn't a paid promotion. But I think if you're in a golf and you want to have good tempo, and strengthen, get an Orange Whip, I'm pro Orange Whip. So that's what's behind me.   Emil: You're gonna love this. So my brother in law started this little it's another gimmick. It's called putt cup.   Tom: I'm in, Ooh.   Emil: So a mug that has a flat brim so you can lay it on the ground and just practice your putts. You know if you'll put mugs on the ground, but it has this flat side to it. So you get a nice roll in there.   Tom: That's beautiful. At first I was thinking oh, there's a hole in the cup. So when you putt it goes in, but that doesn't make sense.   Michael: Wouldn't be a cup anymore would it? It'd be more of a funnel.   Tom: Where does he sell it on?   Emil: Amazon. You just go look up putt cup.   Tom: I'm in.   Emil: Another gimmick for you.   Michael: Also not a paid promotion.   Tom: Yeah, another amazon.com!   Emil: Have you heard of it?   Tom: Have you heard of it?   Michael: It's a little book company.   Emil: Small boutique retailer.   Tom: Related to Amazon is this thing called fake spot. So an Amazon companies could like spam a bunch of high ratings when they have their product. But there's this thing called fake spot that you I think I posted on that Academy Slack channel that will analyze if the ratings are fake, and it gives a true ratings by looking at and getting rid of the bots. It gives you an honest take. So Orange Whip, fakespot, and Amazon. Those are my three recommendations for today.   Emil: Okay, guys, well, we could be talking about golf and Amazon all day. But people are here for our real estate knowledge, or lack thereof. So let's talk about how you find and vet, a lawyer. We'll break it down into three parts. So when in the process of your real estate investing journey or buying a property, should you look for this person? How do you source? So how do you go out and find a lawyer? And what are the best questions to ask to make sure they're legit, and can help you and be a valuable member of your team? So let's start with when in the process. Should you find the lawyer? Do you guys have went Have you guys done this in the past?   Tom: All right, so I'll jump in first. If you are investing passively, you're holding properties in your own name, you know, it's not necessary that you buy them in an LLC, I would argue that within your checklist to get going as a remote real estate investor, getting an attorney in place is not high on that list. And that you don't have to do it before you start evaluating. You don't have to do it before you start buying. If you are looking to own these properties into a more complicated structure, with either LLC is sure you're going to want to have an attorney either to help you, you know, set up your LLC or using like a Legal Zoom or one of those type platforms.   But if you are like myself, and perhaps you own a couple of properties, not in an LLC, you have it in your own name. It's not necessary to have get a lawyer upfront, or even after you own. You know, it really depends on what you're doing and what your threshold for risk as it relates to having things in your own name. You know, as far as timing, I would say it depends and it's not necessary to do upfront.   Michael: So I'm going to take the counterpoint to a slight degree. I think it depends on what your risk tolerance looks like and what your starting assets look Like, if you don't have a whole lot to your name, it's probably less important to go chat with an attorney prior to. But if you do have a lot to your name, you could have a bigger target on your back. And so, I think just understanding what you're getting into the risks you're taking on, and what structure if any might be appropriate for you, those can all be really great questions to ask on the front end, prior to purchasing. And just as if you're looking to get involved with real estate as a whole, again, good questions, to be asking questions to go get answers to just so you're coming to the table with all the information or as much information as you can.   And so having a consult with an attorney doesn't have to be yours. But one, a real estate attorney in general, can be really great, and how do I protect myself, but also understand that they are likely going to try to sell you something, all kinds of asset protection, and they often will use scare tactics. So take everything you hear with a grain of salt and go talk to other investors about what's actually happened in their world.   Tom: Another thing to think about is, what are the different use cases that you're going to be using attorney with, so one of them would be on the front end, you're, you know, setting up a structure, maybe you're putting a fund together, maybe you're putting together a single member LLC, you know, that's a use case of using an attorney. And if you're not going through that, it's not necessarily that you find one other use cases that come in with an attorney is perhaps you buy a property, and there's an eviction with the tenant or some kind of issue like that, more likely than not, your property manager is going to have some legal, you know, representation, or kind of like a third party that they'll use to manage the process of eviction or three day notices and all that stuff. So it's not necessarily that you personally have an attorney to do this, your this is something that you're paying your property manager to do, they're gonna forward some of those costs to you, but they're going to get kind of better, better pricing, because they're like at scale, and probably have like, pre made templates for a lot of this kind of stuff. What other use cases would you be using an attorney with you guys think of?   Michael: That's like, 85% of my experiences with it, I've used mine in an insurance issue, I had to bring in my attorney and just be like, Hey, I'm not getting the service and answers to the questions that I'm posing. And then also with a contractor that I had to fire, they were saying, they're asking for all kinds of stuff, and I ended up firing them and I copy my attorney, and you have to pay me and I said, That's not gonna work like that. And here's my attorney. And so if you'd like to say anything, you could say to both of us kind of a thing. And that solved that problem pretty quickly.   Emil: And that was the end of that,   Tom: On the front end, if you're buying with, you know, friends, or whatever creating a fun, so structuring that whole thing. I guess I'm repeating myself again, I did that before. But   Michael: Yeah, I think I think structure is a huge part of it. And so making sure that you get that right on the front end is super, super important. And so I've used my attorney for that. So we were talking and it's so one word can change the meaning of an entire contract. So making sure that that's right and designed to protect everybody involved in it actually is designed to do what it's intended to do is really important. So I've used done that in the past and setting up multi member LLC partners have have her structure that and draft up those documents.   Tom: On those documents, there are some good hybrid approaches, such as LegalZoom, and Rocket Lawyer where they have these templates that are pretty much ready to go. Be it tenant related templates, which you're not going to need if you're using a property manager, but setting up an LLC and that kind of stuff. It's a nice hybrid approach, which might be a little bit more cost effective than bringing on an attorney where you're paying $500 an hour or whatnot. Just because, you know, setting up an LLC is kind of a punch and play thing where this it's a well worn path where these hybrid approaches where you could buy these templates can be more cost effective.   Michael: Yep, I would agree.   Emil: I'll just, I'll speak quickly to my own personal experience, I wouldn't say this is the right or wrong way to do it. But just so our listeners kind of have an example of, you know, when in the process, one of us use it. So for me, I bought four properties in my name, no LLC, just directly in my name. And after my wife got married, had our daughter, we started really thinking about, you know, what are some of the legal implications of having all these properties in just my name, you know, we had a family member who went through probate, which again, if you want to learn more about that, Episode 41, like Michael talked about, and so I really wanted to avoid those things.   Once family came into the picture, you start thinking a lot more about these things. And so that was the point for me, which was actually earlier this year, that I decided to enlist the help of a lawyer to help us create a trust so everything you know, in case, knock on wood, anything happens to me, it flows directly to my family without much hiccup or headache. So that was kind of just my my personal journey into when I picked up working with a lawyer and..   Michael: In episode. 40 We also talked about trust stuff. And we talked about in that episode about anyone who's investing in real estate should absolutely investigate whether or not a trust is a good fit for them. I think probably it's going to be,   Emil: Especially if you have a family and again, you, you know a lot of these properties in your personal name. And there's all this like, legal stuff that can happen if you don't set it up properly. So good idea.   Tom: It's interesting how much of real estate like strategy wise, it's like, next generation, you know, just like…   Michael: Yeah, after you die.   Tom: Totally. Yeah. But I mean, what a great gift that you can give to your family's future. I think talking about defer, defer, defer, and then you die, you know, with regards to 1031s and taxes. So anyways, short commentary, there   Micheal: It's the gift that keeps on giving, you know, real estate.   Tom: Yeah.   Emil: Anytime you talk about legal stuff, it's always just such a happy episode.   Michael: It's always the doom and gloom and morbidity, right?   Tom: What's consistent in life, death and taxes?   Michael: Death and taxes.   Tom: That's it. There we go. Next episode.   Emil: All right. So let's, let's move on to how do you source How do you go out and find people to interview? So how have you guys in the past? You're looking for a lawyer? What did you do?   Michael: I got super lucky, my older brother had a good friend who I'm also friends with. And one of his good friends from college was a lawyer. So I reached out to her and we've been good friends. And I've been a client of hers for a long time. So it's great that she's very young and but experienced, and so she's going to be around for a while, and looking to grow as well. So I don't have to work with someone for five years, have them retire, and then go look for another attorney. So she's been awesome to work with. She's super, super great.   So I just happen to know someone, I didn't really have to do a whole lot of interviewing, and we kind of just grew together naturally. And it was a really good fit. Tom, what about you?   Tom: I would go back, we've talked about in some of the other episodes of the hierarchy of where to identify these type of vendors. So at the top of that is personal relationships that you may have. And when I worked at one of the single family REITs, got to know the attorney, actually, we might actually have him, come on to the episode, he didn't come on the podcast soon. He's the general counsel at Mynd Property Management, where another great resource is professional references and then looking at forums BiggerPockets, brucite, Academy members have access to our Slack channel, and then just general view, so I say those are the key spots in descending order of what I'd recommend for identifying a lawyer.   Emil: I think the big theme, and we're hitting on it in all these episodes is the power of networking and asking either the people you work with or networking with other investors who they know because they've worked with them, they have experienced with them, right? It's not like you're just going on Google and who's the first name that comes up, or the first ad that comes up, and it's just so powerful to network and ride the coattails of others, if they found good people. Michael: Yeah, you don't need to reinvent the wheel.   Emil: Alright, cool. That was a fast section. So moving on to the last part. What are some good questions that our listeners can ask? When they're interviewing a lawyer to make sure that's the right person to bring on to their team?   Michael: For me, I think the first question is, do they work with real estate investors? Because there's all kinds of attorneys out there that specialize in different disciplines, just like you have all kinds of different doctors, specialists. You know, if you had a problem with your hearing, you wouldn't go to an orthopedic surgeon, probably I don't know, I that's my guess. There's not medical advice. So same thing with attorneys, and accountants, and really all the team members were talking about these episodes for that matter. So making sure that they specialize in real estate, and specifically working with investors I think is really important because they're going to look to do certain things for you that are going to be different than if you were an owner occupant.   They're going to treat you in a very specific way and look to structure things very specifically for you as an investor. And so when they have that experience and background, that's going to be really helpful for you. I also like asking where they can work, what states can they work in? Are they licensed in multiple places? Are you in California and the attorneys in Colorado? Does that pose any issues? also asking what their fee structure looks like? That's a big one we talk about with a lot of the vendors we speak about working with, are they hourly do they want to retain, do they charge by 15 minute increments? You know, how do they bill? And what does that look like? And then asked if they charge flat rates for certain services like setting up an LLC, asking them what their typical turnaround time is on inquiries and how they best like to communicate. If you text them a question, you get charged for that, if you call email, what's the best way to get ahold of them? Tom, I don't want to give you the scraps again. So I'll make sure you get in here   Tom: I'm coming up with some fresh stuff. So some Attorneys Offices, there might be multiple attorneys. So here's an example of a question I like to ask him. If there's multiple attorneys, you know, is there different rates, so if the office perhaps has multiple attorneys, maybe there's a younger associate, that they do more template work, or more kind of bread and butter work at a lower rate? That's something to ask us, you know, are there many attorneys that I have resources with, because you know, with law, there are different types of specialties. So perhaps, if you are one a slightly more expertise on particular areas, it could be a bigger law office that has more resources versus a kind of a one man show or one woman show that's that's doing all the different work.   This is just a way to evaluate different attorneys and what their resources are. I would also ask them about some specific use cases that they had, in working with investors, have they done the initial contract work upfront in structuring funds? Have they done any work as it relates to dispute management with property managers or contractors? Have they done any work as it relates to eviction is just kind of go through their repertoire of what they have competency in, in law? And just let them speak? Kind of get them started? And let them talk about it?   Michael: And I think it's fair to say, Tom, would you agree that most attorneys during this kind of interview phase are not going to charge for their time?   Tom: No, I would be overt and clear that, hey, you know, I'm in the process of evaluating. I'm speaking to two other attorneys, and may or may not be speaking to two other attorneys, but that's between you and me. And just let them know that you're kind of in that evaluation phase.   Michael: Yeah. Yeah. I totally agree.   Emil: Solid.   Tom: And references, references, get some references. Love that, you know, can't say that enough. for everybody. That's like, honestly, the biggest sort of BS detector is if you can get a reference who isn't their grandmother, or niece or nephew or whatever, you get a real reference and talk to them.   Emil: Solid. I don't have anything to add. I'm glad you guys. One note I had was expectation setting. But I think Michael, you talked about it like, like, let's say you decide to work with them, if you email or call or text, like, are they going to charge you for those 15 minutes, or whatever it is? Or like, you know, for smaller stuff? Within reason, right? Like, if you're emailing them every week or something, okay, it's probably fair that they charge you but like, if you have a question every couple months, are they going to like charge you or that kind of just part of working with them? Anything else? Add here, guys, before we wrap up?   Tom: I think that's good.   Michael: I think that's good. And I would say, you know, if you're questioning it, just go reach out. It's one of those things like legal and accounting is one of the two areas where it's kind of a pain in the butt because they're expensive to deal with. But the things that they'll be able to do for you and answer for you are well worth the expense. And we are not experts, as real estate investors in the law. We are not experts, as real estate investors in accounting. So we need to go find people that are and finding good ones, they are well worth the cost. And so just kind of bite the bullet and keep track of those expenses because they are all deductions.   Tom: Yep,   Michael: It often ends up paying for itself in the long run. And this is your and your family's financial future. And so don't skimp out on a couple hundred bucks of an attorney to try to go do it yourself to then potentially have a get messed up down the road. It's a small expense in the grand scheme of things when it comes to the risk that's being mitigated.   Tom: Pennywise pound foolish Don't be penny wise pound foolish.   Michael: That's right. That's right. Man I should have been an attorney.   Tom: Let's go study bird law.   Michael: That's right, bird law!   Emil: Cool. So let's wrap this one up. We're doing a little giveaway for people will leave us review right now we're at 93 ratings on Apple podcasts. And we're trying to get over 100 so the next 10 people will leave us reviews. We're going to randomly select two people and send them some cool stuff, maybe some books and some some swag and stuff like that. So if you haven't already go leave us review on Apple. We love hearing from you guys. And as always, we'll check you guys out in the next episode.   Michael: Happy investing   Tom: Happy investing

Tom, Michael and Emil continue our series on how to source a powerful real estate team. In this episode, we discuss the property manager. --- Transcript   Hey everyone, welcome to another episode of The Remote Real Estate Investor. My name is Emil Shour, and I'm joined by my co-host,   Tom: Tom Schneider   Michael: And Michael album.   Emil: And in today's episode, we're going to be continuing our series on finding and vetting different people on your real estate investing team. So last couple episodes, we've covered insurance carrier and lender and then in today's episode, we're going to cover the property manager. So let's get to it.   Theme Song   Emil: Alright guys, in the last episode, we gave a quick shout out before we got into the episode and want to do that again. Give people shout outs for leaving us reviews. So this last one came from IanC11. Love the pod great for someone who is new to real estate investing combos and personal experiences are super insightful, and the info is easily digestible. Thanks, Ian. Appreciate it. Man.   Tom: We are almost at our 100th review on Apple podcasts, which is pretty awesome. And I think for the person who hits, who writes the 100th review, what do you think Emil? Some sort of like,   Emil: What if now nobody wants to write a review? Because they're waiting to get to 100?   Michael: They're waiting?   Tom: Yeah, I think we sent him a shirt, a roof stock Academy shirt and books done. approved, budget approved.   Emil: How about the next 10 reviews? So anyone from 94 to 104? will pick one person and send them that cool pack you mentioned?   Tom: Well, maybe it's at 98, 95. There's a term for this type of promotion. It's we could be at 100. I don't know we could be right below good reason to write the promotion. We'll do it for two people.   Emil: Two people. There you go. Alright, next 10 reviews, we're going to randomly choose two people and send you some cool stuff. Okay, so we're talking about the property manager. This episode, we're going to follow the same format that we have been, which is a three part question series. So the first part is, when in the process, should we be finding our property manager? When in our real estate acquisition process? How do you source a property manager? And what are some good vetting questions to ask them to make sure you're finding the right property management partner? So let's kick it off with when in the process? Should a new real estate investor start looking for a property manager? What do you guys think? When have you guys started looking for your pm in the process,   Tom: I would say you can't do it early enough. Because it you know, if you take one thing from this episode, and I've probably repeated this a couple of times, is you can bring, especially as a remote investor, leverage that property manager as local boots on the ground. And you can begin the interview process by adding them as a data point within your acquisitions process. So let's say I'm looking to buy a house in Columbus, Ohio, or Atlanta or Indianapolis, you know, in talking to property managers, I can get their feedback on properties that I'm looking at and neighborhoods, it's a really, a secret sauce to a remote investor is bringing in that local property manager early and often. So I would say as early as possible, what you don't want to happen is in a transaction, you know, you've found a great property you like it fits, checks off all the boxes you're looking for. And then like last second scrambling to find a property manager, you're not going to make as good of a decision. And plus, you're wasting that opportunity to use that property manager as part of your acquisitions team. So early and early. Yes, early.   Michael: I agree with you, Tom 150%. I think you, you nailed it. And they can be your eyes and ears, they can be adult, they should be involved in the due diligence process, they can give you insights into markets and sub markets and streets where you want to avoid and things where you want to be looking out for. I think they a good property manager is going to really have their finger on the pulse of a particular market. And so that only goes to stress the importance of finding not only just a property manager, but a good one. And Tom, to your point of scrambling last minute to find a PM, I've been there done that I did that twice. Actually, in the same market, I was really excited about the market, I was really excited about the deals, I didn't have a pm in place. But I had a really great agent.   And I've talked about this in the past. And so I purchased the deal. And then I threw it in interviewed a bunch of different property managers, and there were just no good options. So I had to pick the least bad of all the options. And like, just to put it bluntly, it sucked. Like it was so bad. I ended up firing the property manager A few months later. And it was a really awful experience. And after I closed that second deal, I was thinking about selling both properties and just getting out of the market because it was such a nightmare dealing with the pm in that market, because there were just no good alternatives. And the whole time before I fired him I was looking for alternatives and I just couldn't I just not none existed. And so I can get into it a little bit later. But I then convinced my agent to start a property management business and that worked out pretty well. But so in lieu of find if starting your own property management business are forcing someone to do it on your behalf. Definitely try to find a good pm early. Well, before you purchase. Again, if I hadn't been able to do that I would not still be in those markets today. I think your investment lives and dies by your pm.   Tom: Yeah, I think we had an earlier episode where we talked about the decision of using professional property management or self managing, yes. This is the the, this episode, the guise of it, I think I'm using that word right, is you are buying remotely and you are using professional property management is the assumptions that we're making. In this episode,   Emil: I would say that once you've decided on your market, once you're saying I'm gonna go invest in Dallas or Atlanta or wherever, I think your next step should honestly be to go talk to property managers, they know so much about the area. Yeah, you can spend tons of time researching online, looking on forums, whatever, but like property manager lives and breathes that they're managing, often hundreds of properties in that market, they can tell you the areas that they like managing where they don't like managing, where they're seeing a lot of growth, rent growth, whatever it is, they can tell you the types of properties that they are able to lease up very easily, versus ones that are more difficult. They're just a knowledge of wealth that I think you should tap as early in the process, like you guys mentioned. So honestly, it's like, once you've chosen a market, I would go start talking to two property managers, honestly.   Michael: So Emil, I actually work with a student in the academy who takes almost the exact opposite approach. He's involved in a particular market, loves, loves, loves his property management company, and is now investigating other markets, only those in which that same property manager operates. So he's actually following on his property management coattails to other markets, other states, because he likes them so much, because he believes in them so much. So you can almost use your property manager as a roadmap so to speak, if they're operating in other markets as to other markets to potentially investigate. Now, of course, you can still go do your market due diligence and validate it for yourself. But knowing that that piece of the puzzle is already solved for you, makes it kind of nice.   Emil: Yeah, this person probably chose a market and then found the property manager, and now is using them to explore other markets, right?   Michael Correct. Yeah, it's only it's only for secondary. After you've established that property management foothold,   Tom: I'd like four different property managers that I interface with, and man, it'd be a lot cleaner to just have one.   Michael: So much better.   Tom: That sounds pretty good.   Emil: And just knowing that you have a reliable property manager to keep using, like, that's so invaluable.   Tom: Yeah. And some specific stuff that I've gotten from property managers is they're like, for the most part, they're pretty honest. Like, in talking about a neighborhood, if they like or don't like it, in my experience has been a pretty like low pressure sales, like not like high pressure, like, Oh, yeah, this is the house right? where they'll give honest feedback. And some specific feedback I've gotten is, oh, you know that property, it's really consistent rent, it hasn't shown a lot of appreciation. But you know, it's always occupied that kind of neighborhood. Another one was looking at a property.   And they were talking about the bedroom count, I'm like, Yeah, it's a four bedroom, two bath, and like, oh, wow, we manage a bunch of properties there. And there's very few four bedrooms, that's going to move right off the shelf. So getting that kind of insight information that you wouldn't be able to get if you didn't bring a property manager in super early. So those are some specific examples of the benefits of bringing the pm in as early as possible.   Emil: Nice way to throw some good anecdotes in there. All right, ready to move on to the next one, then?   Michael: Do it.   Emil: So our next question, or subtopic is how to source? So how do you go out and even find a couple of property managers to start interviewing. So what have been some ways you guys have researched potential property managers in the past?   Michael: I'll jump in here and say personal references have been top of the charts for me. And if there's not personal references, then professional references, whether that's the agent you're working with, or through roof stock, or other investors in the area that you might not know on a personal level, the slack forums if you're a member of the Academy, or bigger pockets, great places to reach out to folks and ask who they've used to, they've had success with. And then cold calling and Google reviews, I think good sources as well. We talked about this in the past, but a lot of those reviews, you kind of take them with a grain of salt to a degree in that it's usually the unsatisfied folks that are leaving the most reviews and the loudest reviews.   But also by that same token, I've mentioned on previous episodes, that the people making these reviews, if their tenants are your future clients, and so you want to make sure that the client population being served by the manager is happy and satisfied, because that's who your tenants are going to be dealing with as well. So that's kind of the hierarchy that that I'll use, and it's a lot of cold calling, a lot of cold calling.   Emil: Yeah, I've recently there's a property manager in St. Louis, who I'm looking to grow with. I was just doing a round of interviews last week and it was one pm that really stood out to me. And I always like to look at reviews but at the same time, like you mentioned, take it with a grain of salt because it's a You could have 100 happy tenants and they never write reviews and it's right I've disgruntled ones who were like, they want to get back at whatever pm and so that's the way they do it. This one actually had a bunch of great online reviews. So I thought that was really cool.   Michael: That's even better sign.   Emil: Yeah, rare. Yeah.   Michael: Yeah, that's pretty. That's pretty rare.   Emil: Anyway, Tom, what about you?   Michael: Oh, just one more to add. Sorry, Tom,   Tom: Take all my points. Make sure you take em all.   Michael: How's the scraps man? NARPM. National Association of Realtors and Property Managers I think is that acronym, but there's some national accrediting body for property managers, and if they're a member of that…   Emil: National Association of residential property managers, just look.   Michael: Thank you, sir. So checking out that website can be helpful. And it's just another accolade for them to put to their name into their business. So they're usually held to a certain standard level, which can be helpful to know that they've got that in their back pocket, I Tom scrap away,   Tom: Scrap away, I'm gonna try not to just repeat it, but the the Maslow hierarchy of selecting a property manager. Okay, I'm just gonna repeat it. So the first reference is a great place to start. But that's not the end all process, then you go into your interview questions and references, but personal references and professional references, and the best professional reference with the property managers I found to be his agents. So is there an echo in the room. So like Roofstock has some references within all the markets that we operate in, we go through a pretty thorough process of identifying property managers, so professional references, and then kind of blogs, social reputable forums, our friends BiggerPockets, Roofstock Academy, we talked quite a bit about specific local property managers that we like. And lastly is the old Google search bar. So on top of that list is where I will start in opening a market searching for a property manager. Yeah.   Emil: As someone who works in digital marketing, I want to give one word of caution to our listeners, just know that a lot of times online, when, let's say, someone posts about who are the best property managers in x markets, you'll a lot of times either find vendors or vendors will peg a customer like they're watching those forums. They know a lot of investors are there. And so sometimes they'll peg a friend or somebody to go post on those. So just know that going in, right that things can on the internet can very easily be skewed and always do your own research. That's the one tip I want to give people here.   Michael: Wait, you mean? You mean the internet doesn't have like editors that make sure everything is factual?   Emil: Look, man, we're saying that all here, but think about it. Think about it. 10 o'clock at night, you're looking around. And you know, there's a couple couple people chiming in for the same property manager online on a forum, right? You're not immediately. You may be skeptical, you may not. So I just want to heed that warning to our, our wonderful listeners.   I don't have anything else to add here. You guys, you guys hit all the good ways to source potential property managers. Alright, so let's get to the good one. I think this will probably take up the majority of our time here is the vetting questions. So this is such an important part. It's important because I think it's easy to get a list of questions to ask. And I think property managers often get a lot of the same questions, and they can get good at responding in a certain way that they know and investor likes to hear.  So I'm curious if you guys have like, tried and true questions that kind of help break past the the canned responses.   Tom: Emil I feel like Michael and myself has been like taking a lot of the low hanging fruit with some of these initial questions. Would you like to take the lead and leave us with more more scraps?   Emil: Absolutely. I thought you'd never ask.   Tom: Being a gentlemen.   Emil: I'm going to go through kind of the questions I mentioned last week, I did a round of interviews. I'm just going to go through the questions I have listed to ask and some of them they get canned responses, but I need to know them anyway. So the questions I like to ask, and there's always things that come up that I don't list here, but how many properties Do they have under management? This kind of just lets you know, you know how big of a shop they are. I don't think there's a right answer for big or small. It's just good to know how many people they're serving.   Tom: I think the size of the market is really important. Not so like if it's a much smaller market, it would be unreasonable to expect them to have these huge amount of properties. But if it's a very big market, so I think there's some thoughts in evaluating their answer based on what market they're in. Sorry, go ahead.   Emil: Yeah, I mean, maybe some pros and cons, I would say, like, let's say they have less properties under management is you may be taken care of more, because you're not one out of 1500, you're one out of 200 properties under management, but they like maybe they only have 30 owners that they work with, right. So you're just going to naturally get more attention. The advantages, maybe some bigger shops is that they probably have some of their more like their processes and reporting. More buttoned up. I don't know. Do you guys have any anything else add in terms of properties under management?     Micheal: Yeah, I like your take, too. I would also just add that I think a lot of the smaller shops are kind of more boutique key, and they can often be a bit more catering to their owners. And so I don't think that number alone, necessarily dictates good or bad, or strong or weak. It's just an interesting number to note, interesting metric to note and just kind of be aware of.   Emil: Yeah, yeah, it's helpful as you're asking these other questions. Go ahead, Tom.   Tom: My last thoughts just on volume of how many units they manage, I would, if I had to choose between one that manages less versus more, I would pick the one that picks more just in viability of the company, like it would stink, if you had a property management company that didn't manage a lot of properties and wasn't profitable, or wasn't able to stay in business that would just stink casting to all things aside, needing to change if for whatever reason, they were not able to stay in business. So that's not like a tried and true way to say how profitable that company is, or you know, if they're able to be sustained as a business, but looking at indicators that it's a business that's viable, that's going to continue on would be important to me, because I don't want to have to go and go through the exercise again.   Emil: Okay, so some other questions, I like to ask, areas that they cover within that market. So there's some property managers that will have just a geographic concentration, they just a lot of their properties are packed into one area, so they'll know that area very well. So I just like to know what areas they cover where they really pros where, you know, they can help with determining rent, just knowing quality of tenant in those sub markets, so I always like to get an idea for the areas they cover. Next is the types of buildings they manage. So do they manage primarily single family homes? Do they manage a lot of small multifamily? Or do they primarily manage large, multifamily 50 unit plus or something? So, again, if someone's a property managers, primarily large multifamily, maybe me bringing them as single families, not the best idea, so I'd like to see what kind of buildings they manage and that they specialize in. And by the way, guys, feel free to chime in on any of these, if you have anything to add.   Tom: If you are investing in section eight, making sure that they have section eight experience. So you know, not just building type, but tenant type would you say or if you're doing a short term rental versus a longer term rental, making sure that their inventory that they have now kind of maps up against what you have, I love to look at companies, property managers website and see what listings they have available for rent, I can tell you a lot of occupancy one, if you know they manage 100 homes, and they have 50 homes available for rent, like that's not a great sign like 50% occupancy is not very good. And then also making sure that that map, there's a great overlay of the property where you're looking at its similar location as well as rent. So you know, if you're buying a property that rents for $3,000, in this person's property management, they manage homes that rent for $800, that may not be a good matchup. So just making sure it's similar type property, similar rent type, all that good stuff.   Emil: Great tip. Another question I like to ask is, usually you try to speak to maybe one of the co founders, or one of the owners of the company. And I always like to ask them if they own any real estate themselves real estate investments. And the reason I like to ask that question is, I think if they personally invest in real estate as well, they just have a much better understanding of the investor and how an investor thinks. And I like that I want them to think like an investor and how do my clients think, right? Like, when it comes to income expenses, all these different things, if they're doing all that stuff themselves for their own portfolio? Hopefully, the idea is that they're treating your portfolio the same way.   Michael: Absolutely. On that note, I like to find out if they do own investment property, where they are located, and ask them the question kind of carte blanche is hey, if we both have a vacancy at the same time, who gets priority?   Emil: I doubt they'll ever say that their property gets that would be bad. If they're like, yeah, my property and then your property.   Michael: Yeah, but you can keep them honest. You know, if you ever happen to see their property listed on their website at the same time, yours is you can bring it up.   Emil: Yeah, sure. A couple other questions. So I always like to ask them what their standard operating procedure for handling repairs with tenants. So is it an online portal that people Submit through, do they call in? What is their typical response time, things like that? How do they manage tenant calls, some people will immediately send someone out other people, what I like to hear is whoever speaking to the tenant, if they call in or whatever is trying to help walk them through how to potentially fix it themselves. If it's something minor, right? Instead of just getting someone out there, you have to pay for that time, that person's time. So like, just getting an understanding for how they deal with repairs with tenants is always a good question, ask.   Tom: Nice, I'm gonna go ahead and jump in here. fees, the Oh, so important fees. And what's pretty remarkable about property managers is it's it's not a one size fits all the way that property managers charge fees, specifically around repairs and maintenance. Some charge a percent overhead, some charge, like an hourly project management costs. So knowing how they charge fees as it relates to property manager, excuse me repairs and maintenance, how they charge fees as it relates to rent collection, how they charge fees as it relates to late charges, all that kind of stuff. And generally speaking, the ranges that I see with single family rental, I've seen as low as 6% on a rent collection, to as high as 12%. In a market where it's more competitive and more property managers, you're going to see a little bit of a lower rate, generally speaking, versus markets where there's not not that many shows in town. So that would be my kind of range and thoughts on fees. And, and also the right now we're we're all three of us are looking at it as part of Roofstock Academy, we have this playbook, this interview template, that's part of the package of Roofstock Academy, where we have it for property managers, and all these other ones. So we're both kind of skimming through our interview template here, as it relates to property managers looking through them. But I think that's such a key one, the cost aspect?   Michael: Yeah, it really is. And it can often be the determining factor between, you know, really profitable investment versus not. And I think one of the biggest components of that is what a releasing fee looks like, or a new tenant placement fee. Oftentimes, you'll see that up at 100% of one month's rent, and I've seen it as low as 25% of one month's rent. So on $1,000, a month rental, that's $750 annual swing one way or the other.   Emil: What do you guys think about management fees instead of percentage based being kind of like a flat fee structure. So example somebody I spoke with last week, they charge you $50 per building, and then $25 per occupied unit. So let's say you have a single family home, I believe it'd be 50 plus that 25 or 75 bucks flat a month. And then if let's say you have a four family, it would be 150. Flat a month would be I've seen that before.   Tom: I think the psychology of it is really interesting, it's like you should have some aligned incentives, right? If the property is occupied, that's great. I want them to be happy about it. And you know, making more money versus when it's vacant. There's also some perverse incentives around construction, where if the property manager is getting paid more money, because more work is being done, and they're getting a percentage, I'm not offering a solution and more just kind of pointing out a problem on the repairs and maintenance and construction side. But to your point on a flat fee versus a percentage, I like the percentage and that there's some aligned incentives, if the property is occupied and performing well, maybe get creative with some like year end bonuses, if they're low, or whatever. I don't know,just thinking outside the box.   Michael: On the flat stuff. I've never worked the property manager that has done it. But mathematically speaking, it could make a lot of sense, especially on higher end rentals. I mean, if you're at, you know, call it 750 bucks a month per unit in that four unit. Let me just run some numbers real quick. That's what 2900 750 by fours 3000. And let's call it 8%. Is $240, is what you would typically be paying on that and in this case, you're paying 50 plus 25 by four, which is 150 bucks, 150. You're saving 90 bucks a month right there. So I think you just got to run the numbers. I don't think it inherently means good or bad. Again, it just you have to look at the numbers for your specific situation. And in that instance, I would take that, yeah, 10 days out of 10.   Emil: Yep. If all the other things obviously check off, right. Like, like, I know, everyone likes to key in on the fee. Oh, yeah, absolutely. You got to make sure these other things that we're talking about, I would say that those are more important, because I don't know, they're just gonna play such a big role. It's easy to get like just honed in on the fees. And something I did early on, it's all I looked at really, which is big mistake. So I think a lot of these other questions are super important to factor in as well.   Michael: Absolutely. And I harp on it all the time with insurance, you can go get the cheapest insurance, but if they suck at the one thing they're designed to do, and that's pay claims, what are we doing here? And so same thing with property managers, if you go find the cheapest property manager, and they can't do the one thing that they're designed to do manage your property, what's the point, you know, it's going to be way more headache and you're going to pay for it later down the road, probably through the nose, as opposed to just paying a little bit more up front. And so there's the age old expression of pay for it now or pay for it later. And pay for it now it's probably going to be cheaper.   Emil: Exactly. Any other questions? You guys really like to ask that our listeners could really benefit from   Michael: Last one I'll throw in there is what their accounting software looks like and what their portal online presence looks like. And if they even have one, that's a big, big, big must have for me, if they don't have an online presence, it's really difficult for me to kind of keep tabs on what's going on. And not that I need to keep tabs on what's going on. But anytime I'm working with a new property manager, I over communicate like probably to the point of a being obnoxious, but that's okay, because it's my property, and they work for me. So we got to make sure that we're both on the same page at the beginning, that just takes time to do and having an online portal makes it much easier for me to track what's going on what expenses are being paid, versus once a month getting a p&l profit and loss statement showing, hey, by the way, we spent $300, this month on x, or if I had known about that three weeks ago, I would have called you and asked about it. So I think that's a big big plus for for property managers.   Emil: And the way you can kind of suss that out is again asking about, okay, when a tenant repair issue comes up, do you guys notify me? Do I get an automated email, like a lot of the property managers I work with as soon as if it's under $500? They don't even come to me for approval, and I just get an email with the issue. But I like that, right. I like that at least I'm getting notified about it. Because if it's most of the things are running the mill things, okay, whatever you at least you just know, and you can move on. But some things is like wait, this is like the third time this issue has come up this year. Now I want to go inquire about it. So just asking them like how do you as the tenant or the owner get updates on Repairs as tenants file those tickets? Go ahead Tom.   Tom: My last question, I'll have more of a request versus a question is to take a look at what their property management agreement looks like. This is your your prenuptial agreement with the company. It defines everything we're talking about. We're talking about fees. Specifically, what I think is, is there's like a breakup costs, I had a property that I sold the other year where I didn't look into the property management agreement, and I ended up having to pay this stupid fee, it makes me mad just thinking about it right now, because I sold the property. And the person who bought the property didn't retain their property management services. So I would look through that property management agreement and see one, what are all the different fees and different ways of the property managers gonna be making money. And then two, if the relationship was to end, either you finding a different property manager, or you're selling the property doing 1031, doing whatever? What are the implications of that with property management agreement, but love all the other stuff you guys are talking about? The investor portal is so important, and point of contact, knowing who your ongoing point of contact would be? And what preferred means of communications and what the expectations are for getting back and responses. And all that stuff is really important as well.   Emil: Yeah, you I remember, you've talked about this one about that fee you've paid when you sold the properties. And in this round of interviews, I talked to a property manager who said the same thing. They have a brokerage out there as part of their company. They're like, if you don't use our brokerage to sell your property, we charge you 1% of the sales price. And that was like an automatic deal breaker.   Tom: It's a deal killer.   Emil: Yeah. Total deal killer.   Tom: Yeah, no thanks. Take that out. Or I'm done. Yeah.   Emil: Yeah. So good. Good to ask that are like really review that management agreement, because it'll be in there. So you got to read those things for sure.   Michael: Emil. a follow up question for them is do what percentage commission do they charge? If they if you do use your brokerage? Do you know?   Emil: That's a good question. I just was like, What? Are you serious? Yeah,   Tom: Yeah. Yeah. Why are you trying to force my hand like this?   Emil: Yeah, but that would be a good one.   Michael: That's a pretty big red flag. But I have a property manager where they charge like, I think for four and a half percent commission, if they are the listing agent, but no requirement to utilize them. They just offer an incentive for you to utilize them.   Emil: So that's great. Yep. That's awesome. It's like, hey, if you end up selling with us, we give you this preferred rate. Not like if you don't sell with us,   Michael: You must.   Emil: Yeah, exactly. Basically forcing your hand so that wasn't cool.   Theme song   Emil: So we've done a couple of our Ask Us Anything, we call them ama's. But there's multiple of us. So they're asking us anything's. And we've gone through the initial batch of questions, and we'd love to hear more from you guys on questions we can answer in future episodes. Literally, whatever's on your mind, Tom, Michael, and I will we'll tackle them on future episodes. And so the best way to submit those questions to us, you can email one of the three of us so I'm at Eshour@roofstock.com. Can you guys give me your email addresses? I don't know them by heart.   Michael: I'm at malbaum@roofstock.com.   Tom: And I am at Tom@roofstock.com. And other way to submit would be Leave us a message so the phone line for submitting these ama's is area code 415-343-5866. You like my tone goes kind of up and down like a   Michael: and I was like I was like wait a minute. That's not how you say a phone number.   Emil: You're like a commercial marketer, 435 he's calling one 800   Michael: Yeah, 588 2300 Empire   Emil: And Twitter. We're always on Twitter. So I'm @emilshour.     Michael: And I'm at. I think it's AlbaumMichael. Michael Albaum probably works too, I'm not sure. I don't know how Twitter works, but I seem to be talking about it all the time.   Emil: And Tom, you are at?   Tom: @tschneido   Emil: All right. We're looking forward to tackling your questions on a future episode. And guess we'll see you guys in the next one. Happy investing.   Michael: Happy investing.   Tom: Happy investing.

In this episode, we continue our series of how to select and vet strong team members. This week we discuss the CPA. --- Transcript   Emil: Hey everyone. Welcome back for another episode of The Remote Real Estate Investor. My name is Emil Shour and I am joined by my co hosts,   Tom: Tom Schneider   Michael: and Michael Albaum.   Emil: And today we're going to be continuing this series we've been doing lately on building out your team. So how do you find and vet the different players on your quote unquote real estate investment team. In today's episode, we're going to be tackling the CPA, which stands for certified public accountant for anyone who's not familiar. So let's hop in.   Theme Song   Emil: All right, before we get into the meat of the episode, the meat and the potatoes, meat, potatoes, the salmon and, the salmon and couscous. Let's go with that. We have some people leaving us some awesome reviews I want to give a quick shout out to so recently real estate financial freedom wrote,   “The show has the feel like we are sitting around a table talking shop about real estate, they do a good job catering to beginner but also go into depth into more complicated real estate subjects. If you are thinking of investing out of state, this is the podcast for you. This podcast makes real estate feel very approachable.”   Emil: Thank you so much love the review, we'll try to give everyone a shout out if you leave us review was mentioned at the end of the episode. But please leave us reviews. We love them. And we'll give you a shout out in a future episode.   Michael: Thank you so much.   Emil: Alright guys. So we usually tackle three questions on each one of these episodes, which is when in the process? Should you look for this individual? How do you source them? And vetting questions to ask them to make sure you're choosing the right person? So let's start with the first one. When in the process of acquiring, let's call your first rental property, do you need to go out and find a CPA? What have you guys done   Michael: Now. Now .ow now now   Emil: All right, Mr. delay?   Michael: I think that first question, it really depends. I chat with someone in the academy a few weeks ago who does their own taxes, they prepare their own returns anyhow, using, you know, TurboTax, whatever. And so they said, Yeah, I already understand how taxes work, I understand tax works. And so adding one rental property to the mix is not a big deal whatsoever. So they've been doing their own. So if that's you great, but if you don't prepare your own taxes, or you want to go hire a professional to do it, I think it can be really great to have that conversation as soon earlier in the year as possible. Because as we all know, taxes are due in April for the year prior.   And you can't really do a whole lot of changes after the fact. And so chatting with a tax professional as you're getting started in owning real estate is going to set you up to have some really good habits and makes tax time so much easier for everybody involved. So I would say as soon as you're considering real estate, talk to a tax professional about how your personal situation might be affected by owning real estate, what some deductions look like and what your overall taxable basis might look like as a result of owning real estate and how that might change as if you previously didn't. So I don't think it's ever too early to start that conversation. Tom, what are your thoughts?     Tom: Yeah, my thought is just kind of on the first piece of this is something that you could file your own taxes and talking to people in Academy, asking about the stuff. My advice is always, you know, it's worth paying that money for a professional, there are a lot of tax benefits with real estate, you get the three DS depreciation deferral and deduction. And you really want to squeeze as much juice as you can out of those three. And it's difficult if you don't have that specific real estate experience. My wife's a tax attorney, but we still hire someone different does, you know international tax, which is very abstract and interesting.   But my point is, real estate tax specifically, is there's a lot of fruit on the tree that you want to harvest. And you want to take advantage. So it's worth paying that money to find somebody. So timing wise, you know, it doesn't have to line up with any of your acquisitions. There is some neat stuff that Michaels talked about in the past will try to sound cool doing cost segues and stuff like that, but   Michael: Nailed it.   Tom: I mean, as long as you give yourself some leeway before going into tax season, I would say that's the real kind of timing and doing it hire a professional who has real estate specific experiences is important before tax season. So that's my timing two cents.   Emil: I like it. I'm going to take the counter point. And I'm going to say that this is a person on your team who, Yes, you can look for them early. But I think there's so many moving parts earlier on to focus on your property manager which market you're going to invest in finding an agent if you take that route that I think the CPA can come a little bit later. I think a lot of fuel can get caught in all the nitty gritty of I should check off all these boxes. And it's like focus on educating yourself and then get that first property. I think the accountant can come a little later. So I'm gonna take the counter point,   Michael: I think it's a really good point to make a meal and that who you ultimately work with can totally come after the fact I think it's really important that somebody at least have the conversation with a tax professional about a like how does real estate affect me personally, because I hear about it all the time. But I don't understand. So for me taken, you know, an average deal, whatever that looks like in your market, or wherever you think that might look like for you as a buyer, how would this affect me because I think it gives a really good insight and helps a lot of people purchase strategically based on some of the tax advantages that they may or may not qualify for. But I 100% agree that the actual person doing the tax returns can totally come after the fact.   Emil: That's a good point. So also, I think when I bought rental properties I chose to that was the first year I hired a CPA to do my taxes. It was like I started doing some, like some side project consulting stuff as well. And so that makes me W2 mix with rental properties. I was like, You know what, I'm just going to give this to a professional, make sure I'm doing it a correctly and be getting maximum deduction so that I save as much as I can. I think we said all the time, a good CPA, they will save you way more than you actually pay them yearly.   Michael: And I'm just curious, do you guys use a CPA on any kind of retainer or annual program or you just pay them for the time that you use when you speak to them? And then for the tax return? How does your program look?   Tom: With my CPA, it's sort of a one time event every year I you know, it's not any sort of like recurring contractor engagement, I could like, use them one year and go somewhere else, but they already have a lot of my information. So it's, it's a lot easier to have some continuity with them. I've been meaning to do a little bit more like a consultation of kind of lifting up the books on all that I have within because right right now I basically just send them all my information all by my 1098 for my mortgage, my 1099 for property managers, I send them all that information, and they just come back with a nice, clean, albeit like pretty long tax return, just because there's so many moving parts that they understand. I've been meaning to do kind of more of like a like an engaged consultation and and have answered your question. But what I do with right now, it's just every year, just a one time do the going through the exercise, but no more strategic stuff. But I'm just something that I think I probably do this year on the list of things to do.   Michael: Do it, do it? Yeah, it's really worthwhile to do that. That planning portion of things. And then what about YouTube? You pay them like an annual fee? Or do you just do the tax return fee? And then the hourly stuff?   Emil: Yeah, it's just the paid to do my tax returns. But I'm probably in a unique situation that my CPA is my brother in law's very good friend. So I can always ask him stuff. And he's really cool about it. But he used to charge me a lot less like he was very inexpensive to start, I think like, friend discount. And I told him this past year, I was like, I asked you a lot of questions throughout the year, our taxes are getting more complicated, like just raise that fee that we normally pay you and he was like, I've never had anyone asked me to charge them more. But thank you. So you know, it was like he's become more consultative throughout the year. And I just want to make sure like, I'm compensating him so he's not like goddamnit Emil's texting me again, right.   Michael: You don't want him to feel like you're taking advantage.   Emil: Exactly. So I was like charging us more. And it's still like totally reasonable. So that's kind of how we have it set up with him.   Michael: Great.   Emil: How about you?   Michael: Oh, yeah, I'm just hourly, and then whatever the tax return is at the end of the year, and so I'm chatting with my CPA several times throughout the year, kind of about next moves and strategy type stuff. We don't really have this formal sit down session where Okay, we're gonna talk strategy about what it is, but I'll call him up and ask him Hey, you know, cost seg, do you think that would have a big impact on my, on my taxes this year, and talked about the numbers and yada, yada, yada. So there's definitely expense ongoing expense throughout the year, but it's just whatever the hourly fee is, however long the call is, that's what that's what I pay him almost like an attorney. And it works great. And I I think it's well worth the money. I'd say it sucks when I get the bill. But I think it's it's money well spent. And it's a deduction to keep track of the…   Tom: Yeah, it's a deduction it is for listeners who are newer, Michael has a lot more moving pieces on within his projects. He's doing multi families doing, you know, all kinds of stuff. But at least for myself, it's a much more simpler engagement of kind of the the annual thing, but I think as you go into more complicated deals and structures, there is more meat on the bone for going through with your CPA. So he would be on the further end of the spectrum of kind of more, I guess, opportunity for tax savings and more more need for higher engagement.   Michael: Right, right. Right. Yeah. more need for planning, I think. Yeah, absolutely. My first couple years, my first one, I had a handful of deals was not nearly as frequent or this often. So I think it's a really good point to make, Tom that this is going to be a pretty person that you probably won't speak to very regularly when you're first starting out.   Emil: Yeah, good point. All right. Let's move on to the second part of these episodes where we talk about,   Michael: We've got about a minute 50 left to cover these next topics. Good luck.   Emil: All right. So moving on, we're going to talk about how do you source CPA? How do you go about finding someone who could be your potential CPA? So how did you guys go about it?   Michael: I called around a bunch of different people. I was using this guy that my dad was using, with a big firm down in LA. And he was, he was really thorough, and he was really good and he was really expensive. And it just got to a point where I was like, Yeah, I just can't, like afford you. Slash need that level of service. So they provide all kinds of stuff. And a lot of that's baked into the cost of the returns. So I went and found my own person. And then that didn't work out. Well, I had a bunch of problems with the IRS because this guy was a pain in the butt. So then my brother found someone he liked down where he lived. And so I was using him and I have been for the last several years, and he's been great. He's a smaller shop, but really knows his stuff has a lot of real estate clients.   So it's been a really good fit since but trial and error and we're going to share here in a minute, some of the interview questions that you can ask a CPA that I wish I had thought of a couple years ago when I was going through this process, because it would have been a lot less painful. Tom, what about you?   Tom: Yeah, so using the same framework that I used in the last episode in sourcing a CPA, I think at the top of the pyramid is personal references is a great place to start and then pass there would be professional references. Oftentimes, a partner with a CPA is an attorney. So you know, if you have an attorney like oh, what CPA recommend, or do you have a CPA like, oh, what attorney you're like, they're oftentimes working together. The third level would be forums Roofstock Academy, that's a place where within our private Slack channel, we talk about vendors and CPAs pretty regularly, or at bigger pockets or friends there have a great forum. And then lastly, just general online research. I sourced my CPA from a reference a gentleman named Paul Kidwell, who was one of the early employees at Roofstock. Think he was our like VP of data, something just super smart guy. He's an advisor. I'll stop now, but I got my CPA reference from me.   Michael: Emil, I know you shared already that your brother in law's best friend, was that the first one that you use? Or did you have some trials tribulations leading up to that point?   Emil: No, I wish it was more of a science that I could divulge sort of listeners, but I've known him for years, too, before we ever actually, like needed his services. And he's a good guy. And I was like, he was the first person I thought of when we needed a CPA and just let him run with it. And he's been great. So yeah, it was more of just going with my gut. Somebody I know. You know, I mentioned like, this is what we're doing. We're investing in property out of state and he was like, totally comfortable with it. And he's been he's been awesome at handling it. So   Michael: Right on.   Emil: Yeah, our situation is a little easier.   Tom: I'm gonna give a shout out to my CPA, though. So I use Iryna CPA accountancy Corp. And she's awesome. So just a little free advertisement, something like Yeah, why not? Why not sure these people she's located out of Oakland and in Northern California, but her website is irynacpa.com. And I've used her for the last, I don't know, five, five years or so. And she's fantastic.   Emil: Yeah, my CPA is Dan Ratynets. And he's at Eichenbaum, Comer & Ratynets.   Michael: Awesome. And I've been using Josey Schenkoske with Bianchi, Kasavan & Pope and they're out of Monterey, California. They go by BKP and Associates.   Tom: Some love, some love shout outs.   Michael: Yeah. So I just want to give a kind of real quick personal anecdote from when I was going through my trials and tribulations trying to find a CPA. So I went from that really expensive one that my dad used. And then I was sourcing my own. And I found this guy, he was a one man operation. I went met him and we talked and he goes, Yeah, I can totally take care of all of this. And this is my accounting firm. That that totally sounds like he knew what he was talking about. No problem. My personal return, including all my real estate stuff was gonna be like 400 bucks.   I was like, Wow, that's amazing. That's cheaper than h&r block. And so I got, you get what you pay for, two years later to get to another account. And he was like, Yeah, but I don't know. Like, what this guy did. This is not at all right. And so I had to pay for it to be corrected after the fact. So don't go with the cheapest option. That doesn't necessarily mean it's the best by any means. So look to that people above and beyond what it costs.   Tom: I love the phrase penny wise pound foolish and you know, you might be like, Oh, this is awesome. I'm gonna save a couple hundred bucks doing this. And I bet you the pain the butt of going back and trying to fix that stuff, you know, know what the market rate is. And typically, we're just going to give super broad ranges But usually, I'd say like 1000 bucks is a pretty if you have a less complicated going up to I don't know what do you think the range Michael?   Michael: Couple thousand, depending on how complicated that is?   Tom: Anyways, I think oftentimes, you're going to get what you pay for.   Michael: Totally, totally. And keep in mind too, for everybody listening. These are West Coast, California Bay Area prices that can totally range as you go in different parts of the country. I feel like attorneys and CPAs often have relatively similar pricing. So at least has what I found here in California for the most part.   Emil: All right, so let's wrap it up with questions to ask that in questions to make sure you're going with the right person. You guys want to go through a couple of questions that you really like asking?   Tom: Yes. All right. I got my question. First one is they need to have real estate experience and what kind of profile of customers they have is so important. I don't want to be somebody kind of break In this type of market as a CPA, and there's a little bit of specialization, so knowing that the other thing that's really important is what states they like have coverage in. So, Oh, am I stealing Michaels? That's cool, it's good, good, good,   Michael: I'll get better ones at the bottom,   Tom: I'm gonna leave you scraps. So if I have properties that are in, you know, Florida, Georgia, Pennsylvania, Ohio, I want to make sure that that my CPA has some experience there and has done in file in those different states. So yep, I took those two. Let's take it from there.   Michael: I like asking the questions of what are your various rates? We touched on this earlier, but do they build by the hour? Do they build by the form, that's typically seen, like an h&r block style will build by the form. So if you have big we'll see that's this dollar market, Schedule E that this much and then ask if there's a flat rate option, that's a really, really important one to find out. But like I mentioned, that's not the only deciding factor.   The other thing I like to ask CPAs is what can I do in advance that will make this process so much smoother and easier for you? Do you want a shoebox full of my receipts? Do you want an Excel doc with all of my expenses, because that's how I work best? And so just having that open communication on the front end of Hey, this is what my system looks like, is that gonna work for you? A lot of new investors have kind of the benefit of they might not have any systems yet set up. So they can tailor their system to work well with whatever their CPA is looking for.   Emil: I get the real scraps, guys got nothing. Good luck. The only thing to add there would be, I think ask them if they work with other investors. That's a good one. I think Tom grab that already. Right. He said about other states or like being able to fund this now. His first one was about investors. All right. Okay. So I got a real bottom of the barrel you scrape. The only other thing I would ask just going off of what we talked about earlier, is expectations around like you asking questions or consultations throughout the year, right. So some people will say, this is my hourly rate. Or Yeah, you know, if you have any questions, no problem, just call me whatever asking that and getting the expectation right up front plane. Another good question to ask.   Tom: I'm gonna sneak one more in references, don't sleep on the references. So perhaps ask if they have a client sort of a similar profile, if they wouldn't mind sharing email to basically check on that. That is just such a high ROI with regards to value. If you can talk to someone who has a similar situation, they like working, I recommend not sleeping on references.   Emil: It's such a good one that I don't do enough. It's like such a good best practice. That is, you say, Don't sleep on it. I think you're stressing it because it's really easy to sleep on. But it's such an important one.   Michael: Yeah, references. I think across the board is one of those things that it's so easy to physically do it, myself included. Don't do it enough. I don't know why that is. I have no problem talking to people. I've no problem picking up the phone and calling. It's just one of those things.   Emil: Yeah, I don't know either.     Michael: Yeah. If anybody has an idea about why Neil and I can't call references, please leave us a rating review. Let us know in the comment section what we can do better.   Emil: Oh, wow. We're to wrap up that episode. All done.   Emil: We'll see you on the next one. Happy investing.   Michael: Happy investing.   Tom: Happy investing.

In this episode Tom and Emil go head to head to debate which investing strategy is superior, local or remote investing.    --- Transcript   Michael: Hey, everybody. Welcome to another episode of their moat real estate investor. I'm Michael album. And today I'm joined by my usual hosts,   Tom: Tom Schneider   Emil: And Emil, The Real Deal, Shour.   Michael: Ooh, I love that self-proclaimed nickname. Love it. And today we're going to be doing another show down. We've got a lot of feedback from our listeners that showed on episodes were well received. So today we are going to be debating the pros and cons of remote investing versus local investing dunked on done. Well, guys, let's jump into it.   Emil: That was actually a nickname that someone I went to college with gave me.   Michael: Okay. So it wasn't self-proclaimed.   Tom: Emil, The Real Deal.   Emil: We were in the same frat and we had like boxing night and…   Michael: that's so good.   Emil: He introduced me as Emil, The Real Deal!   Michael: I would never go on a boxing match with anybody that had that intense of a nickname.   Emil: Those people went down. Went down hard.   Michael: Okay. So for any of our new listeners out there, my name is Michael Albaum and I'm the head coach with the Roofstock Academy, Roofstock's education arm, and Emil, do you want to tell us a little bit about yourself and who you are?   Emil: Yes. My name is Emil Shour. I work on the marketing team here at Roofstock, which if anyone's not familiar, it's a marketplace where investors come to buy and sell single family rental homes. And so I work on the marketing team. I actually invested through Roofstock's marketplace before I was employed here. And now I have the joy of getting to spread the word.   Michael: So you're drinking the Koolaid.   Emil: That's right.   Tom: An evangelist!   Michael: That's right. And Tom, who are you my friend?   Tom: That is a deep question.   Michael: Start at birth!   Tom: Start at birth. So I am an investor. I'm a California broker. I work here at Roofstock on the investor education team. I initially worked at one of the very first publicly traded REITs, doing single family rental, kind of in the wild West of 2009. And then our CEO went and was a co founder and starting Roofstock. So I jumped over and joined him at Roofstock on the product side and the operations. And now, as I mentioned on the investor education side.   Michael: Awesome. Love it.   Tom: Before we get into the meat of the episode, a quick announcement as usual, this episode was brought to you by Roofstock Academy. Roofstock Academy is Roofstock's education program to get you to the next level. We include over $2,500 worth of marketplace credits on demand lectures, one-on-one coaching group coaching, all kinds of benefits. And we have this new benefit that we put together that Michael is leading it's our book club.   Michael: Within the Roofstock Academy, we actually do a monthly book club. We get together and read the same book over the course of the month that has some takeaway, some motif, some applicable things to real estate investing. And we get together at the end of the month and we have a chat about it. And cause now it's COVID, we're doing that all virtually, but hope to be able to do that in person at some point down the road. And this upcoming months book club book is Michael Uber's, one rental at a time. And as an added bonus for this month book club, we're actually going to have Michael Zuber on that call with us as kind of a fireside chat. And as we're going to be discussing his books, we get to hear it from the source himself about some of the reasons he wrote the book and some of the takeaways from the book as well. So now is the opportune time to join the Roofstock Academy roofstockacademy.com. So you can join us for that monthly book club and take advantage of all of the other advantages the Roofstock Academy has to offer as well.   Emil: For people who aren't familiar with Michael Zuber, he's been on the podcast twice. Good friend of the podcast episode 11 was the first one we had with him, the power of four rental properties and how it can change your life. And most recently, I think we, we dropped an episode with him this past week called how Michael Zuber Quit His Job On a Whim After Achieving Financial Independence. So if you're not familiar with who he is, go back and listen to those episodes. He's a super, super smart guy he's been investing for. I think 20 plus years. Now he knows a lot and has a really, really awesome message for other investors.   Michael: So today for our shutter and episode, we're going to be taking two sides of this argument and splitting it up a meal. Why don't we give you remote? We'll give you a remote and Tom, you're going to have to defend local investing.   Tom: Yeah. A classic episode, a classic discussion for the remote real estate. We're going to, you know, try not to be too biased…   Michael: But it is called The Remote Real Estate Investor,   Tom: But it'll be fun. It'll be fun. I don't know. Yeah. It's fun going to the other side of the table. So..   Michael: I think it's important to address and acknowledge both sides of any topic of any discussion because it's two sides to every coin and there is no one size fits all approach, even though remote real estate investing is far superior, but we're going to get to that in the episode. So a meal, would you like to go first or second   Emil: I'm game for either Michael?   Michael: Okay.   Emil: You're the moderator.   Tom: Go first Emil. That way I'm giving you a heads up. I'm handicapping you alright,   Michael: Emil, the floor is yours.   Emil: All right. So I have three points I want to hit here. That Tom is going to have a very hard time rebutting. So the first one is that with remote investing, you buy where it makes sense. So if you're a local investor, you're looking around at your local market, you're geographically constrained to just the deals around you. So if you live in Los Angeles or the Bay area, like we do, prices have gone out of control. Prices have gone up a lot and rent has not been able to keep up with that. So in certain markets, it's very hard to find cash flowing properties, unless you have a lot of money, put a lot of money down. It's very, very hard to make those work. There's still good markets. It's just harder to make the cash flow work. So when you're a remote investor, you buy where it makes sense.   You look at different markets, you look at where deals are, where the fundamentals are good and you invest there. You're not geographically constrained to only where you live. You go to where the deal is. Makes sense. The second point I want to touch on is you get to build a team instead of doing everything yourself. I know personally, if I was investing locally, I would want to do a lot of things myself, instead of relying on other people, finding the right team. And I think that's an advantage in building a team because these people are professionals. I'm not, I'm not a professional property manager or inspector any of these things, but being the person I am and liking control, I feel like I would try to get my hand into too many of those things. Whereas when you're remote again, you have to rely on the fuel.   You have to build a team. And so I think that's one of the advantages of going remote is you're required to build that team of professionals. The last one I want to touch on before I get on the floor is I think with remote investing, it's a lot less emotional and more about the numbers. I think when you go and view properties all the time in person, it's hard to ignore some of the blemishes that you bring to the property, right? You have some bias. You're like, Oh, would I live here? And with rental properties, especially for cashflow, that's not what matters. It's do the numbers make sense in a market that I like. And is this an area that I'm comfortable with? The risk it's not about is this somewhere I could see myself living. And I think if you're doing the local investing, you bring a lot of that emotion in looking at a lot of the properties you look at.   Michael: Wow. Tom, come back from those man.   Tom: I like it. I'm so confident. I'm going to slow roll a little bit. I'm actually just going to compliment a couple of your points before I stepped back and do the fade away three while kicking my leg out for you to run into it for me to get an extra free throw. So yeah.   Emil: Okay. James harden.   Tom: Okay. So to honor my comment there, I love the point about how it allows you to not kind of get in your own head and just be super data-driven about it, but okay. Onto the good stuff, I'm a good stuff. So investing local is definitely the way that you want to do it. So I think the first point that I'm going to make, which could be the most relevant is you're never going to know a market better than your own market. And me personally, I've been studying the market since I was about eight years old. I'd go to Safeway, I'd get the homes and land magazine. And I would just study comps. And I had this long trend of analysis. I know the different markets, different property types, how they're trending. Heck I even know the agents, right? The Kerses family out here, great agents. So you're going to know a market a lot better just from, you know, kind of hounding your local Zillow or Redfin or whatever. Basically the adult version of the homes and land magazine from the Safeway. All right. The next point is, man, what value is it to be able to touch and feel the house, you know, to go up to the house and touch the walls and kind of like smell it. You can't do that remotely. And one of the reasons people like investing in real estate is because it's a tangible asset. It's, it's something, you know, you're not buying some future of gasoline because the price of crude is low.   You know, it's an actual asset that some people actually use using by doing it remotely. You're kind of getting away from that. You're getting away from that touchy, feely wonderfulness of buying a house that you can actually see and walk into. And you know, you get out of the ethereal, if I steal a word from Michael here, it's a nice to the realleal, so, you know, you're being there. So that's number two is the tangibility of it, of actually being there, getting to go see it. It's pretty awesome. And lastly is you're not going to get taken advantage of, you know, doing things over the phone. You're going to have these quick talking sharks, selling you snake oil and all kinds of trouble. So I like to shake somebody's hand or I guess nowadays is you do an elbow bump of, you know, getting, if I'm going to do business with somebody, I'm going to want to get to know them.   I'm going to want to look them in the eye and touch elbows or whatever we do now with COVID and you can't do that in zoom. It's just super awkward. So there you go. That's why you want to invest locally.   Michael: So, Tom, what would you have to say to some of the meals points that he brought up?   Tom: All right. Let's do it so well, I, I quite agree with a lot of appeals points. I totally agree. I mean, I don't want to waste my, you know, momentum for when we switched sides of the argument, but there is a lot of limitations on only looking into your own area, but you know, just when we say local, that doesn't mean you have to do everything, you know, within five miles of your house, roll it out a little bit further, you know, go 30 miles go a couple hours. So we were talking before the episode where we were talking about our experience with local investing and I have done some stuff working for fun, not with my own money, doing local investing, but Michael has invested locally. I would consider, you know, within that three hour range that kind of counts as local. So to address that point about, you know, not being specific things in your area, you know, rollout the distance, the radius, spread it out a little bit further. You can still do things locally. You know, if you're uncomfortable going 2000 miles away go 200 miles away like within striking distance. So that would be my point number one.   The point number two, about being comfortable about using other folks is, you know, it's a muscle and if you're uncomfortable, you know, going a hundred percent building a team, that's okay. Just kind of pick points and spots and build that muscle of getting trust in getting good at letting go of things. And honestly, that's a big problem. I know for a lot of people, especially investors who are pretty generally pretty type a kind of go getters is to consciously make an effort of letting go of certain aspects of the business. So you can focus on where you have higher ROI.   Michael: I've got a question for you, both that you both kind of touched on Amelia, you mentioned that if you're going to invest remotely, that you can't go see the property and that that's difficult to do. And Tom, you mentioned, you know, being local, you're able to go touch and feel and see the property, but couldn't someone who's investing remotely still go touch and feel, see, and smell and taste. I think you included in there, the property,   Tom: If you're good, you will.   Emil: That's right. Always want to lick the walls before you sign those docs.   Michael: Check the lead based paint disclosure before licking the walls.   Emil: Correct. Actually, I think the right thing to do is to lick it, to make sure that there isn't lead.   Michael: That's right.   Tom: It's your tongue turns blue then…   Emil: Trust the verify.   Tom: No, you're totally right, Michael. I mean I've for some of the house that I've bought, I've seen them, but for most of them might have nod and what the ticket is, is having an inspector because honestly, if I go to the house and my ability to assess, you know, issues is not going to be better than an inspector who like does this professionally. So, you know, having the idea that, Oh, me going out there, I'm going to be able to do a better job than some inspector is a little bit of a stretch. So, you know, having confidence in the credentials and you know, where these inspectors are coming from, and then also looking at their homework. So like when an inspector goes and does an inspection on a house, they're filling out a super thorough report on what was identified. And that is including pictures and descriptions and as well as adding any followup items that are on there. So I'm not really sure where I'm arguing on this. I got, I got going, but you know, to the point, like I think it's, yo u know, going to see the property before buying it, you could totally do that. Even if it is remote, you know, there's no reason why you couldn't do it. And it makes you get comfortable to be able to get in the game. You know, that's an expense that you can use as a writeup. I'm not a tax professional, but for that in there,   Emil: Thank you, Tom, for further arguing my remote point but no, I think you're right. I think you can, like, let's say you put an offer on a property you're in escrow. You can go visit that property, put some eyes on it, make sure everything looks good. Yes. You know, I rely on pictures and video and things like that to like before the offer process. But I actually want to make that part of how I operate going forward. Obviously with COVID, it makes it a lot tougher, but the markets I invest in, I want to be visiting those more regularly. I haven't at all, but I want to be. And I think it makes a lot of sense if that makes you more comfortable go visit the property before you finish escrow.   Tom: Yeah. I think I personally kind of like Seesawed a little bit on like, you know, needing to be in the market where kind of when I was in it, I think it was really important to go and check it out, to go in the other way of seeing like, nah, you don't need to see it at all. I think it's been to find a happy balance. Like if you buy a property and it hits those check boxes that you're looking for with regards to population and schools and other kind of local dynamic economy, like great. I think it's some people need to be comfortable by taking a look at the market. Great. Go be comfortable and do that. Just know that, you know, there isn't necessarily a one size fits all answer.   Emil: Yep. And one last thing you mentioned being local, you know, your market way better than being a remote investor. I think that's true. I think that that'll always be the case you live there, you just, you know, what's happening. One thing I really trying to do though in the markets that I invest in is like get more ingrained in local news outside of just real estate. So I'll set up Google alerts and get the top things happening in that city to just like better understand what's going on. And I think this is where talking to your property manager regularly, again, visiting those markets regularly doing drive-through of different neighborhoods. It's just going to get you better and better at these different markets.   Michael: That's a really great point Emil. I'm going to piggyback off what Tom said. I always talk in the Academy with members about if going to the market is what's stopping you from investing then by all means go, but you'll have to kind of face the reality of everybody has personal biases and you're not going to be able to unsee undue, unexperienced, the things that you see and do and feel, and experience in that market for better or for worse. And so the ideal scenario is you pick a market that has good numbers, has good metrics and you go see the property and you love the property and you love the market, but that's not always the case. Just like you said Emil is that it doesn't necessarily matter how it makes you feel because you might not be living there. If the numbers make sense and the facts are there to support the market, it could still be a great investment independent of the fact of whether or not you enjoy it. And so if you go somewhere and think, wow, I would never live here. I don't want to invest here. Now we're mixing emotion into the decision making process, which can really be dangerous. And so if we can go with the guys of understanding that it doesn't really matter how I feel, if I feel great, that's kind of a cherry on top, but I should still be willing to invest. Even if it doesn't make me feel good. That's something to think about.   Tom: That's a great point. I mean, so much of this is an introspective exercise where it's like, okay, what do I need to do to know that, you know, I feel good about investing in this area. And I think it's a great point, Michael, that it comes to a point where you need to be a little bit just focused on the numbers. But if you know that you're going to need to kind of touch it and take a look just at the market in general, then there's no reason that you can't do that. And I like the happy balance of, you know, if there's a market, you know, going to take a look at the market and not necessarily, if there is a property to look at great, go look at a property, but you don't necessarily have to look at the one that you are investing in, but you have like a general kind of taste of the area. If that's something that's important to you, there's no reason why you can't do that. But to Michael's point, like at the end of the day, the numbers are really what carry the day trust in the process.   Emil: All of us kind of agree that the numbers, aren't the only thing that drive us, right? If it's like awesome cabaret cash on cash, but it's in a really rough neighborhood where we don't see that neighborhood turning around or whatever it is. I don't think any of us would invest there just because the numbers on paper look really good. There's a lot of other factors that we also take into account as well.   Michael: Yup, absolutely. Alright. This was really great. And I want you guys to flip flop, Tom, why is remote investing far superior than local investing in meal? You've got to defend because you got to go first, last time. So now Tom's on the offensive. Fight!   Tom: Emil, welcome to 2020. The world is your oyster. Get out of your little hole, get your head out of the sand, you Flamingo is that the animal does the…   Michael: Ostrich.   Tom: You're, you're being an ostrich. And you know, there's been some advents in technology that has allowed us to invest remotely. One of them is cloud computing that allows for you to have access to incredible amounts of data outside of your backyard. So cloud computing, that's one, the other is, uh, mobile phones. Uh, there's all kinds of cool technology that didn't exist before that Roofstock leverages and other, you know, potentially brokerages. Um, have you guys seen, have you heard of the 3d walkthrough? Right? So inside maps, Matterport, very cool companies that allow you to basically walk through the house as if you are there. Not only are you being more psychogenic, you're just working smarter, not harder. So you're able to check these houses out at a really in depth level without needing to go there. You're saving gas mileage. Think of, you know, you're being green, okay. Cloud computing, tons of data, cheap data on markets and evaluating other markets. Number two, mobile applications, mobile devices. And with that is the ability to have these really cool 3D walkthroughs to have a proliferation of inspections available. I know at Roofstock we use some cool mobile phones in using for our inspection capture leading to my third point, this ecosystem, right, that has developed around companies. So one such as Roofstock that basically does all the work ahead of time. All the benefits you would get from local investing in that, you know, being able to find these local partners, you can do really easily through platforms like Roofstock, which will connect you to all the partners that you need.   Be it insurance, be it in lenders. Now I'm not saying you can't use that same grit that you would be using locally, remotely. You should still apply that and apply it in a very diligent way, but all the drawbacks of doing it remotely that used to exist no longer exist, just because of the way the technology has advanced the way the cool companies like Roofstock has advanced. And the proof is in the pudding. I know just off the top of my head, I think there's been, you know, over over $10 million of transaction within the Roofstock Academy community, over $2 billion worth of transactions on the Roofstock community. So the proof is in the pudding. It's, you know, if you're not doing it right now, Emil, remotely investing you're behind. So, so get on the train.   Michael: Tom, what do you have to say about the interwebs, the online, the www online's making remote real estate investing easier?   Tom: Uh, you mean the connected tubes?   Michael: Yeah,   Tom: It honestly it shrinks the world. It's fantastic. And the big value points I think in there is just access to data. So being a data driven investor, I want to know what are some reputable sources for evaluating the local schools. I want to do a walk around on that block. Oh, wait a minute. I, can I go to Google maps and do a little walk around? That's fantastic. And honestly, again, you get a pretty good taste of, of being able to do it that way and getting the curb appeal and all of that good stuff. So the internet, I mean, it, it honestly would not be possible without it, but just as we've, since we've come so far since AOL and 56K modems or whatever, it's like, you know, on my phone, I could do a diligence on a property that honestly, the top private equity or top real estate investment companies could do it, it would cost them thousands and thousands of dollars to do on an individual property that I could do for free, just on my mobile phone while I am walking in my living room, in a local area. So the cost of doing the kind of diligence at an incredibly thorough level has gotten so cheap and so accessible. That there's just no question that remote investing is here and jump on board toot toot. Get on the train toot toot.   Michael: Alright Emil, you need some ice. Are you feeling okay? Are you ready to start swinging back?   Emil: I'm ready. You know what? I think Tom just convinced me to become a remote real estate investor. You opened my eyes. Michael: You didn't know this other world existed.   Emil: I had no idea about this, what podcast are we on?   Michael: Someone get this guy, a mobile phone.   Tom: Yeah get him a mobile device connected to the internet.   Michael: To the interwebs.   Emil: All right. I'm going to try not to rehash too much of what Tom mentioned. Hold on. Let me get my dog to shut up, one second. Zeke!!   Tom: So Mr. Michael Album, I hear you are doing some remote investing to the extreme. I've been following you on the Twitter world and yeah.   Michael: That's… No one should do that. That's a scary thing to hear.   Tom: Yeah. Doing remote in the United States is one thing, doing remote on the, across the Atlantic?   Emil: Portugal! Michael: Going very far East, stopping once I hit Europe, I'm actually currently investing in some properties in Portugal. There is something called the golden visa that I'm looking to take advantage of. And one of the ways to get a golden visa, which is basically permanent resident status, and then ultimately a passport after a five year period is by investment in the country. And so that can take the form of a few different ways. And so one of the options is investing in property. And so I'm looking to actually flip a property right now and then purchase a property for a long term buy and hold to get me access to that golden visa.   Emil: [sings] You go the golden visa, you got the golden visa. It's made up, it's fairy dust that someone sold Michael   Michael: And so you, Oh, that's right. That's right. Yeah. Speaking of buying snake oil.   Tom: Was this specifically for the golden visa.   Michael: It is, it is. So the returns are not anywhere near as attractive as what you can get in the States. And so the fact that you can buy an investment property and have it generate some kind of return is really a cherry on top. The real premise and the real Genesis is to get a golden visa and ultimately a second passport.   Tom: Wow.   Michael: So just being able to travel work, live, receive healthcare in the EU, any of the EU countries essentially for free. And so having the benefits of an, of an EU citizen and potentially be an EU citizen after five years.   Tom: Wow. So you would be a Portuguese and an American citizen. Yes. Very cool. Yup. Nobody knows any Portuguese out there that wouldn't mind tutoring me a little bit. I would love the help because I am pretty useless.   Tom: Portuguese is a difficult language. I went to Brazil for a little bit and Holy moly. I do not. Yeah. It was a…     Michael: It's so foreign and it's so fast.   Tom: Obrigado!   Michael: Yeah. Yeah. That's right. That's thank you for anybody listening. Nobody got it. Alright. Emil you're ready to punch back?   Emil: Alright. Knowing your market. I think that's a big advantage. If you're local, when things happen, you can go visit. That's another big one. The other three I wanted to mention are I think it's a lot easier to project manager rehabs. A lot of times when you're, you're doing a rehab or any type of any type of rehab from distance, you're trusting a lot of people project managing it. Isn't the easiest. Sometimes property managers will do it for you. It's a service they will provide. Sometimes they don't, but you're relying on pictures to kind of make sure each interval of the rehab process is happening. And a lot of times the little details are harder to see through pictures or anything, right. You want to make sure that it work is done right. And I think when you're local to be able to go and see the work that's being done, it's a huge advantage to make sure the little things weren't skipped or things that show up in picture that look okay, but you actually view it in person.   You know, the paint is splotchy or things like that. You can verify those things in person, much easier to do when you're local. The other one is this kind of ties into knowing your market, but where you live and where you are locally, you, you probably believe in that area. You probably believe in that economy. That's probably why you're there. You have a job, whatever it is when you're local, you probably have a sense that this area is going to do well for years to come. And you're trying to ride that wave of appreciation. Whereas when you're going remote harder to know all those things, you don't live there. You're not living and breathing and in that place and knowing what the local economy's doing. So I think when you're a local, you just have a better sense of is this place on the rise? I think most people live somewhere where you think things are going well. So that's another advantage to local, I would say. The last thing I talked about building a team, when you're remote, you have to build a team. I think when you're local, you build a team too. People will find your deals, property management, all those things. But the advantage of when you're local is you can actually go meet those people face to face, interview them a lot easier than when you're remote and you're just calling people. There's less of that personal connection. And I don't know when you meet people in person, you take them more seriously. They take you a little more seriously, not always, but I think it's actually easier to build a team when you're local. You do it for remote and local. And I think it's just easier to local. And that's it. Tom, go ahead.   Tom: Alright. Last couple of points I'll make on yours. You know, talking about investing in a market that you kind of believe in, you live in something we've learned over the last, I don't know, 30, 30, 40 years of investing is diversification is key. And a lot of people, their biggest investment that they make is going to be the house that they own and live in. And if you're making your biggest investment, obviously in an area that you live in, cause you live in it, why would you, you know, basically just double down on that same area, when you can diversify a little bit and put that money to work in an area that, you know, there might be some correlations with the economy because there generally is, but is subject to other upside and other kind of benefits. So being able to place your chips around. So instead of owning multiple houses in the same area that you live in already, where you have your biggest investment, the benefits of mixing it up and putting it into a different area, there's lots of value to diversifying that play.   Michael: Would you say Tom, that you would peanut butter spread the risk?   Tom: I love peanut butter spread. So my wife has started getting groceries from this place called Thrive Market and they have peanut butter in a spreadable packet. Pretty sweet.   Michael: Different than Justin's?   Tom: I don't know if it's Justin's I don't think it is, but anyways, it's not in a jar. It's like toothpaste packets. It's like toothpaste   Michael: Just on the go packs. Those things are great. Yeah.   Tom: I think I'm kind of violent about it. Cause I like burst a hole, like in the side. So peanut butter spread the risk, right? Just like spreadable peanut butter. You spread it apart. I guess the last kind of general point that isn't necessarily arguing to one way or the other remote or local investing is with all of this. It's not a one size fits all. I think all of us agree that, you know, while there is a little bit of unique requirements for investing remotely, ultimately the different types of returns it gives you access to and the diversification it gives you access to is it's worth that little bit of overhead. And as we mentioned before, then this episode, there's, there's different ways that people can get comfortable in different areas. For some people, they just get it right away and they can jump right in and invest.   And that's awesome. That's great. For some people they want to be a little bit more hands on and go and visit the area, perhaps even talk to property managers and that's okay too. Just kind of know where you sit and know what you need to do to get there either to move forward with an investment or to move on to some other type of investment. So I'd say as a theme in this podcast and real estate investing in general, have a bias for action of getting yourself into a position to either make the investments or to move on. Let's see the last little recurring theme that I think probably talk about every other episode is, as a remote investor, there really is no one as important as your property manager. So even if you're doing it locally too, and using professional property manager, your investment is gonna live and die by how well someone's going to be able to manage that for you and get, at least if you're not self managing and using professional property manager. So, you know, it doesn't matter if you're doing remotely or locally, but you know, especially if you're doing remotely, since you're not going to be able to visit the property that often do not sleep on the work that it takes to assess and qualify a property manager because you know, buying right can take you so far, but ultimately, you know, winning the operational metrics and keeping your overhead low is going to be on getting a good property manager. Who's going to keep that property occupied. So those are my final tidbits on it.   Emil: Well done. I know I don't get a rebuttal, but I thought those were all very strong.   Michael: I thought you both had strong points nicely done to you both. I'll share a little bit.   Tom: I'm excited for the Michael tidbits.   Michael: I was just going to share that I've done some, you alluded to it previously, Tom, but some quote unquote local investing. It was really, my first investment was down in Southern California, which we talked about on a previous episode, but I couldn't fathom investing remotely or out of state or really at much of a distance just because I was so green. So new to this space, you know, Roofstock wasn't around this whole education piece for a, Roofstock Academy wasn't around. And so that's all I knew. And so it was about three hour drive away from my grub. So it was semi local and I went and touched and toured a bunch of properties and met with my local agent who is a family friend who is also my property manager. So to Neil's point, we could touch a shake, hands, have visual rapport, physical rapport, which I'm kind of old school in that regard.   I would always prefer that. I think it's much more meaningful than the remote over zoom or over the telephone. And so I was able to be very hands on with that investment. And it's gone really well, given a long enough time horizon for anyone who listened to that first episode where it just like that property has been through several road bumps, several hiccups and speed. So the fact that it was local did not have any bearing on how difficult it was as a first property. It did not have any bearing on how bad or how sideways things could go. And that's been by far probably the worst experience I've had with any of my other investments. And so you can have good people and bad neighborhoods and bad people in good neighborhoods in local markets and at distance markets. So it's, you know, again, I think we said it before, it's not a one size fits all.   You just, every investor has to figure out what makes the most sense for them and Tom, you were just touching on it. I think if you need to baby, step your way into investing and start local or semi local, do it. If that's what it's going to take for you to start getting into the real estate investing arena, you know, start where it makes sense for you. Some people have no problem letting go of control and just doing it at a distance and setting up a team and kind of taking a back seat so to speak. But if that's not, you figure out how you operate as a person and figure out what's going to make the most sense for you. And then just go do it.   Emil: So for anyone who was curious about Michael's first deal, we covered that in episode 12, Here's What Our First Deal Looked Like and How They're Doing Today. That was the name of that episode. But I think, you know, the, the main theme, I'm glad you touched on that is there's people who are successful doing both right. There's people who are just local investors in expensive markets who are doing really well. People who just do remote investing, who are doing really, really well. And there's some people who do both, right. They do some local, some distance. And I think that's like the main thing we want to highlight. I don't think one is necessarily better than the other. It kind of just depends on your situation. And I think there's people doing well and doing both,   Michael: I think I want to just double down on that statement Emil. It is so dependent on who you are as a person and where you live. Because if someone's living in the Midwest right now, listening to this, so like I'm surrounded by deals. Why would I ever go remote when there's tons in my backyard, us being all Californians were, you know, semi-forced to go remote and you know, forced to go invest at a distance. So if that's not, you don't think that, Oh, I have to go invest remotely because of everything they talked about in the podcast, maybe, you know, our remote is your local, Oh, that's a trademark, Michael Albaum,  July 28, 2020.   Emil: Our remote is your local.   Michael: Yeah. So just go find where the deals make sense. I think is the one of the biggest takeaways because they could be read under your nose and you might not even know it because you're so focused on remote. I absolutely looked at local as a first opportunity semi found it and then how to go remote after the fact.   Michael: All right guys, I think that was a great rap battle for remote versus local investing. And before I let you guys go, I've got the question of the episode for you. Are you ready?   Tom: Let's do it.   Emil: Always. I'm rabbit, baby. I'm winning this rat battle.   Michael: What's your favorite breakfast cereal and why?   Tom: I'm ready.   Michael: Tom go. It's called Magic Spoon. It's not made with normal sugar. It's made from the sugar of raisins. So it's actually being promoted on a lot of podcasts. We're not being paid to promote magic spoon here. We have no affiliation with any royalties, but we're not opposed to it. And so magic spoon is basically children's cereal for adults. It is delicious. It doesn't have carbs. It's full of protein. What's great about not being, you know, I could just kind of say, say the good things about it and not necessarily have a check, a reference check on it, but it's, it's really good. Magic spoon, peanut butter. It's great raisin sugar.   Michael: So if it doesn't have carbs, like what is it like, what is it made of?   Emil: Fairy dust.   Tom: Magic spoon.   Emil: I've heard of that. It's expensive. It's not cheap.   Tom: I can't believe how expensive it is. Don't get me going on that.   Michael: There was this like frozen yogurt place that came out. I don't know. Maybe this is like going back 15, 20 years and kind of dating myself. But it's got like golden spoon, in Southern California, but I like the name gives you no indication of what the thing is. Like you would never think that's an ice cream place because it's called the golden spoon. Am I the only one that thinks that, sorry, golden spoon… If…   Tom: Spoons got range. Alright Emil, how about you, favorite cereal?   Emil: Does granola. It's like a granola cereal kind of thing. It's called Autumn's gold. I found it recently a Costco and it's like all nuts and cinnamon. So kind of same deal. It's paleo. No carb. I try to eat paleo during the week, at least. So that's probably like the only cereal these days I eat. But if we're, if we're aligning the clock, favorite cereal growing up, it's gotta be them Lucky charms, man.   Michael: They're always after me Lucky charms.   Tom: Are you a guy who eats non marshmallows until the very end? And then you just go all marshmallow.   Emil: Is there any other way to eat Lucky Charms?   Michael: I don't trust anybody that eats Lucky Charms any other way?   Emil: Yeah.   Tom: Yeah. And remember that like promotion. They are like, oops, we made a mistake and just marshmallows, man, that person on the factory line. What a moron!   Emil: Or a genius dude. He sold so many Lucky Charms boxes and he was promoted to like vice president.   Tom: VP of product.   Michael: That was like Playdo. Wasn't that? A mistake invented by mistake. So many of the greatest things.   Pierre: Sticky notes.   Tom: Sticky notes.   Michael: Yeah. There you go. Alright, Pierre, what's your favorite breakfast cereal? And please don't say like the last pizza episode. I don't like breakfast cereal.   Pierre: Well, okay. I don't eat breakfast cereal for breakfast. It's more of a dessert. If I'm going to eat cereal, it's going to be before bed.   Michael: I don't always eat breakfast cereal, but when I do it before bed.   Emil: I'm with Pierre man.   Tom: I like that tip. I like that take, unless it's magic spoon. Go ahead.   Pierre: Hmm. Chocolate granola, chocolate hazelnut granola.   Michael: Nice, particular brand?   Pierre: Oh man. It doesn't matter, really. I was raised on coupons, so whatever's on sale.   Tom: Michael, you got one?   Michael: You guys are all healthy. I'm like cocoa puffs fan. I like my milk, but I prefer it to be chocolate. So that's really all it is. It's just a vehicle to get more chocolate milk. I don't really care how it tastes.   Emil: That is true. Just gives you chocolate milk at the end.   Michael: That's right.   Tom: I had a roommate, shout out to Carson Mobly. His, uh, he had this quote about food is just a vehicle for sauce.   Michael: I've always felt that way about carrots and celery. It's just like, how do I get bar ranch into my mouth in a faster, more efficient way.     Tom: It's just a vehicle for sauce.   MIchael: That's great. All right, everybody. That was our episode. Thank you so much for listening. If you liked the episode, feel free to give us a rating or review wherever it is you listen to podcasts. Also feel free to subscribe so that you get the most up to date episodes automatically downloaded to your listening device. We look forward to seeing you on the next one. Happy investing!   Tom: Happy investing.   Emil: Very formal, happy investing.