Real Wealth Show: Real Estate Investing Podcast

Low Mortgage Rates for Another Two Years? (Audio)

There’s a lot of talk about mortgage rates and whether they are heading higher. But they’ve actually gone down for several weeks, and some experts see that downward trend continuing, for at least two years. There’s even better news about refinancing loans, that we’ll hear more about in this episode. Our guest today is Caeli Ridge. She’s president and CEO of Ridge Lending Group which is focused on helping homeowners and investors realize their dreams of homeownership. She’s been an established real estate investor herself for more than 20 years with as many as 42 investment properties at one time, and she’s dedicated to helping others do the same. Join RealWealth today to find out how to build wealth with new and renovated single-family rentals. Membership is free, and will give you access to the Investor Portal where you can view sample property pro formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more. To join, go to realwealthshow.com. Go to www.RealWealthShow.com for more information or to listen to past episodes. Transcript [00:00:00] [music] Voice Over: You're listening to The Real Wealth Show with Kathy Fettke, the real estate investors resource. Kathy Fettke: Are interest rates going to go up? If so, how would that affect the housing market? I'm Kathy Fettke and welcome to The Real Wealth Show. Our guest today, Caeli Ridge, is an expert in these things. She is president and CEO of Ridge Lending Group and has been an established real estate investor for over 20 years, holding as many as 42 investment properties across the United States, and is helping other investors do the same. Caeli, it's so great to have you back here on The Real Wealth Show. Welcome. Caeli Ridge: Thank you, Kathy. I love being here. It's my pleasure. Hopefully, I'll be able to impart some valuable insight today. Kathy: I'm sure you will and you're so cute because you're like, "Oh, is this video today? Because I just got back from the gym." [laughs] Caeli: It is what it is. Kathy: I said, I don't know, somehow over the last year it became video and I also just finished yoga. Here we are. That's the beauty of working from home. Let's talk about interest rates there. There are a lot of experts saying that they probably will creep up, but not too much, but eventually, they might. There's a lot of unknowns here. What are your thoughts on it? Caeli: A couple of things. Actually, there's some great news that we just got last week, but I'll come to that at the end. That'll be my hook for everybody. We've actually been seeing since somewhere around February of this year, rates start to increase, creep up a little bit, largely initially due to inflationary concerns. We were seeing some of that and then specific for non-owner occupied, our investors, and second home occupancy, there was an announcement back in March, March 10th, I think, to be specific. Fannie and Freddie released that-- This gets a little technical. I'm going to try and abbreviate, that they were going to be increasing [00:02:00] their risk layer for the non-owner-occupied properties. They have a senior preferred stock agreement with the treasury, which by the way, is purchasing or has been purchasing mortgage-backed securities for the last 18 months at the tune of $40 billion per week. The treasury has quite a bit of weight that they can throw around and for those two-- Kathy: [unintelligible 00:02:26] $40 billion dollars these days? Come on. [chuckles] Caeli: I was writing a check a week, mind you, a week. With all of that and thank God for it. The treasury has actually really been helping throughout the pandemic, et cetera, to keep the interest rates as low as possible so that the affordability is better for homeowners, potential home buyers, et cetera, refi cash out, yadda, yadda. They released this announcement. The Treasury wants to limit some exposure and some risk. They are maxing out the purchase per aggregator. That means that I let's say I've got $10 million worth of mortgage-backed securities or loans that I'm going to resell on the secondary market, we have dozens of aggregators that we will sell these bundles of loans to on a per aggregator per cell basis. The maximum of that bundle of loans for non-owner occupied and second home can not exceed 7%. That news created a flurry of activity on the secondary markets and increased rates for non-owner and second home. From February to now, we've really seen some significant increase rates. Rates increased, I'd say by about a full percentage point, we were at 3.5% back in February, we've been running at about 4.5% for the last five-ish months now. Here's that hit or hook rather. This is good news. Anybody that's been paying attention to interest rates remembers last year, the FHFA had added an adverse marketing [00:04:00] fee for all refinances. Do you remember hearing about that? It was a 0.5% fee for refinances back in June, I think it was. The Biden administration just canceled that. That's gone. It's effective August 1st. We're expecting to see any time. I think they just announced this Thursday or Friday last week. That removal of the adverse marketing fee for refinances should improve rates. Now, by how much? It will be a TBD, but I would expect-- Again, if you're at 4.5% on a cash-out refinance, somewhere in August or early later this month, maybe we'll be at 4%, 4.25%. See that? Some good news. We might see some additional refi boom pick back up over the course of the next few months. Kathy: Could You just summarize that for somebody who's new to the concept? What does this mean for the real estate investor? Caeli: This means that interest rates, at least for refinance, are going to be reducing, I think, by a substantial click, maybe a 0.25%, 0.375% in the next coming weeks. We will see some improvement for refinance transactions on the 30 year fixed mortgage rate. I think that in general for purchases, as rates are concerned, as herd immunity continues to become more prevalent and servicing chains and things start to open back up, supply chains, et cetera, rates are going to come back down a little bit as well on purchases. For the next couple of years, while we're getting through this recovery, I do think rates are going to remain on this low end. They are up a little bit now, but let's put that into perspective. We're still in some 5% interest rates on investment properties for 30 year fixed mortgages. In summation, rates are low. I think they're going to get a little bit lower over the next weeks, months, depending on the transaction type. They're going to stay low for the next of years. Kathy: If somebody did get a higher rate [00:06:00] recently, when can they refi into a low rate? Caeli: Excellent. Typically speaking, you want to see-- `It really depends on how long they're going to keep the property. The math to figure out your breakeven is, figure out the monthly payment difference between the rate that you're paying now and what the refinance rate would be. Take that monthly payment difference and divide it by the cost of the loan. Let's say it's a hundred dollars a month, divide that by 5,000 in closing costs, just for example, that's 50 months recapture. If you're going to keep the property for at least 50 months, it probably makes sense to go ahead and refinance. Now, keeping in mind too, that you'll have some tax advantage rate points that you might pay so that probably should work into the equation, but that's the math that you should use. You have to figure out how long you're going to keep the property, and then you can decide if it makes sense or not based on the savings and costs. Kathy: I've been getting phone calls from lenders who would like to refi and offer really low rates. We came really close [00:07:00] to doing one of them until I took a deeper dive into the fees and then the reset of the 30 year fixed. It basically brought us back to paying a lot more of the interest, whereas the loan I was currently and we were paying more of the principal. It actually ended up being a horrible deal for us, even though it looked good. It was a lower rate, too high a fees. It restarts that loan where you're paying more interest and debt. How does that work with a 30 year fixed? That's how it works. In the first 5, 10 years, you're paying primarily interest. Caeli: Correct, yes. The first 10 even plus 90% plus of what your payment is going is going to be for interest. It's not until the back end of that loan that you start really plunking down on the principal. This might be a good segue into a fun statistic and depending [00:08:00] on the circumstances, it's very circumstantial and it depends on the property, what their plans are, et cetera.That can be a fluid thing. When we talk about 30 year fixed mortgages, especially for investors, I think it would be important to mention to your listeners that the life cycle, the average life span rather of a 30 year fixed mortgage for investment property is probably five or six years. The percentage of investors that start on day one with a 30 year fixed mortgage and keep that loan for 360 months is less than 1%. Depending on the circumstances, I would just be aware of some of those details too, when making a decision. There's a psychology about that 30 year fixed that I think makes people warm and fuzzy and it helps them sleep better at night. I can get it. I have some of it myself, but the reality is that pay attention to the intent of what that investment is meant to be. If it's your primary residence, probably a different conversation, but in any case, that would be my response. Kathy: That is a conversation rich and I have all the time. He likes the comfort of that 30 year fixed. He just doesn't want to regret it in the future if interest rates are much higher. Then we have to refi at that time. He'll pay more for that [chuckles] comfort. What is it that you recommend? I think you just said. Caeli: Sure. First of all, I wouldn't say, for investors-- We're going to just focus on the investor. I would say away from a shorter amortization loan, always. Let me get into that first. I get a lot of questions about what are 15 year interest rates? They're going to be lower than a 30 year fixed rate. However, there's no need. Even if you want to accelerate the payoff early, there's no need to look at a shorter-term amortization because you can do exactly the same thing on a 30 year amortization. Even though the interest rate is higher by simply calculating that payment difference between the lower 15-year rate and the higher 30-year rate. Let's just [00:10:00] say it's $300 a month, whatever the number is, take that monthly payment difference and apply it with your 30 year fixed payment every month, you'll cross the finish line in about 15.4 years, I think, is the average calculation. Most importantly, and the reason I bring this up, is that the 30 year amortized loan is going to maximize or optimize the individual's qualification in their DTI. That 15 year payment is going to be significantly higher. In turn, it's going to affect a debt to income ratio, DTI. There's no reason to look at a 15 year. I definitely advise my clients, always take a 30 year. Whether you accelerate the payoff quicker or not is entirely up to you. You never pay the higher interest if you're doing that because you pay off so quickly. That would be the first thing. The other thing I would say is, usually speaking, I like to see a recapture when we're talking about refinance. I think that's the question. I'd like to see the recap rate somewhere in that three to five-year window of breakeven, cost versus savings. Again, depending on what their, if they know what their long-term plans are. If they know that they're going to sell this thing in a year or two years, then probably doesn't make sense to refinance, but if they just refinance and they know they're going to have it in five years from now. I'd say, look at the numbers at least and do the math. Kathy: That's just great. That's so many questions when it comes to loans. All right. Where do you see rates going with your crystal ball? I know you get asked that all the time, but let's say by the end of this year, by the end of next year, and five years from now. [chuckles] Caeli: Again, come fall early fall, mid-fall, I think that we'll start to see rates come down a little bit from where they are now. We already talked about the adverse refi fee is going to be going away in August. That just in and of itself is going to create some reduced interest rates. We can feel pretty comfortable and confident that rates are still going to be in the mid-threes, [00:12:00] high-threes, mid-fours range at least for this year. Beyond that, I really hate predicting even past a week. There are so many different variables that can create-- Kathy: [chuckles] It's really hard. Caeli: Totally. Here's my overall consensus. If you think about the amount of debt as a company or as a country we have amassed over the last 18 months, the servicing of that debt in and of itself is going to make it very, very difficult for the feds to increase rates. It's just not going to happen. If you think about trillions of dollars and the payment on that debt, a blip, an increase in interest rates would make millions of dollars in interest. Rates are going to stay low during recovery is what I'm going to say to that question. Kathy: It sure seems that way. All right. Now, another question of course we have is the forbearance and that is ending in September, correct? Do you see that increasing inventory at that time? Caeli: I did a webinar not too long ago. When this topic came up, initially, I thought, yes, maybe. It's just an unfortunate casualty of the pandemic and the forbearance, in particular, we will see some foreclosures. However, I don't think it's going to be as much as people originally maybe thought. I don't think that the Biden administration is going to allow that. I think that there'll be provisions that will try to remove as much of that as possible. I would not expect a huge flurry of extra inventory on the market. I do think that as lumber prices, whoever's following that, they just took a huge nosedive recently. Quick numbers, last year, I want to say March, something, the cost per square board, I think, is how it's measured was $333. Up until a couple of weeks ago, I think it was $1600, right? It was insane. It took a big dip. Those supply chains [00:14:00] are going to opening up. For those reasons and in several others, I think we'll start to see a little bit more inventory. I'm hoping that some of these factors will help lighten the frenzy, the marketplace, so that it's a little bit less competitive and prices start to just-- We always want to see an upward trajectory, but I'm sure you'll agree, Cathy, with the way in which they're going right now, it's a steep climb, it's not going to be sustainable long-term. I think the market will correct though. Kathy: All right. Let's see, what else? Eviction moratorium too. I know that you, as a lender, focus mainly on investor properties. I would think this is something that you're looking at. You don't want to see a bunch of landlords who have borrowed money from you or from the banks you work with, suddenly not have income. Are you concerned about that? Caeli: I feel like a lot of what has come across my desk anyway has been relatively well handled. I think that landlords have been forced to get pretty creative. We haven't seen too much of that. When things were really at their hairiest, they were finding ways to equal compromises, maybe pay a portion of the rents. Give them instructions on where to find unemployments in their areas. I mean, job listings, right? They were really getting super creative in how to help their tenants make sure that they could pay their rent. I think that most people have done a pretty decent job of avoiding that thing. Kathy: What about cash-out refi? Are you seeing demand for that? If so, are you concerned or is it a good thing? [00:16:00] Caeli: No, I loved the cash-out refinance and we've been talking about rates. Rates are still incredibly low. Most people are aware, but for those that are not, a cash-out refinance of an investment property is non-taxable. Borrowed funds are non-taxable. Taking some of the equity with the appreciation that we're seeing right now and utilizing it to deploy for further purchases, I love the idea. Yes, 100% go cash-out refi. We think that rates are going to get a little bit better in the coming weeks too. By all means, I think cash-out refi as a general rule is going to start to get some more steam. Kathy: How much more expensive is it from just a regular refi to a cash-out? Caeli: In interest rate, probably about 0.375%. Kathy: Not too much more to be able to, like you said, deploy those funds and purchase more properties. Now, once you sell that property, it's at that time that the government will want their money unless you do a 1031. Hopefully, that 1031 stays in play. Even with the way that the Biden administration is looking at it, it seems to affect just higher-cost properties versus the ones that our members are looking at. I haven't been too worried about it, but time will tell. It takes a long time to change the tax law. It's not easy. What about adjustable-rate mortgages? I know, we mentioned that, but do you see a comeback there? Caeli: I like an adjustable-rate mortgage, to be honest with you on it. For reasons that we talked about earlier, there's a psychology to 30 year fixed versus the adjustable rate, but statistics tell us again that the lifespan of a 30 year fixed, especially for the non-owner occupied, is in that five or six range window. right now, today, as we're talking, the secondary markets for interest rates are on what we call an inverted yield. That means in simple terms that a 30 year fixed [00:18:00] mortgage has a lower interest rate than an adjustable-rate. It's lopsided, it's inverted. Under normal circumstances, the only reason to take an adjustable is if the interest rate is lower. Usually, by about a percentage point is what we tend to see. Right now, adjusted rate mortgages, no, there's no incentive to do that. I do believe that we will see that shift at some point probably once they really figure out what to do with the conservatorship of Fannie, Freddie. Again, this gets into the weeds so I'll abbreviate, but '08, '09 crash. Dodd-Frank all of those elements is when we saw that inverted yield, adjusted rate mortgages, interest rates went up, 30 year fixed low, don't even look at the adjustable. Once we start to really look at how to release Fannie, Freddie from its conservatorship that they were put in back in 2010, I think it was, I think that we'll start to see those adjustable rate mortgages make a play again in the open market to where it does make sense to consider if the interest rates are that 0.375% to 1% plus lower than a 30 year fixed counterpart. Kathy: Now, I had read, and I think we did a story on it that there was less funding available through Fannie and Freddie or the requirements were getting stricter for investment properties. Is that correct? Caeli: Not that I'm aware of. As a [unintelligible 00:19:25] you mean? Not really. Kathy: No, it was at banks had a maximum number of investor loans they could do, something like that. Caeli: There's probably something, maybe if you've heard, there's are things called overlays. Overlay is just an added requirement or risk to what the already predisposed guideline, Fannie, Freddie guidelines says, There's something called the seller's guide that Fannie, Freddie published. This is a 1400 page document that, within crazy detail, told us [00:20:00] exactly what the loan has to meet in order for it to be insurable by the United States government. Ridge, because we're so investor-friendly, we go straight by the seller's guide. A lot of banks out there are going to impose these overlays that add into, for layers of risk, a maximum number that they'll finance for one individual, maybe it's 4. The rule is 10. Fannie Freddie will allow up to 10 finance properties per qualified individual. For husband and wife, for example, one of the things that we coach or counsel is that if they can, we want to qualify them separately from each other independent so now we have 10 golden tickets, we call them golden tickets, highest leverage lowest interest rate, so that they can maximize those spots. I think that's one of the things value-add wise that that Ridge does for its clients is it's looking for education and teaching them how to optimize qualifications and what to look for. Tennis is what Fannie, Freddie says. We don't stop at 10. We've got a whole diverse menu of loan products for investors that go well beyond, but that's what the actual guideline says and we don't impose those overlays. Kathy: That's fascinating. Let's say a family, maxes there 10, the wife and the husband have now maxed out. They have 10 each or it's a single person who's reached their 10 limit. What are their options today and are they expensive? Caeli: There are several. Two, to be specific. There's something called non-QM. Fannie Mae and Freddie Mac are defined as QM, qualified mortgages. Everything outside of that box is now non-QM. Non-QM in it of itself is very diverse. It's not just for investors. It's for anybody, really, that just doesn't fit into that box. There are no limits to the number of finance properties an individual can have using non-QM terms. Just specific to this piece, non-QM has a whole variety of things for investors, [00:22:00] but this one just as it means that you have maxed out your Fannie, Freddie 10. Guidelines are pretty much the same. Qualifying guidelines, if it's full doc, income debt to income ratio, assets credit, very similar, leverage is pretty similar. 75%, 80% leverage, 30 year fixed. The difference is going to be rate. The costs are going to be the same. It's really going to boil down to rate. Right now it's about a point difference between Fannie, Freddie and, let's say, a non-QM. If you're 4.25% on a Fannie Freddie loan, you can expect the non-QM to be somewhere around 5.25%. Otherwise, it's the same. Kathy: Which is really helpful. I know you've helped a lot of our members who are in the middle of a 1031 and they forgot about this detail. They have to get another loan on the replacement property and maybe they've already maxed out with Fannie and Freddie. They come to you and you fix that problem. You get them the loans they need. Caeli: Yes. That's true. Kathy: That can be stressful. Plan ahead if you're doing a 1031. [chuckles] Any other tips for investors when it comes to leverage? Caeli: I would say plan ahead is a great segue to close out the conversation. Planning ahead, make sure you get pre-qualified in advance of getting out there and starting to make offers. You want to get your financial debts in a row. Again, Ridge is really going to focus on educating you and teaching you, not from, real in-depth levels, but baseline stuff so that you understand the mechanics. What's going on in the black box of underwriting guidelines, how it applies to you, and certainly the goals and taking all of that and understanding what moves not to make. Because you don't know what you don't know and having some of that baseline information, I think, is crucial to your overall success. I want to leave people with that and we really focus a lot of our attention on [00:24:00] that education. That's why I like your platform too, Kathy, because you guys are educators and it's just so important. Somebody getting into real estate investing just on its own without even the financing part added in, they're drinking through a firehose. That's the analogy that I give. There are a lot of moving parts. Just taking some time to educate yourself and aligning yourself with educators is just so, so important. I'm grateful for you and that platform and Ridge follow suit. Kathy: Absolutely. I see too often people who have a toe in the water, maybe a real estate agent that just works very, very part-time and they think they know everything [chuckles] and they may be talking about something that was true 10 years ago. We really want to get the education from somebody who's active. Who's very, very involved with what's going on today and has been doing it a long time. That would be you for sure. It's a family business, right? Your dad did it before you, so you grew up in it. Caeli: That's right. Second generation. Dad is retired now in Southern Florida, Santa Rosa Beach, the panhandle, and living life. I took over. Kathy: You're still in Oregon. Caeli: Yes, our corporate offices are in Oregon, but for those that maybe don't know, we're licensed nationwide. Kathy: Yes, that's right. You can help people get loans definitely in all the markets that Real Wealth network has been involved in. Caeli, always a pleasure to speak with you. It's so great to connect. It almost feels like we're in the same room. Thank you so much and have a wonderful rest of your day. Caeli: You too. Kathy: Thank you for joining me here on The Real Wealth Show. You can find out more about the various lenders that we work with and resources under our resources tab under our invest tab at realwealthshow.com. There you'll get referrals to people with the kind of experience that you saw with Caeli today and also property teams in some of those strongest, fastest-[00:26:00] growing markets who acquire the investment properties, get them to rent-ready condition, or build them brand new and provide ongoing property management for our members who want to own rental property out of state. Again, you can get more information@realwealthshow.com. I'm Kathy Fettke. Thanks so much for joining me. We'll see you next time. Bye-bye [music] Voice Over: The views and opinions expressed in this podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com.

How to Get Off the Work Treadmill with Single-Family Rentals (Audio)

In this episode of the Real Wealth show, we'll peek behind the curtain to see the reality of buy and hold investing. Our guest will talk about the good, the bad, and the ugly of being a landlord, and how patience and perseverance can really pay off. Brent Palmer lives with his wife in the San Francisco Bay Area. His investing story begins with a full-time job as an engineer, two side jobs, and a desire to get off the work treadmill. After listening to the Real Wealth Show, joining as a member, and attending live events, he pulled the trigger and bought three properties in Kansas City. Those first investments came with challenges however, but he stuck with it, bought more single-family rentals in a different market, and has been able to quit those two side jobs. You'll hear his Real Wealth story in this interview. If you’d like to become job optional by investing in rental property, join RealWealth for free by visiting RealWealthShow.com. As as a member, you'll have access to the Investor Portal where you can speak with one of our experienced investment counselors, view sample property pro formas, and connect with our network of resources, including property teams, CPAs, attorneys, lenders, 1031 exchange facilitators, and more. Subscribe to the show on Apple Podcasts and get the latest episodes uploaded to your device as soon as they are released. Like what you hear? Throw some stars our way and leave us a review! We appreciate you! Transcript: [00:00:00] [music] Announcer: You're listening to The RealWealth Show, with Kathy Fettke, the real estate investor's resource. [music] Kathy Fettke: On today's RealWealth Show, we're going to peek behind the curtain to see the reality of buy-and-hold real estate investing; the good, the bad, and the ugly and how, when you stick with it, it really can turn out very well in the end. I'm Kathy Fettke, and welcome to The RealWealth Show. Our guest today was feeling overworked, on a treadmill. Even with an electrical engineering degree, he was having trouble keeping up with the very expensive San Francisco Bay Area and he didn't see a way off of that treadmill. Then he listened to The RealWealth Show and joined as a member at RealWealth Network, and started attending our live events. At that time, he pulled the trigger, and bought three properties in Kansas City. Even though those first properties have come with their share of challenges, Brent is still on a mission to build his real estate portfolio. So far, it's allowed him to quit his two side jobs. Brent, welcome to The RealWealth Show. Let's talk about when and why you started looking at real estate as a vehicle for retirement and investing. Brent Palmer: Well, I was aware of you, Kathy. I had heard you on KSFO, talking of one of the financial gurus, maybe about 10 years ago. I was so touched. Kathy: That was so long ago. Oh, my gosh, that's funny. KSFO, yes. Brent: Right. That buzzed around in my head for a time. I was here in the Bay Area. I had graduated from Cal Poly San Luis Obispo in 2006. We were quite fortunate, my wife and I, to land a house during the recession. Kathy: Wow. Brent: Right. We got a really great deal on our place. Impossible now, of course, but that was a huge help as far as having that. Upon graduating with my engineering degree, I had this crazy notion, [00:02:00] "Well, wife, you can go ahead and stay at home, and I'll be the breadwinner." She was able to stay at home with our children for a while. That was really great, but I was a little naïve as far as Bay Area cost of living. Thankfully, we got the house, but still, I was having to work multiple jobs. In addition to my main engineering job, I was working for a couple of tutoring firms on the side, doing statistics and math tutoring for high school students. I was staying pretty busy with that. It was just not an ideal situation, financially. I was looking for a way to get out from that, and really just be able to have one main job. I was aware of you and so I started looking into the RealWealth Network. I signed up as a member and looked at your material, started attending live events. That was maybe about six or seven years ago, and attended live events for a period of time, maybe. Not a hugely long period of time, but perhaps, maybe over the course of a year, I attended several events. It just got really comfortable. Then I talked with my advisor, Aristotle. It just felt really like a comparable thing, to go ahead and land that first property and try to transition out of working so much. I met with an affiliate provider in the Kansas City area. I know currently, from what I understand, RealWealth doesn't have a provider in that area, but anyway. At the time, there was somebody so I flew out there, got the lay of the land, was shown around of what rehabs looked like, what completed properties looked like. I went ahead, and this was in 2016, in the span of about nine months, acquired three [00:04:00] properties. Then I set up-- Kathy: Wow. All in Kansas City. That was probably a big learning curve there. Brent: That was a big learning curve. I had stayed, of course, quite busy with my jobs, but I ended up making the transition with my main day job to another employer and so I had some company stock. That helped me then to go ahead and be able to get the funds for procuring those properties, because I was just busy. It was like, "How are you going to get the funds here to go ahead and procure a property?" That just helped. It definitely made it possible for me to get those properties. I know that's not for everybody, but I'll admit I had listened to some Keith Weinhold as well and that influenced me, where if you're in a rough situation, just go ahead and take the tax hit. I was young enough. I felt my risk tolerance was high enough, that I was comfortable going ahead and using those funds that were for the company's stock, and going ahead and using those as down payments for my three properties in the Kansas City area. Kathy: Yes, as you mentioned, we're not working in Kansas City anymore. I think it's a great place. We just didn't have luck with property management there. We had difficulty with the older homes. It was a tough market, even though there's a lot of growth there, at least for us. I know that you experience some of that. What's the ugly side of real estate, and investing out-of-state that people need to hear. Brent: Right. That's true. That was a challenging market. I was definitely gung-ho because I wanted so much to be able to quit my side jobs, [00:06:00] and just have more time. I grabbed those three properties. Unfortunately, one of them did get placed with a bad tenant. I can't recall. It might have been actually the second tenant on one of those. She looked good on paper. She passed the background check, looked good. She had a job with Kansas City Medical Center even. That Kansas City affiliate actually had brought in and developed a property management company in-house. I was with that property management company. At the time this tenant was giving me grief was about the same time that that property manager actually folded. I wasn't aware. She had actually left town, and left the bathtub faucet on and at full blast. Kathy: Oh my gosh. What a-- Brent: Yes, I was faced with an astronomical water in utility bill. [chuckles] Kathy: What about damage to the house? Brent: I was fortunate in that the rehab had been done well enough to where-- the tub didn't overflow, the piping was good. Kathy: It was just water loss. Oh, my gosh. That would be a real crime. You'd get arrested for that in California. We can't waste water like that. [laughs] Oh, my gosh. Brent: Right, pretty hard. Kathy: Do you think she just forgot? Brent: I'm sorry. Kathy: Do you think she just forgot to turn it off, or intentionally--? Brent: No because, let's say, I had photos of some other parts of the house that definitely would indicate no. There was, I think, some intention with that [chuckles]. I don't know. She didn't know me from Adam, but anyway. Kathy: You're "the greedy landlord", I guess. I don't know. Oh, I'm so sorry. You had water bills. [00:08:00] Sometimes, in certain states, there is a lesson there, that if the tenant doesn't pay the water bill, it's stuck with the landlord, right? Brent: That's true. That's a good point. Right. I was hit with all the utilities. Then, just of course, I did an expensive make-ready to prepare for the next tenant on that, and transition with the new property manager. It was definitely an eye-opening experience. It's good that we stress this here. It's not always going to be a smooth experience. This was early on for me. It was definitely rough sailing for a bit of time there, to get the safe-- Kathy: Did you doubt yourself at that point? Like, "Oh my gosh. Here, I thought this was going to be my answer and instead, it's just more stress and more headache." Brent: [chuckles] To be honest with you, I didn't immediately quit my side jobs. I was still really busy and, thankfully, I had the funds to deal with it. That's why it's so important to have your reserve funds. When you're working with your lender and they want to see that, that's why you have reserve funds. I just ate it. Of course, I undertook legal proceedings with her, but nothing. We weren't able to track her. She just skipped town. To me, I was just so busy, it's like, "I'll just deal with that." I wasn't pleased about it, but I just felt it would work itself out over time. I was willing to be patient because I had heard enough people say real estate is not a get-rich-quick type of scheme so I was-- Kathy: That's a great attitude. That's a great attitude because things do happen and the odds are, eventually, it does happened to you, but that is why the reserves are in place. I'd recommend at least $5,000, set aside for property, or six months to 12 months of the rent, set aside. If you just have it in your [00:10:00] head, "This is for times like this, so I don't have to worry about it. I'm not going to be upset about it. It's just part of the cost of doing business." We have that in our actual business. We have emergency funds and a fund for legal in case that comes up. Then when it comes up, you don't stress about it. Brent: Exactly, because I think the water alone because of the tiered system, the water I think it was over $2,000 digitally. Kathy: Oh gosh, please. How are those properties doing now? Brent: Of course, as you said, RealWealth doesn't have an affiliate in that area, but there was a property manager who overtook the properties for RealWealth Network members who were in that situation with that particular previous property manager folding. I stayed with that particular provider over time and developed a trust with them there. It hasn't been totally smooth as far as tenants. Maybe that's why you folks aren't in that area right now, but I actually I'm currently dealing with another tenant right now who's, this is very recent, he's trying to squat on a property. We will see how that goes. Kathy: I know other people who have done really well in Kansas City, but we just have not. We tried probably four different providers and couldn't make it work, even though I think it's a great city. It's a growing city. There's a lot of positives. I'm sorry that you're dealing with that. It could happen anywhere, but it does sometimes. Sometimes in situations like that, I just sell the house and say, "This is just bad luck," [laughs] and I go get something else. Brent: Yes, I'm actually considering that. We'll see how things go. I think partly might be due to the COVID situation and people's [00:12:00] finances is that he qualified for a property, now he doesn't want top up the funds for rent. We'll see how it goes. Kathy: Oh, boy. What are some of the lessons you've learned and how are things going now in general? Do you still believe in real estate? Brent: Absolutely. Again, it's not a get-rich-quick scheme. I haven't quantized it. Here I'm an engineer but I haven't quantized exactly what I'm netting per month. I have seen it improve my finances. Even in the worst-case scenario, you're still building wealth in the sense that you're making payments or your tenant is making payments on a property and over time, you're going to own that property and you'll see rents go up over time. There's still a benefit there. That's definitely one thing I've learned is just be patient and be content. As far as how are things going on, I actually have diversified. I've got two properties in Indianapolis as well. I am currently, as we speak, working on acquiring a third. In addition, I mentioned I spent some funds to acquire downs, which I think for a lot of people might be a challenge. People look and think, "How am I ever going to acquire real estate?" The downs are not huge of course relative to California real estate. I was able additionally because we got our house here in the Bay Area, I was able to use a couple of cash-out refis. I think both of those were for the Indianapolis properties. Now one of the properties I've had for about three years in Indianapolis. We are using the equity in that house [00:14:00] now to tap in and acquire a third property in Indianapolis. It's rewarding because we got in, rates were higher at the time, interest rates were higher. We've seen them come down and now, we're going to cash in on the equity and acquire an additional property in Indianapolis. That's been a much better market for me, has been very smooth sailing. I'm staying in Indianapolis for the time being and keep adding on one or maybe two properties this year, and we'll see how things go. Kathy: Great. What's your ultimate goal in terms of real estate and in life? [chuckles] Brent: [chuckles] Initially, it was simply to acquire-- The immediate need after meeting with Aristotle was simply to acquire three properties. We figured that would be enough for me to be able to quit the side jobs and focus on the day job and then real estate on the side. It's really a blessing to be able to go beyond that. At first, I didn't have any hopes. I was having trouble seeing how am I going to go beyond three? Now, we've been able to look at other means of financing these properties for the downs. We're continuing to go forward. I think I have other cash reserves or other equity in other properties that I can tap into as well so I'm not eating up cash on my end to try to fund the downs for these properties. I'm just going to keep going, probably try to add maybe one a year for the time being. This will be six for me, and then I also structured my primary residence so that that loan is all under my name. I'll be at 7 then of the golden 10 as you call them for the golden parachutes for my real estate number, and then we'll probably try to focus on my life and structure it that way. We've definitely tried to hear and listen to [00:16:00] your advice, Kathy, for structuring our portfolio. Then as well over time, there are processes I need to get more efficient on as far as probably work on developing spreadsheets, keeping better track of things. Then the legal end we're working on. I got some paperwork I'm probably going to be doing this week for the RealWealth Network's recommended legal provider. Because I have had some bleeding with property, just trying to shore up the bleeding as I go along and get more disciplined and more structured. Kathy: What would more disciplined look like? Would your acquisition process be different? Brent: I think it's just developing a better tracking program of costs. My property manager does a good job of all of that. As far as the asset protection, I know there's a recommendation to have I think separate possibly banking accounts for each properties, you develop the LLCs. I haven't gone to that level of detail. I need to work on that more. It's just trying to have bulletproof, I guess, asset protection and be more disciplined. I'm trying to develop this as I'm running along the way. Obviously, I got three children, family needs and so it's definitely busy trying to get all the stuff in. Kathy: Everybody has different opinions on how much asset protection they need. I personally don't have separate bank accounts for my properties. If they're highly leveraged properties, then I put them together in one LLC, but again, that's just me. I just figure there's not enough in them that someone would try to go after [00:18:00] properties that are highly leveraged within one LLC. Again, that's a discussion you have with your attorney. I love that you're looking at how can I run this more like a business? What's my criteria for acquisition? What do I need to be looking for? Is it a certain amount of cash flow? Is it a certain amount of growth in the area, jobs, population, age of the house, renovation, brand new? What's your criteria? Then having the discipline to stick with that because sometimes you can't find it. Brent: Definitely. Kathy: Sometimes it takes a while to find exactly what's going to fit that. I'm happy to say that we do have a new marketplace at RealWealth where you can plug a lot of that in. I don't know if you've used that yet. It's brand new. We're just coming out with it, but you can put your properties in there and analyze them a little bit more easily, so check that out for sure. Brent: Right, good point. Kathy: Rich and I got a bookkeeper finally because it was just like, "It's so much detail in managing the properties once you get a lot of them." It's nice because then he presents us with a spreadsheet and we can see how our properties are really doing. I do recommend if you're too busy just get a bookkeeper. [chuckles] Brent: [chuckles] That's a good way of doing it. I had the sense of just hitting the ground running with this stuff. Of course, it was for a time just I don't want to say overwhelming but working multiple jobs and it was more than I could keep track of. Now that things have settled down a little more, just trying to refine the process. Definitely take a look at that resource. Kathy: Obviously, you all have good sense about things to be able to buy in the down market. That said, a lot of people weren't able to do that. I imagine there's a lot of equity in your primary. Have you refi that and lowered your payment there or potentially taking cash out for investing? [00:20:00] Brent: Right, we have. We've actually refinanced two or three times. I don't remember, it's either two or three of our properties we are able to use the cash-out refi proceeds and able to land those, so, yes, definitely. We may do that again. Kathy: Awesome. Yes, I know, with the [laughs] way prices have gone up. Have you noticed or even paid attention to whether the properties in Kansas City or Indianapolis have increased in value? Those tend to be markets that are linear, they don't tend to go up in value that much, but the last year has been phenomenal. Have you noticed any equity growth, Brent: Right, it has. Right now we're refinancing one of our properties in Indianapolis and we're waiting to see the inspection report and see the appraisal, and see what we get for that. I do believe has gone up, but we're just waiting to see on that pretty sure. Then we may look into the Kansas City market. With that, I mentioned I've got a tenant that we're dealing with, squatting tenants, we may possibly try to sell that property. I looked into those. I'm pretty sure Indianapolis, because those are better quality properties, has done a higher versus Kansas City. Kathy: Okay. It seems like you're at the level, almost at least, at the level of owning properties that potentially if your wife did most of the managing of it and could show 750 hours spent learning and managing your properties, she could qualify as a real estate professional if she's not working right now and help offset the taxes you're paying. Brent: Right now [00:22:00] my youngest child is eight years old. She's pretty busy with the children and she is working right now. She's supportive of this, so maybe eventually. Kathy: When a spouse doesn't have a W2 job, and they're able to show that they would spend more time on real estate, which again is 750 hours a year, then they can qualify as a real estate professional just from managing the properties, meaning taking over the bookkeeping and making sure the insurances is good and so forth. There's ways to document that. All right. Well, any other suggestions for new listeners or anybody who's thinking about getting started or investing? Some of the things you said are pretty scary. Again, I think you already said it, but what advice would you give to new investors? Brent: Be patient and don't give up. Overall, I think it's a winning proposition and I've seen things improve over time. I think real estate is really good also in the sense, for employers as well because what this has done for me is it's enabled me now that I'm not having to work the side jobs, I'm more dedicated to my primary employer. When you're able to do that-- I'm not looking to quit my day job anytime soon. I think a lot of times employers look and have their 401(k) package and all of that, but I think what we do as real estate investors is actually really good for employees when you're still working a day job because it just makes you a better asset to that employer. Kathy: Oh, that's a great point. You mentioned earlier too, you're feeling less stressed because again, you're not having that second job. How would you say on a scale of 1 to 10, [00:24:00] you've been able to create real wealth, meaning having the time and money to live life on your own terms? Brent: It was definitely at a one or a zero probably, to begin with, where I was just being pulled by the necessities of life to I have to work so much. It's improved. I'm not to the point where I'm just living off the funds of my investment properties, but I'd say it's probably up there to seven or eight. It's definitely at the higher end of the scale. Kathy: Oh my gosh. That's incredible. I love hearing that. All right, Brent, well, thank you so much for joining me here on the The RealWealth Show and inspiring our audience and showing what's behind the curtain. It's not always easy, but if you look over the long run, that $2,000 hit one day, but maybe you made that much in appreciation or in tax benefits. It's a long haul and you got people paying off the debt for you. You're going to look back, it'll just be a blip. Brent: Thank you so much. I appreciate the advice and mentoring you've given over time to those of us in the RealWealth Network. Thank you, Kathy. Kathy: Thank you so much. Brent: Definitely. Kathy: Thank you for joining me here on the The RealWealth Show. If you'd like to hear more RealWealth stories or get access to over 500 free educational webinars on everything, from asset protection to getting good insurance on your properties, to getting really good financing, you can get up to 10 investor loans that are backed by the US government with just 20% and 25% down. Then referrals to companies across the country who've helped our members at RealWealth acquire investment properties for the long-term with property management in place. You can do that at realwealthshow.com and it's free to join. I'm Kathy Fettke and we'll see you next time. Announcer: The views and opinions expressed in this podcast are provided for [00:26:00] informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com. [00:26:14] [END OF AUDIO]

Two Young Entrepreneurs Share their Secrets for Short-Term Rental Success (Audio)

Have you thought about buying a vacation property and putting it on the short-term rental market, but weren't quite sure how to manage the process? Our guests, Bryan Marks and Jimmy Woodard, have known each other since 2010 when they met as students at UC Berkeley. Since then they’ve built over a decade of experience in the tech industry, and have put their tech know-how to good use in the launch of a short-term rental business. They bought their first short-term rental just 6 months ago at Lake Tahoe and are working on a second one across the country in Miami. In this interview, they join us with some tech tips on what they've learned, so far. If you’d like to find out more about owning rental properties, including short-term rentals, join RealWealth for free by visiting RealWealthShow.com. As as a member, you'll have access to the Investor Portal where you can speak with one of our experienced investment counselors, view sample property pro formas, and connect with our network of resources, including property teams, CPAs, attorneys, lenders, 1031 exchange facilitators, and more. Go to www.RealWealthShow.com for more information or to listen to past episodes. TRANSCRIPT [00:00:00] [music] Announcer: You're listening to the Real Wealth Show with Kathy Fettke, the real estate investor's resource. [music] Kathy Fettke: Have you thought about buying a vacation property and putting it on the short-term rental market but aren't quite sure how to go about that? I'm Kathy Fettke, and welcome to the Real Wealth Show. Our guests today, Bryan Marks and Jimmy Woodard, bought their first short-term rental property just six months ago. It's been so successful that they're doing it again, but this time across the country in Miami. They're here to give us some tips on what they've learned. Hey, Jimmy and Bryan, welcome to the Real Wealth Show. Jimmy Woodard: Thank you. Thank you for hosting us. Kathy: Just first talk about the short-term rental business, a year ago, there was a lot of concern that Airbnb wasn't even going to make it, now I don't know if those were just scary headlines. Today, I think it's been busier than ever for Airbnbs and short-term rentals and Vrbos and everything else out there. How did you guys get started? Let's just start with that. How did you get started in short-term rentals? Jimmy: Bryan, you want to take it away? Bryan Marks: Yes, thank you, Kathy, for the question. Great to be on the show. Jimmy and I actually met a long time ago, 10 years ago in college. We actually started doing short-term rentals before Airbnb was a thing. I know some people don't remember that far back, but we went to Tahoe a lot, Lake Tahoe in California, and we loved it. We had a great experience. We always had aspirations to have our own that we could use in our spare time and, then ultimately, make that into a revenue vehicle for us to generate income, passive income, which is our opinion some of the best kinds of income. Ultimately, we talked about it for years, and then recently, we made the plunge late last year. Kathy: Late last year? Okay. Jimmy: Yes, we're still new. We started back in December of last year where everything came full circle and we got our first property in Tahoe to help other people also [00:02:00] invest in short-term rentals because we want to spread wealth as far as we can through our business model. Kathy: You didn't exactly pick the cheapest market, and you also didn't exactly pick a down market. [laughs] I think that could've been the hardest time to buy vacation property in a place like Lake Tahoe. How did you get that first property? Jimmy: Actually, it's funny you mentioned that because there were multiple properties that we bid on that we got outbid. It was a very frustrating process, but what ended up happening was we came across this company called Flyhomes. I don't know if your audience are familiar with them, but they help you convert your conventional offer into an all-cash offer. They at the time didn't even exist in the Tahoe market, so we had to cold email the CEO and beg him, "Can you help us get a property?" because we kept getting outbid. It worked out where the very first time that we worked with Flyhomes, our offer, even though it wasn't the most money that was offered because it was an all-cash offer, we were able to purchase the property. I would definitely recommend them to all of your listeners. For anyone that going through that same frustrating process, keeps getting outbid, Flyhomes is a great partner that we worked with. Kathy: Oh, that's wonderful. You had to have the downpayment, or they put up the rest of the money for you so that it's cash and then you finance it after? Jimmy: Correct. Kathy: Are you guys from the San Francisco Bay Area? Jimmy: Yes. Kathy: It's just like this tech hub of awesomeness where there's just something new happening, [chuckles] something coming online all the time. I don't know if you know, but I won this award with Goldman Sachs of top 100 most intriguing entrepreneurs, which was really cool. Jimmy: Oh, nice. Kathy: I sat at a table in 2012 with these two young guys [00:04:00] who were telling me about this new business they had. It was basically they were so tired of trying to get a taxi, and I think you know where I'm going. I don't know if you remember days before Uber. Fine, I do. In San Francisco, if you were at a bar at 2:00 AM and you needed a taxi because you did need a taxi because you shouldn't be driving from a bar at 2:00 AM after drinking, you'd wait hours. These guys were literally standing on the corner watching these cars go by thinking, "I just want to jump in one of those." As they were standing on the corner, they come up with the concept for Uber. Jimmy: Got to love that. Kathy: I got to meet them at the very beginning, I didn't even know what it was. It's just really cool to see that ridesharing, and now, house-sharing, which I think is what you guys are doing now. It's only been about six months, but how's that vacation rental performing? Bryan: It's been doing great. Back to that tech story, we do have a lot of tech background, both Jimmy and I, myself being more on the engineering technical side and Jimmy being more on the sales. We did lean a lot into that. One thing that was really helpful and just for your listeners or viewers out there, there's plenty of tools called machine-learning tools where, basically, they're really good at predicting how much a home will do on these short-term rentals, whether it's Vrbo or Airbnb. We knew pretty definitively that we can build a pro forma right out the gate and actually hit really good numbers and really feel confident that we're going to get a great ROI from the property. We jumped in there and did that initially. It's been doing great. It's actually exceeded it. We've added a lot of the amenities that have proven to improve the outcome of the home and have a great experience. Something ultimately that we wanted, two things that come to mind are, one, we added a hot tub to the property. It's always great to be in the snow and then just be in the hot tub. It's really nice to [00:06:00] have. Kathy: It's a must. Jimmy: [crosstalk] Oh, yes. Bryan: It's a must. Then we added a little movie theater room, too, with very comfortable sitting and a bar area because I know, especially during COVID, people just want to be with their bubble and with their friends and family and they don't really necessarily want to go out, so we did have a bar, lounge area into the house so it felt like you could stay home and be safe while still having a good time. We added a lot of those amenities, and they paid off quite a bit. Kathy: Do you think that's going to continue because I think a lot of people forgot there was a COVID? [laughs] It's crazy out there. My daughter was showing me pictures of San Diego, and there was no sign of anyone staying home. Jimmy: Yes, they were binge spending, right? In full force right now. Kathy: Yes, [chuckles] exactly. I imagine no matter what's going on, people like having hot tubs and bars in a vacation home. One of the sites you mentioned or one of the technologies, is it AirDNA? Is that the one you use? Jimmy: Yes. Kathy: You can become a member there and get a lot of data on vacancy rates and what the average house is getting, right? We've used that before, that was really helpful. Jimmy: Yes, very helpful tool because you don't want to go in blind thinking that you buy a property here, it's going to do so well because it's in a popular city, but it's not near any attraction or it's just in a bad zone and you waste all your money because you didn't do the research upfront. We made sure to do the right homework before we invested in our first property, and we did the same thing for our second property, which we're going to launch in Miami pretty soon. Kathy: That's so cool. I had the founder of AirDNA on the show, and I didn't really-- hadn't heard of it and I didn't understand the value of it at the time. I was confused, but I think it's really taken off since then. All right, let's talk about Miami then because we started Airbnb business during COVID too, [00:08:00] and it has been really successful. Jimmy: Nice. Kathy: It's just a little guesthouse right on our property. If my house cleaner doesn't show up, I can change the sheets, I can take care of it. Not that that happens very much. There's something really scary to me about owning a rental property, a vacation rental so far away, although I'm sure there's all kinds of [chuckles] management companies there for that. Rich and I are really seriously thinking about doing it in a ski area so we can use it when we want and other people can pay for it when we're not using. How do you manage it when it's across the country like that? Bryan: Back to technology, everything to hammer is to nail type of situation, we use quite a little bit. Ultimately, it comes down to having a really good team in place of folks that you trust. The two most important components are your maid service, having a really good relationship with them and trusting them a lot. Then also having a really good-- a couple of handy people on a deck. The maids act as the eyes and ears a little bit, they do their job. We cycled through a few, so it took a little bit. It was a little bit like a relationship, we were dating for a little bit, and ultimately, it didn't work out. Then we found a really great company that we work with in Tahoe. That's been super fruitful for us and really automated a lot of the process. Beyond that, we do use some little gadgets here and there. Our biggest concern is making sure the neighbors have also a good experience because that's probably the hardest part about owning a short-term rental is, honestly, what the neighborhood takes into that and what's your impression in the community there? You really don't want to be-- you're negative area in the community, so you really want to treat those neighbors well, and that's something we really strive to do. Another part of that is noise sensors. We have noise sensors throughout the property, so we can tell if they are being a little bit loud. We can just ping them or let them know, "Hey, we did pick up that you guys might [00:10:00] get a complaint soon if you're going to keep it up. Beyond that, we have some outdoor bell cameras to make sure that trash is accounted for in the right place. Tahoe, for example, has a lot of wildlife, and you don't want any bears coming out at your trash, which is-- Being a city person, you wouldn't think that that's a major thing, but in Tahoe, they take it very seriously, and we do as well, to have everything in the bear box locked away so no bears are at your front door. [laughs] Kathy: Not just at your front door. My sister lived in Incline for many years. There was one morning she was-- turned around, there was a bear in her living room, and she jumped up on the counter and like- [crosstalk] Jimmy: Oh. Kathy: -[unintelligible 00:10:38] away. Jimmy: Live to tell the tale, right? Kathy: Yes, that's right. She also went out into the refrigerator in the garage and all the chocolates that she handmade were gone, and the lasagna, because they do like our food. [laughs] Jimmy: Oh, yes. [laughter] Kathy: That's really that's super helpful. I don't know if you know, but there was really just a horrible tragedy in Malibu where a woman-- There's very, very strict short-term rental laws in Malibu where you actually have to live there, that's why I'm allowed to do it. Let's start with the first question, is part of the research finding a place where you don't have to live there to own it? Jimmy: Correct. Kathy: Yes, okay. [laughs] Jimmy: We do that research. It's pretty simple, you can just type in "city" plus "Airbnb laws" and then you'll see a bunch of references that come up to make sure that you're following the rules because our job is not to put up illegal properties, it's to make sure that we're complying with the local rules around short-term rentals and things of that nature. Kathy: Yes. They'd passed this ordinance, at least, I believe this is what it is in LA County that you can rent something on your property but you got to be there. A woman in Malibu rented out her home for the weekend. In the summer, you can make so much money, so a lot of people [00:12:00] have done that for years, the short-term rentals over the summer, and that pays for their living in Malibu for the rest of the year- Jimmy: Oh, yes. That's right. Kathy: -because it's so expensive. She rented it out. Well, these young kids rented it, they said there was just six of them, they ended up being about 40, and the neighbors called her and said, "Hey, there's 40 people at the house, and they're on the balcony," and she was on the phone with them for hours. Well, the balcony collapsed. I don't know if you saw that. Nobody died, which is great, but young people were hurt, and now she's got lots and lots and lots of lawsuits. That's another thing that really scares me about-- At least, if it's where I live and I say on the description, "We're here, no parties," because we'll know. My daughter who's-- I won't say it was my daughter but her friends very, very regularly tell a different story to the Airbnb hosts to say they're- Jimmy: Of course. Kathy: -a Bible study group, and then it's the fraternity and then there's a hundred kids. Again, you said the sound monitoring, can they turn that off? What about cameras, can you have cameras? I know you can't probably inside but-- Jimmy: Well, the Ring, so that's another tool that we put to use. We have a Ring doorbell camera, so that's the easy way for us to monitor who comes in and who comes out, and in a way, that's not invasive because we're not trying to invade people's privacies here. Then the other thing is, on Airbnb, and I know we do the same on Vrbo as well, you can select what type of guests that you want. If somebody has zero reviews is something that we recently talked about because of 4th of July. If someone has zero reviews, you can actually screen that out in terms of guests that are allowed in your property. There are different ways that [00:14:00] we try to get around it. Then, of course, the last one is having short-term rental insurance, separate from homeowners insurance, because you need a little bit more to some of these points that you're making to make sure that you cover your bases in having an Airbnb. Kathy: You just call your insurance company and let them know you're doing short-term rentals? Jimmy: There are actually specific insurance companies, so Proper and CBIZ are two in the space. Then you don't necessarily need both. If you are solely using it as a short-term rental like we are in our case, so we just go with-- CBIZ is the company that we work with currently. Kathy: Okay. I was told that Airbnb offers a million-dollar policy, do you know much about that and if it's any good? Jimmy: We know about it. If it's good, we haven't-- Thankfully, we haven't had [crosstalk] to take advantage of that. Kathy: [laughs] Haven't tested it. Jimmy: Exactly, we haven't tested out. We just want to cover our bases too just in case there are things that Airbnb doesn't cover. Kathy: All right. Then you mentioned that there's ways to save on rehab costs by doing it yourself. I'm sure I wouldn't be qualified to do it myself, but what kind of tips do you have? Bryan: Rehab costs, yes, that can be a huge cost to the business. If you're setting up your own Airbnb, that can be almost the majority cost of getting a house ready. You have to know when to pick your battles as far as with doing the work yourself. My recommendation is to get a lot of price quotes from folks but try to be almost a general contractor in a way if you have time, especially if it's very much a transactional nature. For example, let's say you're insulating a room, you can go and try to tear apart part of the drywall and do yourself and put insulation in there to make better heating. There's also plenty of services that will charge you $1,000 to go through and drill holes and then they pump [00:16:00] this special material in there and they walk you through it, and it's very much transactional in nature, it's commodity. You can definitely find subcontractors that will do a really good job for a very affordable price, but it really depends on what it is. Some like painting, for example, it's going to be very expensive because it's just the man-hours that you can only paint so fast, and that's something that almost anyone can do. You can even have a painting party with some friends and order some pizza and you guys can all paint together if you guys are really close friends and they're maybe staying at your house for free. There's lots of fun ways to approach it. For the most part, anything in the interior that's not going to be very sophisticated like patching some drywall or potentially putting together some furniture is something you can definitely do yourself. You might want to start to look at contractors if it's getting more and more sophisticated on the inside. Kathy: Okay. Well, my goal would be to not-- [chuckles] just have it be completely hands-off. What do you think about property management companies for short-term rentals? How do you find a good one? Jimmy: The great thing is, we actually do it ourselves. One of the things that we tell everyone is that if you have the time, which honestly it's 5, 10 hours per week, so not a huge commitment, if you have the time, you can do it. If you want to completely get rid of that responsibility, then you should be prepared to give away a huge chunk of your money because, for the most part, property management companies are going to charge you anywhere from 15% to 25% of your top line. Not profits, just everything that you gross, they're taking 15% to 25%. There are a lot of good ones in the space, you can google and find a lot of options. Just make sure that you're not just paying for someone to [00:18:00] essentially help you with answering people on all these different platforms because you could do that yourself. Methodism-- [crosstalk] Kathy: That's not too hard. Jimmy: Exactly. There has to be some value add, whether that's increased bookings or consultation to help you increase your revenue with different amenities that you can add to your property. We do that ourselves, but you can easily find someone if you are looking to just completely offload that time to somebody else. Kathy: You can definitely do it yourself, and I agree with that, it's not too time-consuming, although you can get an assistant too, that would be much cheaper. I know J. Martin, I think he's got assistants in the Philippines. I'm not sure, I could be making that up. There are ways to get people to handle that for you, although, like you said, it doesn't take a lot of time. Would it make sense to maybe hire a cleaning company so that if your housekeeper's sick, they somebody else? That seems like it would make sense. Jimmy: Correct. Kathy: Yes. Then screening, I think you said something about if they don't have a profile, they don't have reviews, they don't have a photo, how do you pass on somebody? Are there fair housing laws around that? You just say, "No, [laughs] you can't rent it."? Jimmy: It's your property, right? At least for Airbnb, we do Instant Booking, but they have a feature where they have to request a book prior to being able to Instant Book. We understand we're running a business and money is money, but we want to make sure that we're responsible with the guests that we take onto our property. Bryan: Another thing, on that point real quick, is that it's a very seasonal business, so you have peak seasons and you have your slow seasons. You can be much pickier during peak seasons, and it's also when a lot of the parties tend to be and a lot of the people tend to-- cutting loose, so to speak, over the holiday weekends, so you can be much pickier [00:20:00] about who you let into the house and for how much during that time. One really effective strategy is during peak season, you have set very high pricing and you try to maximize those days the most and you be very selective about who you let in the house. During the slow season, there's going to be less issues and, a lot of times, there's also less people too. You should be much more competitive during the slow season, lower your rates a little bit, maybe have Instant Booking. You really have to play to the seasons because you will generate the majority of your income during peak seasons. Kathy: I see. What you're saying is if I want to break the rules and have a massive party, I should do it offseason. [laughter] Jimmy: Just not in our place, not in our place. Bryan: As long as it's your party, yes. Anyone else's party, no. Kathy: Okay, perfect. I'll invite you guys. Jimmy: That's right, only a Kathy party. Kathy: All right. Any last tips? I know you guys started a business. Jimmy: The tool that I recommend to everyone for pricing, you can do either Beyond Pricing or Wheelhouse. Make sure you utilize one of these tools, they only take 1% of your revenue, so it's next to nothing. Otherwise, you're leaving money on the table if you try to price yourself. I would highly, highly recommend if you get into the short-term rental space, utilize a pricing tool because you're leaving money on the table otherwise. Bryan: Yes, and the pricing tool's super effective for us because it's going to look at everyone else in the market, everyone else in the area and set a very reasonable rate. You should still double-check those. I work with a lot of machine learning engineers, and they're smart guys and girls, but they don't have the final say all the time. Definitely check the data. It's a great tool for really knowing where the market should be and how to really maximize your income. Occupancy doesn't necessarily translate to more revenue. You could have 100% occupancy, but you could be leaving money on the table in a lot of cases, and so you want to optimize for even lower. Especially, lower occupancy rate for higher revenue. Definitely, you'll want to check out some of these tools that Jimmy mentioned. Kathy: All right. Thank you [00:22:00] so much, Bryan and Jimmy, for being here on the Real Wealth Show. I love inspiring other people, showing that, "You can do this," you can do this. Jimmy: That's right. Thank you for hosting us, Kathy. Bryan: Thanks so much, bye. Kathy: Thank you for joining me here on the Real Wealth Show. If you don't know already, at realwealthshow.com, we have a list of property providers nationwide in the hottest markets in the [music] country who offer long-term rental properties with property management in place and also short-term rentals in the Florida area mostly. You can get referrals to those teams, just like thousands of our members at Real Wealth Network, and get lots and lots of information, free webinars at realwealthshow.com. Have a great rest of your day and we'll see you next time, bye-bye. Announcer: The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com

Family Wealth: Long-Time Investor Shares His Story, Strategy, and Sage Advice (Audio)

The key to buying real estate may no longer be “location, location, location.” According to one long-time real estate investor, it’s now “property management, property management, property management.” That’s just one piece of sage advice you’ll get from this interview with Myron Schroer. He’s had a real estate license since the 1970’s, has purchased real estate in several parts of the country, and is teaching his kids and grandkids about the business with a family corporation. You’ll find out how he and his wife got started, how they got the whole family involved, how they choose their markets, and where they have invested. Be sure to join RealWealth for access to the kind of information that has helped Myron become a successful real estate investor. Go to realwealthshow.com and sign up for free. It’s also free to speak with one of our investment counselors who can answer questions and put you in touch with experienced property teams across the U.S. AUDIO TRANSCRIPT: [00:00:00] [music] Speaker 1: You're listening to the Real Wealth Show with Kathy Fettke, the real estate investors resource. Kathy Fettke: The key to buying real estate may no longer be location, location, location. According to our guest today, it's more about property management and I agree. I'm Kathy Fettke and welcome to the Real Wealth Show. As I said, this is just one piece of advice that we'll get from today's interview with Myron Schroer. He's had a real estate license since the 1970s, has purchased real estate in several parts of the country, is teaching his kids and grandkids about the business with a family corporation and that is so cool. You'll find out how he and his wife got started, how they got the whole family involved, and how they choose their markets, and what they're doing today. Myron, welcome to the Real Wealth Show. Myron Schroer: Oh, thank you. It's great to be here. Kathy: I'm excited to hear about how your family has created a family legacy with real estate knowledge and wisdom passed on to the kids. That's not always easy to do. How has that worked for your family? Starting with you, was your father in real estate? Myron: Correct. We bought our first house a couple years after we had been married. We moved out here from Indiana, and I grew up on a dairy farm. My father started in real estate and like I said, we bought our first house. He was instrumental in us doing that. Over the years, we continued to purchase additional homes, as it became available. In about 1991, he started doing condo conversions. We had some apartments, and we're trying to convert them to condominiums. In 1991, that, unfortunately, went south. [00:02:00] We had a problem. Actually, the builder went bankrupt. My father was the money partner of it and he almost went bankrupt. Unfortunately, it took us about seven years to pay everybody back that was owed. At about that time, unfortunately, he passed away of a sudden heart attack. In the interim there, he had formed a corporation and put most of the real estate into that corporation. In doing so, he actually gifted part of that to myself and to my sister. After he passed away, the corporation wasn't doing well, obviously. We just paid everybody back that we had owned from the previous problem that we had had. In the course of the next couple of years, we actually was able to turn things around, sell a few things get the cash flow going in a positive direction. At that point, the corporation actually started doing well. My mom was actually the owner at that point or the major shareholder. At that point, we decided that, from an estate standpoint, it made sense to start gifting part of the corporation away. We did that to the kids and the grandkids. We started having yearly corporate meetings, which was really a blessing because it forced us all to get together. Sometimes that's not the easiest things to do. Again, we wanted to do things right from a corporate standpoint. We started having our yearly meetings. [00:04:00] People started getting more and more involved. Really over the course of the years, it's been a real blessing. Kathy: How I bet? How did those family corporate meetings go? What was [crosstalk] Myron: Well, initially, we didn't really know what we were doing. It was a lot of questions. I think most of the folks trusted my wife and I pretty much run it. In the meetings, we obviously have questions about where we're going, what are we doing, what do they invest in? Dividend is a big thing. This is a philosophy thing, but we never wanted the good corporation to give off more to the individuals or to give off enough that would change their lives. In other words, we learned a long time ago that you can't give somebody something for nothing, because it will change who they are and it's just not a good thing. We never wanted the corporation to give off a large sum, the intent was to help the kids, the grandkids, for example, playing sports is relatively expensive in school now. If the kids want to play sports, it can cost as you probably know, a pretty good chunk. We're able to help with that if the kids want to play sports, if they want to do extra things. I have six grandkids, and four of them are currently in college. It's been able to help with them. One of my grandsons is getting his [00:06:00] aerospace engineer degree, and he just became a pilot. That's extremely expensive. It's been able to not pay for all that but to help him to achieve that goal. In fact, he had his first solo here about two weeks ago. Kathy: How exciting. Myron: We're very fortunate to be able to do that. Kathy: I agree with you that when things are handed to others for free, it's maybe not appreciated, or doesn't necessarily go in the right direction. How do you keep it equitable with your kids? Is there any kind of expectation that, yes, these funds will go towards the sports or the college, as long as you hold up a certain GPA or, or you show up at a practices? Are there any requirements? Myron: We're really, really, really fortunately blessed. Our kids and grandkids, they're great kids. They understand what it means to work to achieve things. We've been very, very fortunate in that area. What we do is we give out shares and the shares give the dividends, and then it's up to the individuals to do with those as they please. One other thing that we've done, we've been able to take in and actually use a corporation as a bank, in a sense for the kids and the grandkids. If they have additional funds, they can invest in the corp, and we pay a 6% [unintelligible 00:07:41]. It's like putting in the bank only, it's the corp. It helps a corp give us money to go out and purchase additional things, but also it gives them a little bit higher return than they would get in the bank. Then we can coach them [00:08:00] on what to do with those funds eventually also. Kathy: Are any of your grandkids invested in it? Myron: They are. Kathy: With their savings? Myron: We have a couple that have shares at this point. They come to the meetings. We've tried to come up with guidelines that make sense. You have to be a certain age, in order to take and to buy in. You have to have a certain number of shares to be able to vote so that investing-- Also, we try to take advantage of the tax advantages of having a corporation and having a meeting. We pay the individuals to come to the meeting. Again, like I tell people, and I tell our accountant, we want to take advantage of every tax opportunity that is there but we don't want to take and do anything that's questionable. If the line is in the sand, we want to be a foot away from the line. The corporate meeting allows us, to take advantage of some of those, tax opportunities. Kathy: For example, the family could meet in a reunion-type setting and have that meeting and a couple of nights might be covered by the Corporation, the cost, and the food. Myron: We have not done that yet. We will. Our corp meetings, we have them local and the food and then the travel expense and the attending the meeting, those are all paid for. We've talked about the remote location and having a meeting. We haven't done that as of yet. Kathy: It seems like it would be really important for your meeting to be somewhere like Hawaii where you [00:10:00] can really relax and create. [laughs] Myron: I agree. Kathy: That might be too close to the line, but I don't know, conversations with URCPA. That is really cool. I haven't heard of that kind of scenario besides the billionaire families who do that, I don't know how far you are and your net worth, but I love that the family and the children and the grandchildren are all a part of this family corporation. That's really fascinating. Where are your properties? You live in California? Myron: We do. We're about an hour out of the San Francisco Bay Area. We actually have properties in Oregon, of course, California, Arizona. We were fortunate that about 15 years ago to go into Texas fairly large. We've got a number of homes in the Dallas Fort Worth area. We just recently went into the Florida market, and those are doing quite well as you know. Then Indianapolis really liked the Indianapolis market. In fact, we're in the process of doing some stuff in Evansville with [crosstalk] Kathy: Oh, yes. We like that area, too. Myron: That's pretty much it. We have stuff in Utah also. Kathy: What role do the kids play in the management of all these properties? Myron: At this point, not a lot. When we have a meeting, for example, we talk about using a family bank, and so a couple of the individuals were tasked with doing the research on that. What does that mean to take advantage of the corp? The intent was if someone were to maybe want to purchase a home, or if they wanted to start a business, and they needed funds for that, obviously, it's [00:12:00] a little bit difficult to get that from a bank, maybe the corp can help them out. How would we set that up to be equitable? Who would control that? Those type of things. We're looking to diversify because everything we have right now is real estate, so we're looking to diversify a little bit, and maybe it'll go some into the stock market a little bit. A couple of individuals looking into that to see what does that looks like? What's a good plan to do on that? Those are the kinds of things. We've gone through trying to set up the bylaws as far as who can be in the corp? Who can't? Things come up, people get divorced and [crosstalk] how do you handle that? If that will happen or when it happens, how do you handle it? Those are the kinds of things that we've tried to look through or work through if you will and look down the road and say, "Right now, it's not an issue, but those things are going to come up. How do we handle it? What do we do? When they do?" Those are the kinds of things that we have tried to work through and talked about. Kathy: Really incredible. There will be a lot of inheritance coming to younger people over the next decade. I wonder how many of those children are going to know what to do with what they inherit. That's why there's always opportunity for real estate investors because people inherit property, they're like, "I don't want this," and get rid of it. How brilliant to bring them in on the business years in advance where they really understand it and start to take on different positions and leadership roles within that company, so when that transition happens, it's fluid. Myron: [00:14:00] That's eventually, obviously where we'd like to get. Having the corp also allows them if, at some point in time, they want to sell their shares, they want to get out because it's not for everybody. Some people like it, some people don't. If they want to get out, they'll have that opportunity to take and do that. I believe and have always believed that real estate is just the way for the average person to create long-term wealth. If you stay with it, and if you don't get undercapitalized, that's another key. Don't get undercapitalized long-term, you're going to do fine on the tax advantages, and stuff in real estate is just that-- I don't know of anything else that is close to it. Kathy: You've been in real estate for how many years now? Myron: Actually selling real estate and I got real estate license in 1973. I did it part-time most of my life. I guess it's been, do the math, 50 years. Kathy: That's why we wanted you on the show to give us your sage advice that starting young is worth it because we're going to be living longer and longer, and a 30-year fixed-rate loan seems like so far away in the future, and it's not that far away. Over the years, I know back in the '70s, there were people saying that real estate was expensive in those dollars. From that perspective, it wasn't really that much easier than it is today. What do you think? Myron: We bought our first house and I had alluded to [00:16:00] that earlier. I wrote to work with four other people and we would talk about real estate. I had it, but the first listing that I got was actually worked out to be a really good rental. I said, "I'd love to buy that house," but we just didn't have the money. We'd only have been married a couple of years, we didn't have any money. One of the guys I wrote this, "I'd really liked to buy a house too, but I don't have a lot of money either." We bought the house together, we still own that house, that same amount today. Now, before you say, "Hey, it's already depreciated and you're a fool for still having it." From an investment standpoint, you're absolutely right, but that house, it's symbolized for us what real estate investing is? It's at this point, obviously a cash cow. Is it hurting us tax-wise? Of course, it is. In fact, we're probably going to take and sell it here before long on 1031. You're right, it was tough to get started then, it's tough to get started now. I would just encourage everyone to do what they can do to get into real estate. I know that can be difficult, but again, long term, it's going to pay off, it just is. Kathy: There is a belief even back in the '70s that how could prices go much higher. My dad bought a home, a primary residence in Atherton for $99,000, and he was a dentist. It was hard, it was a big purchase. $99,000, those homes are 10 million now today. You couldn't fathom that a $99,000 house, it was already expensive, could [00:18:00] ever be worth a million, or 2 million, or 10 million? It's not in our ability to understand that. Yet, it happens every decade, right? What did you pay for that house and what do you think it's worth today? Myron: We paid $21,500, we'll probably sell it for $700. Let's wait, it'll probably go over 700. Kathy: Back then, you couldn't fathom that much money. Myron: No, it was no. You asked about the prices and getting into real estate and one of the things that I'm sure your viewers are probably thinking, "Prices are high right now. Should I invest now or should I wait?" I tell people, "It really doesn't matter." Don't stop watching this podcast because I said that. If you step back and look at it, you need to get in the game. It doesn't matter when you get in as long as you can afford it. For example, right now, you buy a house for $500,000. Interest rates are extremely low. If that house, let's say a year from now, or two years from now, it's 20% less, and it goes down to 400,000, people say, "Hey, I should have waited." Chances are a year from now or two years from now when that house is $400,000, interest rates are not going to be at three and a half, or three and a quarter. They're going to be up at four and a half and five. Run the numbers, what you'll find out is your payment will be higher than if you bought the home today. Long term, it doesn't matter when you get in but the key is to get in, and once you get in then it's a little bit different story, but the key is to get started. Purchase your first property, learn the ins and outs. Kathy: Especially today [00:20:00] when we have the kind of inflation that we have, and what was it just at 6%. If you're sitting in cash, you lost 6% of your money by doing nothing with it, whereas with real estate it usually increases with inflation while you're sitting with the same debt position. Myron: Another concern that I found with folks is, "Well, I'm afraid if I buy that $500,000 house, I could lose everything." Well, that's not really true. As long as you're not undercapitalized to begin with, as long as you can afford it, if you can stay in at long term, you're not going to lose because of-- In real estate, worst case scenario if it goes down to $400,000, you'd lose a 100,000. That's a lot of money but if you're in the stock market, the stock market can lose 50% in a matter of a week or two weeks. In theory, you could lose-- If the company goes bankrupt, you could lose everything. Your chance of losing everything in real estate, again as long as you're not undercapitalized-- It's not zero because I guess in the theory it could go to zero but land or real estate it's not going to go to zero [unintelligible 00:21:17]. Kathy: Typically it's worth something. Myron: Absolutely. Kathy: You only lose money if you sell. If you're able to use the property for other things like renting it out, then it doesn't matter because you haven't sold it. Myron: Exactly. Again like I said initially, long-term real estate it is a way for the average person to create long-term wealth. I can give you another real quick story. My son here 15 years ago, we were able to purchase the duplex in Texas and where we get in with nothing down on the whole thing. We financed the whole deal. He put all the money back into it with the intent of [00:22:00] using it to finance his daughter's college education. Well, it was paid off here quite some time ago and as it turned out he didn't need to use it for the college education. Those are the kind of things that people don't really understand or nobody really tells them. If you're a young person, you have kids and you want them to go to college, it's tough to save for that, but you can take them. Buy a piece of property. Yes, it does take a little bit but there's ways to do it. Hang on to that property, put the money back into it that you're making on it, and then 10-15 years now when your children get ready to go to college, you've got the funds available to do that. Those are the kind of things I like to talk to people about and encourage them, and help them to help set them up to be able to do that. Kathy: It can be done tax-deferred, so all the equity gain, there's-- All you have to do is look at the charts and look at history to see that prices are going up. Chances are it will be worth more in 15 years, in which case you just refinance at that time take the cash out and you're not taxed on it. Until you sell-- Of course, the tax situation can always change but that's how it is currently, and has been for a long time. What else do we need to know with your years of experience? What are some of the most important lessons that you learned? Myron: I learned that if you ask an individual what the three most important things about real estate are, they'll say location, location, location. I tell people, "Take that, write it down on a piece of paper, wad it up and throw it away if you're investing in real estate." The reason being that most of the real estate that you invest in is not going to be local. You're going to have to hire a property manager. The three most important things in real estate [00:24:00] if you're an investor is a property manager, property manager, property manager. You can take a good house and a good location and a bad property manager, and you'll lose your shots. You can take a bad house in a bad location with a good property manager, and you'll still make money. That's a lesson that we learned the hard way, but I would just tell folks, "Boy, it's so important to have a good property manager." That's-- Kathy: Well, have you seen a difference because I sure have. In the '70s I wasn't investing then but I don't imagine there weren't computers. It was a very different world, you were probably just investing locally. Then even when I started 20 years ago, it was not very organized but it's come a long way. What have you noticed over the years? Myron: Well, like you say in the '70s it was a totally, totally different ball game. It was really the individual, that was the key. Finding an individual who was a jack-of-all-trades, who was very organized, who communicated well in-- What was I saying? Was a jack of all trades, definitely. That was key, and we didn't have-- At least I wasn't aware of the management companies that had two, three, four, 100 doors. They were smaller mom-and-pop type deals. Now the mom and pop guys, they're not there anymore. It's a 2, 3, 4, 100, 500-door companies. You're right. It's the computer, it's the organization. Communication to me is key. It's just critical to have someone that you can contact or that can contact you. Who does contact you [00:26:00] on a regular basis, maybe that stems from the fact that old school I like the contact, I like to find out what's going on? Computers have made things a lot different. Going in video, the video tours, that's a big change and it's helped a lot. Kathy: absolutely. For our young listeners, for our millennials, and maybe gen X and gen Z, tell me what the world was like in the-- I don't know if you were selling real estate in the 70s but you were buying it. There wasn't internet, there weren't cell phones, no one had a car phone. How did you buy real estate? Myron: if I would get a client, I would have to go out. Actually every Friday the multiple listing service would send out a book and it was a book with all the listings in it printed. Well, it was obviously outdated before we ever got it, but you would go out. If I would have a client looking for a house in a specific area, I would go out two or three days before just searching going through, looking at the different houses in order to be able to show them. It was quite different. You built up your clientele, so if you knew that a house was coming on the market and it was something that you wanted to be able to purchase, you had an end prior to the house coming on the market. That's changed a little bit. Obviously with the computer and MLS and with the millennials now, really they do most of the searching that from a real estate standpoint, [00:28:00] and I still deal in real estate, a client will call me up and say, "Hey, I saw this. It just came on five minutes ago and--" Kathy: "Can you help me?" It's a lot different. What a world? Oh, my gosh. I will say as much as people complain about the technology age, it's a lot easier than back in those days when even just trying to find the property, you had to use a map, you had to go to the grocery store and figure out how to get a physical map and try to find your way to the property. Boy, those were tough times. Realtors really earned their money then, really earned their money back. It was hard. Myron: You take Thomas Brothers Maps to people right now, they probably don't know what it is. Kathy: They don't know what it is. Myron: It was a nickel back then. Kathy: You got your client in the car and you're trying to shuffle through these maps to find the property? Myron: Yes. Kathy: Oh, my goodness. It's really been a pleasure to have you here. I'm curious, how did you find Real Wealth and with all your experience and knowledge? What do you gain from an investment company, an educational company when you already know so much? Myron: Well, this is a weird deal. What we used to do, I learned a long time ago enough to try and reinvent the wheel. What I mean by that is we would take and invest in different areas, but it was through contacts of other people, other realtors, other investors that they had grown to know over the years. They had already gone to a certain area in Oregon for example. We were there only because of a friend that I had that had already been there and then vetted out several property managers. He was doing quite well, so we followed and went there. As far as getting into real-- Well, one more quick story. What we used to do is-- and you're going to laugh at this one, but we would go into a market. For example, after the hurricane down south, we went into Biloxi, Mississippi because of the opportunity. We wanted to find out what was going, had no contacts, went down, and spent a week. We always spend time in Walmart, talking to people and I know that sounds crazy. If you want to find out what's going on in an area, go to the Walmart, and people will talk. They'll tell you what's going on. Kathy: Just walk down the neighborhood and talk to people who are walking their dogs or go to the closest coffee shop, they will talk. Absolutely. Myron: You will learn what the employment situation is. More than that, you'll learn what the attitude of the people is. Different parts of the country, people's mentality, it's just different. The way they look at things, the way they look at personal responsibility, it's different. You'll feel that, you'll learn that real quick. With Real Wealth, we don't do that anymore, because you guys have pretty much gone in and really looked at the areas, you've already bedded the property managers, the realtors that you're involved with. That's pretty much done. It's made it so much easier if you will especially for the person that doesn't really have any experience. You probably don't remember this but back in 2007, I actually wound up calling and talking to you about trying to save individuals' homes, who were upside down during that period. You actually referred me to some folks up in Sacramento, to try to get some funds to purchase loans from banks. [00:32:00] That's how I first found out about you and Real Wealth, and you were extremely, extremely helpful. We weren't able to put anything together to do that but anyway, that's how I got into to hear about Real Wealth. Then we did do some things, at least 2007, 2008, 2009 for a while. Then, we've been utilizing you guys. We've been, I think very, very fortunate to have found you. I love the seminars that you do, the education that Real Wealth provides. It's great having the vendors come in and talking. I love the deal where they come in, and you go to lunch with them, and you can have all your questions answered. I think that's a great thing to do. Hopefully, now that COVID is lifting, you guys would be able to just start doing those again. That's the deal. Kathy: Oh, that's great. Wow. Well, we are really excited to get our next live event scheduled. We hope to do that soon. For any new listeners, who might be surprised the membership is free, and the information and education is free because early on, there was not a lot of information for new people and you had to pay a lot of money for it. You go to these real estate groups, and they'd have some slickster on the stage, get you all excited, run to the back of the room, and pay thousands and thousands of dollars to get the knowledge. That just upset me at the time and we made a commitment to not do that. Not that there's not good education out there that deserves to be paid for but that's just been our commitment to make it free. If you're new to the network, there's nothing to lose. You just [00:34:00] join. You get access to hundreds of webinars. I'm so glad you've been a member for so long and maybe we can get you to be an educator too. Myron: I'd love to help. One of the things you learn too is in this whole thing, and I know you guys I just saw recently you're doing a webinar on the giving back. That's the other thing that that's so important. As we are blessed, we're really-- I would just encourage everyone to make part of giving back part of their life also because it's just so important. That doesn't necessarily mean financially because sometimes when you're first starting out, you think that's pretty tough to do. You can give your time and help others also. I think what you're doing as far as giving back is a huge plus also. Kathy: Thank you so much. Myron: I can also say that every one of the individuals that we've dealt with in the different cities, the representatives that you have there, they've all been extremely helpful. In this business sometimes you get individuals that do apply or maybe they don't mean to apply pressure, but they do. That's another thing that I think of a plus for the whole Real Wealth network. There doesn't appear to be any pressure. Real Wealth is not there, too-- Obviously, you're making money but the important thing is not the money. It's not about the money. That's another way of putting it and I appreciate that. Kathy: Oh, thank you. We've always figured that if we can educate and present-- Well, first and foremost, educate and then [00:36:00] present opportunities, the investors will know if it's a good one or not. If it's a good one, they'll flock to it and if it's not, then that's our bad. We didn't do a good job. There's absolutely no pressure. That's a comfortable situation, too because I've been pressured into so many things, lots of pressure these days. We're adults, we should be able to make up our own decisions, make up our own minds. Well, we are out of time. It has been so great to have you here. I do mean that we should have you as one of our educators on this topic of how to create a family corporation. I just love that. Beautiful. Thank you so much, and have a wonderful rest of your day. Myron: You as well. Thanks. Bye-bye. Kathy: Thank you for joining me here on the Real Wealth Show. If you'd like to find out some of the things that really helped Myron be so successful and his children and grandchildren, go check out realwealthshow.com where you'll get access to hundreds of free webinars. It's free to join free webinars, all on things like asset protection and how to improve your credit and how to get the best insurance for your properties and what to look for in a property management company, what to look for in different markets. Then you also get a referral to teams across the country who help our investors find the properties, get them under good management, and help oversee that process to make it a little less intimidating when you're investing out of state. They wouldn't be on our referral list if they didn't come with rave reviews from our members. If they don't get those rave reviews they're not on the list. Again, you can check that out at realwealthshow.com. I'm Kathy Fettke. We'll see you next time. Bye-bye. Speaker 1: The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy [00:38:00] or sell any securities or to make or consider any investment or course of action. For more information go to realwealthshow.com [00:38:10] [END OF AUDIO]

A Real Wealth Story: Bay Area Couple Buys Six Out-of-State Rentals in Six Months (Audio)

If you put in the time and the effort, you can build wealth through real estate. But there are always surprises along the way, even for experienced investors. In this episode, we hear from a California couple who got started decades ago with rental properties in the San Francisco Bay Area, independently of each other. After they were married fourteen years ago, they continued to invest together, but over the last six months, they’ve almost completely reworked their portfolio. It’s all thanks to a few revelations, and challenges, during the pandemic that inspired them to buy properties in other states. You’ll hear their story, along with some great advice about the 1031 exchange, the benefits of an “escalation clause” when you are competing against other buyers, and what inspired them to invest in real estate in the first place. You can learn more about doing this for yourself by joining RealWealth. You’ll find plenty of free educational material on our website. Our investment counselors can also refer you to experienced property teams who can help you get started in real estate. Go to www.RealWealthShow.com for more information or to listen to past episodes.

A Real Wealth Story: From a Life-Changing Event to a Sailing Adventure with Two Kids (Audio)

Sometimes we are too busy to realize that we are too busy! It’s all too often that we look back and wonder what took us so long to do the things we really want to do. Having a serious health issue isn’t the wake-up call we want to get, but for some people, it’s been the catalyst needed to make a big change. In this episode, you’ll hear from a couple who experienced this kind of life-changing moment. Ryan Dixon had a near-death experience, so he and his wife, Christina, decided their lives had to change. Life is too precious, and you never know how long it will last. They started researching ways to create passive income so they could take a year off to go sailing and travel through Europe with their two boys. In a matter of months, they had a cash flowing real estate portfolio, and an entirely different kind of lifestyle -- and, they share their story in this interview. If you’d like to live life on your own terms with rental property income, become a member of RealWealth for free, and log in to the website. You’ll find a wealth of free educational webinars, articles, podcasts, and market research. You can also schedule a free session with an investment counselor who will answer any questions you might have, and help put you in touch with our property teams. www.RealWealthShow.com

Due Diligence: What You Need to Know and How to Avoid Costly Mistakes (Audio)

In this episode, you'll hear from a member of our RealWealth team. He spent 20-years as a marketing data analyst for Silicon Valley tech companies, and started investing as a side job. Today, he is a full-time investor with 16 years of experience, and helps RealWealth members as one of our investment counselors. Joe Torre is also one of those people who made the most of a challenging 2020. He took some time to write a book called "Real Estate Due Diligence: The Investor's Guide to Avoiding Costly Mistakes" which you can buy on Amazon. He shares some of his due diligence insights in this interview. If you want to talk to Joe or one of our other investment counselors, join RealWealth and sign up for a strategy session. It's free to join, and free to speak with our investment counselors. Additional link: https://coast.noaa.gov/slr/ Disclaimer: The strategies mentioned in the interview may not be appropriate for everyone; other options not mentioned may be more suitable for your specific circumstances. Consult your personal accountant, tax advisor, and/or attorneys to discuss your specific situation. Past performance is no guarantee of future results. Real estate purchases are subject to investment risks, including the possible loss of amounts invested. While every effort is made to maintain accurate and current information, the possibility of errors and/or updates always exists.

A Real Wealth Story: How One Young Couple Reached a 30-Year-Goal in Just 15 Years! (Audio)

She had Mom telling her to buy real estate. He married into the real estate mentality. They both had MBAs, worked at Northern California tech companies, and ended up with two rental properties in the Bay Area. But they couldn’t cash flow. In this episode, you’ll hear how Sophie and Ben turned those properties into a cash flow machine by investing out-of-state, and created real wealth about 15 years earlier than they had planned. You can learn more about doing this for yourself by joining RealWealth. You’ll find plenty of free educational material on our website. Our investment counselors can also refer you to experienced property teams who can help you get started in real estate. Click here to get started, it's free!

Raising the Bar on Single-Family Rentals w/Dallas Tanner of Invitation Homes (Audio)

You may recall that, back in 2012, Warren Buffet said on a CNBC interview that he would buy a few hundred thousand homes if he could figure out how to manage them. Well, some companies did figure out how to do that, and 9 years later, they are transforming what has been an exclusive mom and pop industry for centuries. It’s an honor to have Dallas Tanner on the Real Wealth show today. He is President and CEO of Invitation Homes and is also a member of the company’s board of directors. Mr. Tanner has 20 years of experience establishing real estate platforms and, as a founder of Invitation Homes, he has been at the forefront of creating the single-family rental industry. In this episode, he shares some insight on what it’s like to manage more than 80,000 homes in 16 different markets. He also talks about how landlords of all sizes are coming together with the help of the National Rental Home Council. The Council held a virtual conference last month and is planning an in-person conference for this fall. It will be held September 29th to October 1st in Washington, D.C. Founder David Howard says of the summit: “It will bring together leading executives within the single-family rental home market to discuss, through panel presentations and conversations, the future of the industry. The housing market, and single-family rental housing in particular, has been moving at full speed to accommodate a surge in demand over the past year or so. Our intent with the summit is to address the key issues emerging from this critical period of time, and by doing so, better understand where the industry is heading and how it will get there.” You can get more information about the upcoming conference, when it’s available, at www.rentalhomecouncil.org. For information on how you can contribute to the industry as an individual investor, please login or signup here. It's free to be a member of RealWealth and free to speak with an investment counselor who can answer any questions. www.RealWealthShow.com

Rental Properties: What It’s Like to Land a Real Estate Deal in Today’s Fast-Moving Environment (Audio)

If you've tried to buy real estate recently, you know you have to move quickly. But you may also be wondering how other investors are dealing with this crazy real estate market. In this episode, you'll hear from a RealWealth investor who's now working for us as an investment counselor. She's seen how the market has changed over the last few years, and knows what it's like to buy investment property in today's market. Leah Collich started building her portfolio in 2010 when it was a very different market. Demand was low, supply was high, and prices were cheap. In 2017, she became a RealWealth member and expanded her portfolio into five new markets while living overseas. She now owns over a dozen properties in Texas, Florida, Ohio and Alabama. When we invited her to share her experience on an investor panel, we were so impressed that we offered her a job. And she shares some of her inside knowledge in this interview. If you'd like to talk to Leah or one of our other investment counselors about available investment properties, you can do so for free, as a member. It's also free to join our network by clicking here to join. Links: https://www.RealWealthShow.com https://tinyurl.com/joinrealwealth Audio Transcript: [00:00:00] [music] Speaker 1: You're listening to The Real Wealth Show with Kathy Fettke, the real estate investor's resource. Kathy Fettke: What are experienced investors doing in this crazy wild real estate market? I'm Kathy Fettke and welcome to The Real Wealth Show. Who better to ask than one of RealWealth network's own investment counselors. Leah Collich began investing in real estate in 2010 when it was a very different market. Demand was low, supply was high and prices were cheap. In 2017, she became a RealWealth member and expanded her portfolio into five new markets while living overseas. She owns a dozen properties in Texas, Florida, Ohio, and Alabama. Several years ago, we invited her to be on an investor panel to share with other RealWealth members what she's doing. We were so impressed that we were lucky enough to be able to hire her as an investment counselor helping others today. She knows a lot about what's going on out there and is going to share it with us here on The Real Wealth Show. Leah, welcome back. Leah Collich: Thanks for having me. I was just saying, we either need to do this more often or I need to move less. I'm on the Eve of another relocation here very soon. [chuckles] Kathy: Oh my goodness. That's because your husband is in the military. Leah: Right. They keep us moving. We were in Boston for a quick bit and now we're headed to Texas which is our home state. Kathy: Before that in Columbia. Leah: Right. Bogota, Columbia, before that, California, we've been all over. Kathy: It sounds like maybe a good time to not be in Columbia. Sounds like a tough time there right now. Leah: Yes, it's been hard to watch. Kathy: Thank you for taking this time when you're trying to move. I know you're probably a real pro at it now. Let's just talk about that process. You are a real estate investor. You are an investment counselor at RealWealth and you just tried to buy a house in San Antonio for a primary residence since you're now going to be there. [00:02:00] He's being positioned. What would you call it, transitioned? There's a word for it. Leah: Assigned. Kathy: Assigned, yes. He's being assigned to San Antonio for about three years. What was the process like to try to buy your primary residence in San Antonio today? Leah: I have a lot more practice buying investment properties than primary. I was in a really bad way for a while because I'm so pragmatic about purchases and looking at the numbers and being very logical through things. Unfortunately, the market in San Antonio is like many places in the country, there's no room for that. [chuckles] It was stressful. I think we made offers on six different homes, all above asking all the day they came on the market waving appraisal contingencies. We were one of a dozen offers. What we eventually started looking at to make it more numerical, we started looking at what is the average annual appreciation? Let's look at every quarter in these areas, homes are going up 4%. You start looking at if we wait until the fall or the winter months when things slow down, if they slow down, if there's fewer buyers in the space, we will probably be at 4%, at least maybe 8% higher prices. We might as well come in strong with those offers now. That's what we did and we got one and feel really good about it. It was counter to so many of the rules that we do when we're buying investment property. Kathy: It's different when it's your primary but I am curious how do you know how much more to offer over asking price and what to let go of? No contingencies is really scary too. Leah: I know. I think that is the delicate dance and I think I'm a little bit messed up too because everyone talks about you can bring a California bias into these other [00:04:00] markets and everything looks cheap. You can just throw money that you don't think about. We haven't lived in Texas for over a decade. During that decade, home values have clearly gone up in Texas. We've lived in California, we're living in Boston. We've had some of that influence I think of like how high housing prices can get. I think it was trying to tamper that. It was really just after losing out on a couple of offers that we thought were strong offers to begin with that we just started getting progressively and progressively more aggressive. The irony though is that the house appraised after it. Kathy: That's amazing in itself because that's been an issue too where people do get the winning bid but then they can't get the appraisal. Did you also do no contingency on inspection or did you--? Leah: No. Kathy: No. Oh, good. Leah: We did do an inspection contingency. That was what's crazy because we gave them an offer that I felt like was incredible and nervous about for a sick to my stomach about how much we'd offered on this home. They came back to the offer with a counteroffer wanting us to adjust our terms even so it said to us that our offer wasn't that much better than the other offers. Kathy: Wow. Leah: It was nuts but I'm thrilled to know that we have a landing place on the other end. We'll move right in when we get there. Kathy: Oh, that's great. I'm glad you get to settle in for a bit. Let's talk about what you're hearing at RealWealth. I know you're talking to investors every day about what they're trying to buy. What are you hearing from them? How hard is trying to close on a property for an investor these days? Leah: It's competitive. Deals are moving so fast that it's completely opposite than it was when I joined the network back in 2016. When I joined, every team would maybe have 10 or 12 deals available at a time, [00:06:00] you could think about the deals, you could get on a phone call and talk about it. You had time. [chuckles] Kathy: Time, yes. [chuckles] Leah: Now, we did a property showcase webinar with our Indianapolis team last week and they featured four or five properties. I heard from the team about a half-hour after the webinar, they had 50 email inquiries and 20 requests for contracts. From our members only. Kathy: For what five properties? Leah: Right. Kathy: Oh, wow. Leah: It's intense. What I've been telling everybody is you've got to get yourself positioned where you understand what you're looking for, your financing needs to be like, ready to go. Don't put an offer on a property or even talk about putting an offer on a property before you've talked with the lender to make sure that this is even possible for you. It's really just in the preparation. Then I think also managing expectations, that's been a lot of my conversations is just helping everybody understand that you might need to be a little bit patient. If you have one market that you really want to be in, you can get it. It will happen eventually but you might have to just be the squeaky wheel for a little while to get the deal that meets your criteria. Kathy: What's the case for new builds? Is it the same? Is there a waitlist for those? Leah: Some markets do have waitlists for new builds but I think there's still tremendous opportunity with the new builds because you have the ability to get something under contract today. Anybody that I talked to who wants to get something under contract, we have markets who have contracts ready to ready to sign. They're not to be delivered for another six to sometimes eight months. Kathy: Or longer maybe. Who knows, right? Leah: Or longer, yes. People who want to close on something really quick, [00:08:00] we do have a couple of teams that have partnered with regional level builders and those larger regional builders that are building for owner-occupants, they're tending not to market their inventory for sale until it's already a house, until it's got walls and maybe it's got a roof on and there may be 30 to 90 days from closing. We do have some teams that have that pretty frequently but it's competitive. You just got to be ready to move quickly. I have also noticed, I think a real sense of urgency with the investors that I'm speaking with. This has been quite a year or two years, going on two years now. I think real estate is in every headline news article out there, what's happening. I think there's a lot of people wanting to now get into the space. There's this sense of urgency. Like, "I need to get into this now before the market changes." It's an exciting place to be, that's for sure. Kathy: For all the people who bought properties for the past 18 years that RealWealth network's been around, I hope you all held onto your properties because they're worth gold today. It's amazing. I guess the question is how much longer is this going to last? We do know that, I should say in the past, it was exciting to get in contract on a new build in a rising market because chances were that the property would be worth more by the time you close on it. There's also a chance it could be worth less. That was one of the concerns I had with you when you bought that fourplex several years ago. I thought, "Well, that's kind of expensive for Florida. I wonder if you're paying too much and what if it doesn't appraise?" and our cash flow. That turned out to really work in your favor, right? I think you've just [00:10:00] closed on that in March. Leah: Yes, we contracted that property in August of 2018. It was a long time ago and then we just closed this past March and you're right. It scares me that that made you nervous back then. Maybe you should have warned me or maybe not by how it ended. [laughs] Kathy: Well, it was just an uncertain time. It was the end of 2018, the real estate was slowing down a little bit because rates were going up. Typically, in the past, the federal reserve raises rates when they want to slow down a booming economy and typically they've done that too fast. I don't know if you remember but during the Trump administration, there was a big argument between the fed and President Trump and he was like, "No, no, stop raising and lower rates," and they did. That stopped what would have been a slowdown in real estate and then the opposite happened, it happened even further with lower rates that has further fueled real estate. It really is rate-dependent. Leah: Oh, yes. I went back and reviewed our very first fee sheet on that deal just so I could refresh what lens I was looking through at that time and our lender had projected a rate of 5.625. The deal made sense fundamentally and I think that's why-- We are fundamental investors. I'm not chasing appreciation. I like it just as much as everybody else but for a deal to work, I want to see sustainability and I plan to hold it for a very long time. What the property values were doing, that wasn't the trigger to go for a deal like this. Then of course having no knowledge of what would happen over the next two years-- When we contracted that property, we knew that it was going to be a longer delivery [00:12:00] time, just the nature of that project. It's a quad development so it's got I think 30 something other quads all next to it. Someone who's driving by might think it was an apartment complex. [unintelligible 00:12:11] quad is owned by a separate investor. We knew it was going to be a long time horizon and we talked a lot about everything that could happen in that period of time. Never once did we think pandemic- Kathy: Right. Leah: -but we did play through some scenarios. There was mutual risk taken on behalf of the builder. The builder doesn't know what the market's going to do and I think- Kathy: That's right. Leah: -today is a perfect example of that. Construction costs going sky high and they've got contracts on 36 quads at one price. They could leave a lot of money on the table or they could be losing money in developments like this. Kathy: That's right. Leah: Fortunately, in the end, everything worked out in our favor. Rents were higher than they were, interest rates were lower than they were by over two percentage points. Kathy: That ended up being an incredible deal. What was their purchase price? Leah: It was mid-five, about 530. Kathy: That was the only reason I was like, well that's a big purchase. Leah: It was. Kathy: It's a four-plex. It's great but it's not our typical $100,000 or $150,000 house. That's all. I didn't think it was particularly risky, it just was bigger than some of the other things that we've done. I'm just really glad it worked in your favor. Now, what we're seeing is builders struggling to get and get appliances, to get lumber, to get roofing even. I think on our Reno project, our builder couldn't even get the tiles. They wanted the tiles for the roofs. This is unprecedented. A lot of builders are having to reprice and investors are having to pay more [00:14:00] because many of the contracts that were written allow for that, a clawback if prices are unusually-- I should say the cost of materials is really- if there's a big variance from what was originally expected. Builders do have the right to raise prices because they can't finish the project if they can't afford to complete it. Investors are finding out that they're paying more for the finished products than they thought. What are you seeing? Are people okay with it? [chuckles] I know it's a surprise. Leah: I think it's come as a surprise to many. Though I don't feel like anybody wasn't aware of what construction was experiencing right now. Everybody is hearing about the surge in the cost of lumber and other materials. I think people understand it and that's what I love about the investors that we work with. I feel like we work with very pragmatic people who understand that we're not pitching some get-rich-quick scheme. This is about a free market, that's what makes this work. Our builders are subject to the free market just like we are as investors. I think most people seem to be very understanding of the fact that I can't ask a builder to take a loss on a property. This is the irony is that while some of our builders were having trouble making money on these deals as these costs have gone up, they were closing these properties and the investors were getting appraisals back with $40,000 of instant equity. I don't want to say that's not fair but it really is problematic. Builders will go out of business doing that and we as investors, we need the inventory. Kathy: We need builders to be building, that's right. Leah: I think most people have been really able to look at the bigger picture. The good news is that rents have also gone up, a lot of them still are closing with some equity, and most of the builders who did have to come back and adjust pricing, they were willing to split the difference with the investor. They know, [00:16:00] "Hey, on the retail market, I could sell this for way more. I'll split the difference with you so that this is fair, so there's still some potentially some meat on the bone for you." By and large, no one likes to hear that they're going to have to cough up a little bit more money but I think the fundamentals are still there and it still makes sense. Kathy: Rents are going up as well, right? The cash flows aren't necessarily much worse or worse at all. Leah: I have noticed the cash flows are a little thinner just in looking enterprise-level all the performance. The cash flow is a little bit thinner now, certainly than it was two years ago but that's always the case especially in these growth markets. What makes it a growth market is why there's a lot of new construction there. There's a housing shortage. Kathy: It takes a long time to get the properties up and running and when you've got an area growing so quickly and not enough supply and builders struggling to even get the materials that they need, you're going to see prices go up, and then, of course, cash flows tend to go down. We're seeing more and more people flocking to real estate because of the fear that that's going to continue. If you listen to my last interview, Logan was pretty sure it's going to continue for a while. This is not over yet. Leah: Yes, he said like a 4 million house deficit that our nation has. My situation being a perfect example, it took two and a half years to build that quadplex. The supply isn't created overnight and I was thinking about-- I love macroeconomics and that's why I love real estate but I was thinking about just the construction cost. If we didn't have this surging demand that we do, think about how many builders-- That is ultimately what's creating this hike in the prices, but there's also some supply chain issues. [00:18:00] Under different circumstances, there would be nobody building to help offset this challenge that we have. We just don't have enough housing in this country. Kathy: Even though we didn't have as many births, I thought there'd be a baby boom this past year. It turns out I think people were maybe afraid to have babies with so much uncertainty. There was less than expected but our population is still growing. Again, it's not as easy as people think to get new supply online. It can take-- For example, in Little Lane, in Carson City Nevada, we bought land a couple of years ago, and then COVID hit. Our team literally couldn't even get an appointment with the city planners because the offices were shut down. That delayed that project by about nine months and it's an area that's in desperate need of housing. On the one hand, the area really needs it but the builders can't build it. They literally could not even get the appointment, get the approvals to go. Leah: We've seen that in Florida too. The city offices are backlogged with permitting, they're all working from home so they're slower to respond. I have another new build under contract in southwest Florida and it was getting delayed, delayed, delayed, and we were going, what is the reason? Help us just understand where it's at and the builder came back to us and said that the subcontractors that they used to clear the lots were so backlogged for just clearing that they were on a three-month waitlist to have guys to come and knock down trees so that they could even start [chuckles] to build. At every turn, it seems like. Kathy: That's right. All right. What advice are you giving to investors and what are you seeing? Are you seeing mostly first-time real estate investors that call or is it repeat buyers? Leah: I'm glad you mentioned that because I was just thinking about that in my last response. [00:20:00] I have noticed a lot of 1031 buyers because it's such a great time to sell property. [chuckles] Clearly, hearing my story about selling or buying a primary, you have buyers who are lining up to waive contingencies and give you cash. It's a great time to sell and so the number of 1031 exchange buyers exchanging out of California, getting top dollar, and offers same day, I have noticed that increase significantly. Those are hard investors to help too because they don't just need one property. They're not just trying to get into the game, they're selling a $1.5 million home and in LA and they need a portfolio of homes. They need four or five homes or six homes. That is definitely exciting and I shared a success story with some of our colleagues last week that we had a 1031 exchange buyer this exact scenario. She sold a $1.4 million home in Southern California. Through our network and through our providers, she bought eight homes in Florida and even new construction in Charlotte, rehabs in Florida. She took her cash flow. That $1.4 million home in LA, cash flow for her about $800 a month, she had some small loans on it. Now, this portfolio of eight homes cash flows $6400 a month for her. Kathy: Wow. Leah: She really got to experience the power of want a great seller's market in California but then this repositioning in these more stable markets still high growth arguably but where there's fundamentals and where there's really great cash flow. Kathy: That's incredible. I'm so proud of you and our teams for being able to complete that exchange because it's not that easy to find the replacement property. I'd be kind of scared to sell something today and hope I can find something [00:22:00] in 45 days but you're seeing that our teams are able to get it done still? Leah: Yes. No, they are. I think her success is due in part-- I mean a lot to her grit. She was just very persistent in her approach but we also started having this conversation about her exchange well in advance of her putting the property in California on the market. It was a scary time to be prolonging a sale. We were in an election year, there was a lot of uncertainty at the end of 2020, and kind of preparing for this. She was wondering, "Am I making a mistake by waiting to list this property until I have this 1031 plan at least lightly ironed out?" but I think that is what is contributing to a lot of people's success is just knowing that the market is raging to sell. Let's work over here on the after scenario, on the replacement properties, and try to get that plan and at least those relationships with the teams really well established so that it's feasible. It is. We've seen lots of people be able to successfully do it. Kathy: Yes, we've got-- I don't know if it would appeal to a lot of people but we do have lots in our Park City project. I think we've got five of them that can be sold to 1031 buyers but they don't cash flow. I think they're going to see some pretty incredible appreciation because you could barely get anything permitted in Park City. Have you come across anybody who just needs an exchange to get something soon, we do have lots available. I believe what people can do is they can 1031 into the lot, finish the exchange, and then get a construction loan on that lot and build and create a rental which is another thing that we didn't really see coming. A lot of people who own homes and in vacation areas, they maybe have a second home or investment property [00:24:00] in a vacation area. They moved there during 2020 because all of a sudden they could. They could leave the big cities and go live in Park City. They found out that it wasn't just a great place to ski, there's also beautiful summers and beautiful springs and there's fishing and there's biking and hiking and stuff in the summer. Many of those rentals are now owner-occupied in these vacation areas. The demand for rentals is enormous. It is an opportunity for somebody who doesn't necessarily need the cash flow right now, they've got an exchange, they need to buy something right now, we do have those lots available. Leah: Yes, every time you mention that Park City's project, Kathy, my phone rings with people interested to know about it. I do appreciate that and that has been another I think key to being really successful and honestly, a great plug for the network and just being connected to where the flow of these opportunities is passing through. We've had several situations where we learn about a particular opportunity that could work last minute. Two weeks ago, I had a- in an internal meeting, I learned about a brand new construction duplex that was going to work with an exchange timeline. I immediately went, "I know the perfect buyer." Got on the phone, called them and he contracted it the same day. It's being connected to kind of where these opportunities pass through is I think extremely-- It's the way that it works now. [chuckles] Kathy: That's great, Leah, that you're able to connect the dots there. That's- Leah: It's fun. Kathy: -awesome. I had said to Nick, I don't know if he told you this but I said we need to- for people who are in that situation, we need to get a text system going. [chuckles] It's like if you know you're in the middle of an exchange and we know there's some property available, we can text you right away. Again, it sells so fast, I think so quickly. All right. Well, is there any last advice that you would give to our [00:26:00] listeners? Leah: Yes. My biggest advice for people is always like you can analyze this thing to death. The idea of real estate and what market and what property, you can analyze it to death and many people do. I myself I'm guilty of it, but I think the sense of urgency, you should not hastily buy things but really realize like what these fundamentals are and why they work. Then look at the demographic shift, look at what's happening in the market and see that there's opportunity and the opportunities now. I think the tendency for a lot of people is to kind of wonder, are we about to come up to a cliff and it's going to drop off and property values are just going to plummet and everything about the timing is wrong? As you know and as so many of your guests have said on the show, that's not what we think is happening. It's a good time to be doing this. I think the action part of your process, the emphasis should definitely be there. Kathy: That's great. Love that. How close are you to your goals and what are your goals? What's your endgame? [chuckles] Leah: You and Rich would be mad at me for saying this, but I feel like our goalposts are moving a little bit just because you enjoy this. [laughs] Kathy: That the way it goes, they're always moving. Leah: We got into it with this idea of financial freedom. Okay, let's focus first on my income and get the cash flow to a place where it can replace your income. Then we'll start working on my husband's income so that it aligns with his military retirement but now we're just having so much fun. This was clearly before I came to join the RealWealth team too. Our goal right now, I think in the short term is to max out those Fannie-Freddie loans. We're getting close [00:28:00] to that. I've kind of been in the penalty box if you will with getting loans because I did have a career shift and changing industries. I've had two years of timeout. [chuckles] Kathy: Right. Leah: Meanwhile, we've been focusing on my husband's loan slots and getting those maxed out. He's almost there. Then I'm in the go spot again so now, it's just max out my 10. Our goal is to have tapped Fannie Freddie for all it's worth by the end of our time in Texas. Three years, that's the short-term goal. [chuckles] Kathy: I love it. I love that it's clear. Wonderful. Well, I have no doubt you'll get there. Leah: Yes. [chuckles] Kathy: All right, Leah, thank you so much for coming back on The Real Wealth Show. Thank you for all you do for our many many members at RealWealth and all that great investment counseling that you give them. [chuckles] Leah: You bet, we'll talk soon. Kathy: Thank you for joining me here on The Real Wealth Show. If you'd like to find out about the markets today where you can still get cash flow, where you can still find properties, where there's a great potential for appreciation, just go to realwealthshow.com and click on the invest tab. You'll see a whole dropdown of I think 15 different cities and all the data on those cities along with teams in those areas that can help you find that property. Again, that's realwealthshow.com. [music] Speaker 1: The views and opinions expressed in this podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com. [00:29:48] [END OF AUDIO]