Podcast Summary
Learning real estate investing through the Bigger Pockets Podcast: Regardless of deal size, real estate investing is accessible. Utilize video content for property insights, and join the BiggerPockets community for support and growth.
Real estate investing, including apartments, can be accessible to everyone, regardless of the size of the deal. The hosts of the Bigger Pockets Podcast, Josh Dorkin and Brandon Turner, emphasized that the bigger the deal, the easier it can be to execute. They also shared their excitement about the growth of the BiggerPockets community, welcoming new members every day. A key tip they provided was the importance of utilizing video content in real estate investing. They shared that they have been producing high-quality walk-through videos of properties on their Facebook wall and YouTube channel. By following them on these platforms, investors can watch the videos live and ask questions, or view them later at their convenience. In summary, the Bigger Pockets Podcast offers valuable insights for real estate investors of all levels, with a focus on making the process simpler and more accessible. The hosts encourage new investors to learn and grow, while emphasizing the benefits of video content in the real estate investing journey.
Investing in Real Estate Despite Market Challenges: Investors can earn passive income through platforms like Fundrise and Connect Invest, even during high interest rates and a liquidity crisis. Fundrise offers high interest rates by financing top real estate investors, while Connect Invest allows participation with $500 and a fixed monthly income.
Despite high interest rates and a liquidity crisis in the real estate market, there are opportunities for investors to earn passive income through platforms like Fundrise and Connect Invest. Fundrise's new private credit strategy offers investors the chance to earn high interest rates by providing financing to top real estate investors, while Connect Invest allows investors to participate in real estate investing with as little as $500 and earn a fixed monthly income. Whether you're a new investor or a seasoned veteran, these platforms provide alternative ways to invest in real estate without the hassle of owning or managing properties. Jesse Frigali, a real estate investor and commercial real estate agent, shared his experience and wisdom on the show, emphasizing the importance of persistence and seizing opportunities in the real estate market.
Young exposure to successful individuals and their stories can inspire financial growth: Seeking knowledge and opportunities at a young age, even without full understanding, can lead to significant financial growth through real estate investments
Being exposed to successful individuals and their stories at a young age can have a profound impact on one's financial future. The speaker was inspired by a college investor named Mikey, who owned a Viper and had around 30 rental units. Though he didn't understand real estate investing at the time, the speaker was intrigued and began reading related books. His first investment came when he was in university, as he and his friend were house hacking a student rental property. Despite facing challenges in securing a loan due to his age and student status, the speaker was able to purchase the property with his mother's help and became a landlord. The experience sparked his interest in real estate and led him to make further investments. The speaker's story highlights the importance of seeking knowledge and opportunities, even at a young age, and the potential impact they can have on one's financial growth.
From student rentals to apartment buildings: The investor shared his journey from managing student rentals to purchasing larger apartment buildings in Canada for reduced property management costs and higher returns through cash flow, appreciation, tax advantages, and principal paydown.
The speaker, a real estate investor, went from managing student rentals to purchasing larger apartment buildings in Canada. He shared his journey from owning his first rental property in 2008 during the recession to accumulating 35 student rental units and later transitioning into student condos with property management guarantees. He then shared his motivation for moving towards apartment buildings, citing the desire for reduced property management costs and the potential for higher returns through cash flow, appreciation, tax advantages, and principal paydown. The speaker also mentioned his excitement about recently purchasing an 11-unit apartment building and his plans to continue growing his real estate portfolio. Additionally, he touched on the envy Canadians have for the 1031 exchange in the US, which allows for the deferral of taxes on the sale of real estate and the purchase of a new property.
Partnership with the IRS in Real Estate Investing: Real estate investing offers cash flow, appreciation, tax advantages, and principal paydown. Even deals with minimal cash flow or initial losses provide long-term benefits through tax savings and principal paydown. Discipline and managing larger properties can be challenging, but necessary for long-term growth.
Real estate investing offers significant tax advantages, making it a partnership with the IRS. These benefits, including cash flow, appreciation, tax advantages, and principal paydown, make real estate an attractive wealth-generating opportunity. Even deals with minimal cash flow or initial losses can provide long-term benefits through tax savings and principal paydown. The discipline of real estate investing also encourages savings and financial growth, as the illiquid nature of property investments forces investors to pay down their principal and eventually increase their income through rent increases. Managing larger properties, such as student rentals, can be challenging, especially for students or those juggling multiple responsibilities. A tipping point for managing multiple properties is typically around 3-5 units per property, and hiring a manager may become necessary for larger portfolios. Overall, real estate investing offers unique benefits, both financially and psychologically, making it a valuable long-term wealth-building strategy.
Unexpected expenses in rental property ownership: Communicate with insurance agents, consider property management fees, and estimate capital expenditures carefully to mitigate unexpected expenses in rental property ownership.
Owning rental properties, especially for students, comes with unexpected challenges and expenses. The speaker shared a personal experience of purchasing a property with water damage, leading to significant mold remediation costs. This experience taught him the importance of having a safety net, insurance coverage, and considering property management fees. He emphasized the value of communication with insurance agents to understand coverage and potential costs. The speaker also highlighted the importance of estimating capital expenditures carefully, as unexpected events can significantly impact profitability. Overall, owning rental properties requires careful planning, communication, and the ability to adapt to unexpected challenges.
Beyond mortgage, taxes, and insurance: other costs to consider in real estate investments: When evaluating potential real estate investments, don't forget about property management fees, capital expenditures, and vacancy rates, which can significantly impact cash flow and profitability.
When evaluating potential real estate investments, it's crucial to consider expenses beyond the mortgage, taxes, and insurance. Property management fees, capital expenditures for repairs and maintenance, and vacancy rates can significantly impact cash flow and profitability. Ignoring these costs can lead to financial losses. Moreover, when assessing financials from potential deals, ensure you're receiving accurate information on these expenses. Lastly, student rentals, especially in university towns, can be an excellent starting point for new investors due to the guaranteed payments by parents and the ability to maintain market value rents when tenants vacate. However, this may not be the best option in all markets.
Jesse's movie preferences and Mike's time management tips: Jesse shares his love for 'Terminator 2' and 'Toy Story', while Mike emphasizes the importance of time management in school and life.
The "Random 5" segment of the show offers a more personal connection with guests, allowing them to share their preferences, skills, and experiences beyond real estate. During this segment, Jesse revealed his love for the movies "Terminator 2" and "Toy Story," highlighting their high ratings. Mike emphasized the importance of time management in school and life. When asked about the Super Bowl, Jesse admitted watching it for the game despite his friends' expectations for the commercials. The segment also touched on the worst pickup lines and past experiences. Moving on to real estate, Jesse shared his decision to invest in larger apartments after being inspired by podcasts and friends in the industry. Despite initial apprehension, he found that commercial rules for larger buildings focus more on the building itself than the individual buyer's income.
Mindset and Essential Concepts in Real Estate Investing: A positive mindset and understanding essential concepts like the 50% rule and syndication can lead to successful real estate investments.
Mindset plays a significant role in real estate investing. Limiting beliefs can hinder the process, but with a shift in thinking, deals can be made. The 50% rule, which is dividing net operating income by the prevailing cap rate to estimate building value, is an essential concept in commercial real estate. It's important to note that the value of a property can significantly increase with even small adjustments to income or expenses. Syndication, a model where investors pool their money together, can also be an effective strategy for larger real estate investments. While the process may involve complex calculations, understanding these concepts can lead to successful real estate investments.
Determining a property's cap rate involves analyzing local market and using income and comparable sales approaches.: To find the right cap rate for a real estate investment, research local market, analyze potential deals using income and comparable sales approaches, and seek advice from experts.
Finding the cap rate for a real estate investment property depends on comparing similar properties in the area and understanding the local market. This involves analyzing the financials of potential deals, using both the income approach and the comparable sales approach. However, the specific cap rate required may vary depending on the type of loan being sought, as government-insured loans often come with predetermined cap rates. As investors, it's essential to do thorough research and seek advice from local experts to determine the normal cap rate range in their area. For instance, in the case of the discussed property in Hamilton, it was an off-market deal that required building a team and using specialized software to uncover the opportunity.
Profitable real estate investments outside local market: Identify value-add properties in areas with potential rent increases and good property management for long-term gains.
Investing in real estate outside of one's local market can be profitable if the right opportunities are identified. In Toronto, prices were too high for feasible investment, but in Hamilton, the speaker was able to purchase a property below market value with potential for rent increases. The strategy was to buy properties with value-add components, such as below-market rents and the ability to add additional units. The speaker emphasized the importance of a good property manager when not on-site. Rent increases were projected to be significant in downtown Toronto and more modest in the Hamilton area. The plan was to upgrade the units and refinance in five years. The speaker shared a personal anecdote about the importance of holding onto properties for the long term due to the specific market conditions. Overall, the discussion highlighted the potential for profitable real estate investments outside of one's local market with careful research and planning.
10/31 exchanges for tax savings and property growth: Investors can save taxes and expand rental empires through 10/31 exchanges. Digital platforms like Relay streamline financial management, and strong business plans with credible partners secure financing.
Successful real estate investors utilize strategies like 10/31 exchanges to minimize taxes and grow their rental property empires. One such company, First American Exchange, specializes in facilitating these exchanges for both seasoned and new investors. Meanwhile, in managing finances for these properties, investors can save time and hassle by using digital platforms like Relay, which allows for online business bank account creation and collaboration with team members. John and the speaker share a story of how they came together as business partners, leveraging each other's strengths and experiences to secure financing for their real estate ventures. By presenting a solid business plan and demonstrating credibility to lenders, they were able to secure funding despite having varying financial backgrounds.
Finding a complementary partnership in real estate investing: Partnerships can help overcome individual weaknesses and lead to successful real estate ventures. Be open to the idea and willing to work through challenges.
Successful real estate investing often involves finding a complementary partnership where each person brings different strengths to the table. For instance, one person might have the passion and drive, while the other has the financial resources. This partnership can help overcome individual weaknesses and lead to a more successful venture. However, partnerships are not without their challenges, and it's essential to be open to the idea and willing to work together through the ups and downs. One of the scariest experiences for the speakers was encountering a potentially dangerous situation during their first deal. They arrived at the property to find what appeared to be a drug deal taking place and were later shown an apartment where someone had recently passed away. Although it's a reality that people do die and apartments may be vacant, the combination of these circumstances made them question whether they should proceed with the investment. When reflecting on their investing career, the speakers mentioned that being more open to partnerships earlier on could have been beneficial. While partnerships are not a silver bullet, they might be the best solution for certain individuals, and being open to the idea could lead to more successful ventures.
Budgeting for repairs and maintenance: Underestimating repair and maintenance costs can lead to financial strain. Have a contingency fund to cover unexpected expenses.
Successful real estate investing involves careful financial planning, particularly when it comes to budgeting for repairs and maintenance. Jesse shared his experience of underestimating these costs and the importance of having a contingency fund. Additionally, the current hot market presents challenges in making sound investment decisions. Regarding tenant screening, while checking social media profiles can provide valuable information, requiring access to private accounts may raise legal and privacy concerns. Overall, it's essential to stay informed, be prepared, and follow ethical practices in real estate investing.
Choosing the Right Property Manager is Key to Successful Real Estate Investment: Find a local manager with area expertise, set clear expectations, consider location demographics, and choose a transparent broker for successful real estate investments.
Finding a good property management company is crucial for successful real estate investment. The speaker emphasizes the importance of having a local manager with a deep understanding of the area and its tenants. Setting clear expectations, especially regarding payments and communication, is also essential. Additionally, the speaker advises considering the reasons for a declining population before investing in a location. Lastly, when choosing a real estate broker, a track record and transparency are important factors. Building a good relationship based on trust and comfort can lead to successful transactions.
Overcoming limiting beliefs in real estate investing: Invest in education and practice negotiation skills to secure better deals, and focus on industry-specific resources for success in real estate investing.
Successful real estate investors share a common trait of continuous self-improvement and a growth mindset. According to Jesse Fragale, limiting beliefs are a major obstacle for those who fail or never get started in real estate investing. He suggests that people should look for resources like books and podcasts that inspire and educate them, and practice negotiating skills to secure better deals. Jesse also emphasizes the importance of finding specific real estate and business books that apply to your market and industry. For hobbies, Jesse enjoys working on cars and playing guitar, but acknowledges that real estate investing takes up most of his time. To connect with Jesse, you can email him at jessefragale@gmail.com or visit his brokerage site at avisonyoung.com. Overall, Jesse's story highlights the importance of persistence, learning, and a positive mindset in achieving success in real estate investing.
The Importance of Financial Planning and Support Systems in Real Estate Investing: Unexpected expenses can lead to financial losses in real estate investing. Accurately calculating and budgeting for capital expenditures is crucial. Partnerships can help share financial burdens during tough times. Consider investing in mobile home parks as a lesser-known real estate strategy.
Unexpected expenses can significantly impact real estate investments, and it's crucial to have a cash reserve to handle these unplanned events. During the podcast discussion, Jesse shared his experience of underestimating capital expenditures, leading to financial losses. This highlights the importance of accurately calculating and budgeting for capital expenditures. The conversation also emphasized the value of partnerships in real estate investing, as they can help share the financial burden during tough times. Additionally, the hosts discussed the benefits of investing in mobile home parks, a lesser-known real estate investment strategy. Overall, the podcast episode underscored the importance of financial planning, budgeting, and having a solid support system in real estate investing.
Find an investor-friendly agent for long-term success: Navigating real estate market requires focus on being present for an extended period, find an investor-friendly agent for expert analysis, neighborhood navigation, and confident action with BiggerPockets Agent Finder, free at biggerpockets.com/deals.
Navigating the ever-changing real estate market can be challenging, but the key to success is not trying to time the market perfectly, but rather focusing on being in the market for an extended period. Financial freedom is the ultimate goal for investors, and finding an investor-friendly agent is a crucial step towards achieving it. With BiggerPockets Agent Finder, you can quickly match with a local market expert who can help you analyze potential deals, navigate neighborhoods, and take confident action. This free resource is available at biggerpockets.com/deals. Remember, past performance is not indicative of future results, and all opinions expressed are those of the speakers. Always consult with qualified advisors before investing, and only risk capital you can afford to lose.
