Podcast Summary
Combining Real Estate Investing and Property Management: Investors can expand their income by starting a property management company, find deals earlier, and convey a clear exit strategy, solid team, and proven track record to raise private money.
Real estate investing and building a property management business can go hand in hand. By starting a property management company, investors can not only find deals before others but also increase their income through transaction fees and management contracts. Additionally, when looking to raise private money, it's essential to convey to investors the three things they're looking for: a clear exit strategy, a solid team, and a proven track record of success. Overall, today's podcast episode showcases an investor who has successfully combined these two aspects of real estate investing and offers valuable insights for those looking to do the same.
Maximizing returns on equity investments: Calculate ROE, consider refinancing, selling, or new opportunities. Use tech for lead gen and leverage partnerships for stability and profits.
Maximizing your returns on investments, including equity, is crucial for building wealth. Neil Collins, a successful real estate investor, emphasizes the importance of calculating the return on equity in your portfolio. If the return isn't satisfactory, consider refinancing, selling, or putting the money into more profitable opportunities. Additionally, advancements in technology, such as DealMachine, can streamline lead generation and contact information access for real estate investors. Lastly, partnerships with reputable companies, like BAM Capital, can provide stability and maximized returns during changing market conditions.
Starting in Real Estate: Persistence and Creativity: Despite initial challenges, staying persistent and open to unconventional solutions can lead to successful real estate investments.
Starting in real estate can be challenging, but persistence and creativity can lead to success. The speaker shares how he started by sending out direct mail letters, only to encounter unmotivated sellers and expensive properties. However, he didn't give up and instead discovered a unique seller financing deal that led to his first profitable investment. The podcast he listened to during his road trip, BiggerPockets, inspired him to pursue real estate and the idea of passive income. This story highlights the importance of taking action, even when faced with obstacles, and being open to unconventional solutions.
Learning from unsuccessful deals: Unsuccessful deals can lead to new strategies and significant financial gains in real estate investing.
Persisting through unsuccessful deals can lead to valuable learning experiences and opportunities for growth in real estate investing. The speaker shares an example of a deal where they bought a rundown property for a low price, but faced challenges in selling it for a profit due to the seller's unwillingness to receive a lump sum of cash. Instead, they learned about a strategy called "recollateralizing," which allowed them to transfer the trust deed from the first property to a second property, keeping the low 2% interest loan. This strategy enabled them to house hack a 4plex, live for free, and generate a monthly profit of $8,000 to $10,000. This experience not only provided a substantial financial gain but also ignited their passion for real estate investing.
Staying informed and adaptable to changing regulations: Successful real estate investors must be aware of and adapt to changing regulations to continue growing their business. Creative solutions, like converting properties in commercial zones to long-term rentals, can help investors comply while still generating profits.
Adapting to changing regulations in the real estate market is crucial for long-term success. The speaker shares his experience of investing in multifamily properties with a focus on Airbnb rentals, but faced challenges when Portland cracked down on short-term rentals. Instead of giving up, they pivoted their strategy and looked for opportunities in commercial zones, converting properties into long-term rentals while also exploring value-add opportunities. They discovered a loophole by targeting properties in commercial zones that were being used for residential purposes, requiring minimal upgrades to meet commercial use regulations. This creative solution allowed them to continue growing their business while complying with local regulations. The importance of staying informed and adaptable to changing regulations is a valuable lesson for any real estate investor.
Weighing the pros and cons of short-term vs long-term rentals: Short-term rentals offer high cash flow but require constant attention, while long-term rentals provide passive income and stability.
While short-term rentals through platforms like Airbnb can provide significant cash flow, they also come with a high level of operational work and constant attention. This can be a viable solution for those looking for interim income or those who enjoy managing their own properties, but for those seeking passive income and long-term travel, traditional rental models may be a better fit. Developers and investors must weigh the potential profits against the work involved and decide where on the spectrum of profit versus work they want to operate. Personal experiences of managing Airbnb properties have shown that the constant calls, emergencies, and maintenance can be overwhelming and unsustainable for some. Ultimately, it's essential to consider one's lifestyle goals and business priorities when making the decision between short-term and long-term rental models.
The Challenges of Managing Short-Term Rentals: Managing short-term rentals requires constant attention, hiring help may not be easy, and shifting focus to long-term assets with professional management can lead to scaling and less personal involvement.
Managing a property, especially a short-term rental or an Airbnb, can be time-consuming and demanding, requiring constant attention and availability. The speaker shared an experience of being unable to access his own Airbnb due to a simple mistake, leading him to question the passive nature of such investments. He also discussed the challenges of hiring and managing an assistant to run the business, as well as the potential for expanding into property management for others. The speaker's ultimate decision was to shift focus towards small multifamily properties, where he could hold onto the assets long-term and hire professionals for management. This approach allowed him to scale his portfolio while minimizing his personal involvement and the associated workload.
Exploring income streams in property management: Starting a property management company can lead to various income streams such as brokerage, lending, and capital calls, providing diversification and hedging against economic downturns.
Starting a property management company can lead to various income streams and opportunities within the real estate industry. The speaker started with managing properties in a specific area to avoid extensive travel and build credibility. As they grew, they began to attract investors and solicitations for management and partnerships. This led to the creation of a brokerage firm, where they could facilitate transactions between buyers and sellers, generating additional income. The ongoing relationships with tenants and property owners also provided opportunities for lending and capital calls. By focusing on property management and building systems, the business became less passive but offered a hedge against economic downturns. The current real estate market presents a good time to expand into brokerage. Overall, the ancillary income streams not only diversified the business but also justified the employment of additional staff.
Creating multiple income streams in real estate: Successful investors leverage skills and resources to create income streams beyond cash flow, building relationships and being proactive to secure deals before they hit the market.
Successful real estate investors don't just focus on cash flow but also leverage their skills and resources to create multiple income streams. Neil, a real estate investor, shared his experience of buying, managing, and eventually selling properties to start a property management company and then a brokerage. By building relationships and being proactive, he's able to secure deals before they hit the market, creating more opportunities for profit. The synergy of his various ventures not only generates income but also saves him money. This approach highlights the importance of learning to invest in real estate beyond just cash flow and finding creative ways to amplify returns.
Finding hidden gems through direct mail: Negotiating off-market deals requires understanding the market and investing in property improvements for potential high returns.
Finding off-market real estate deals can lead to great investments, as demonstrated by a 4-plex purchase in 2016. The property, which required some TLC, was found through direct mail to a long-term landlord who was looking to sell. The seller, who fancied himself as a great landlord, was initially asking for a high price, but negotiations with both the seller and his agent led to a purchase price of $450,000. After investing approximately $55,000 in repairs and improvements, the property was appraised for $775,000 and is now being sold close to that price. The key to successful negotiations was having a representative of the property owners who understood the market and the process. The takeaway is that off-market deals can lead to significant returns, but require careful negotiations and investments in the property.
Maximizing Time and Resources in Real Estate Investing: Start with personal involvement, but delegate tasks or build systems to increase efficiency. Use various funding sources and strategically plan for exits to build equity for larger investments.
Starting a real estate investment business involves balancing personal involvement with efficiency and leveraging resources. At the beginning, handwritten marketing efforts may be effective, but as the workload increases, it becomes necessary to delegate tasks or build systems to maximize time and resources. Funding for investments can come from various sources, such as conventional loans or private lenders. In this specific case, a conventional loan was used to purchase a property, and repairs were funded through a private lender. Once the property was stabilized, it was refinanced, allowing for the exit of the initial lenders and the retention of a significant amount of equity. The investors then used this equity to invest in a larger and more valuable property, demonstrating the importance of experience and strategic planning in real estate investing. While cash flow is important, it's not the only factor to consider when making investment decisions. The ultimate goal is to create and build upon equity through strategic investments and management.
Evaluating ROE for better real estate investments: Analyze ROE to optimize real estate investments, sell underperforming properties, and reinvest in new opportunities with better returns. Marketing and finding the right properties and owners are also crucial.
Maximizing returns on investment (ROI) and returns on equity (ROE) are crucial for real estate investors. The speaker emphasized the importance of evaluating ROE, especially when properties have significantly appreciated in value. He shared an example of a property making $48,100 in annual cash flow but only returning 1.7% on the $275,000 equity. The investor suggested selling the property and reinvesting the equity in a new property with better returns. The speaker also highlighted the importance of marketing and finding the right properties and owners. He mentioned that knowing the type of property and owner you want to target and securing financing are essential. Overall, the speaker emphasized the importance of analyzing returns and making informed decisions to optimize investments.
Expanding Services and Building Relationships for Success: Successful investors focus on leveraging strengths, forming partnerships, and looking off-market for profitable deals to maximize potential for success.
Successful real estate investors focus on leveraging their strengths and building relationships to grow their business. This can involve expanding service offerings, such as incorporating a brokerage, and forming partnerships to invest in larger deals or provide management services. Additionally, as investors progress in their real estate journey, they often shift from seeking funding to looking for opportunities to invest their own money. Every investor seeks a good return, security, and excellent customer service. By consistently generating cash and building a network of trusted partners, investors can maximize their potential for success. Another key point discussed was the importance of looking beyond on-market inventory for investment opportunities. With increasing home prices, interest rates, and decreasing inventory levels, it can be challenging to find quality flips and wholesale deals. To address this, investors should consider looking off-market for motivated sellers. Utilizing real estate data providers like PropStream can help streamline the process, offering access to over 155 million properties with advanced search filters and accurate sales estimates. By expanding your search beyond the MLS and forming strategic partnerships, you can increase your chances of finding profitable investment opportunities.
Using Airbnb as a stepping stone to real estate business: Airbnb can generate extra income, build confidence, and lead to a successful real estate career. Start small by renting out your own space while on vacation, find a reliable cleaner, create a checklist, and utilize technology to streamline the process.
Airbnb can provide extra income and even serve as a stepping stone towards starting a full-time real estate business. The speaker shared his personal experience of using Airbnb to generate the confidence and financial means to quit his 9 to 5 job and become a successful real estate investor. He emphasized that anyone can get started with Airbnb, even while working a regular job. He suggested considering renting out your own space while you're on vacation to offset costs. For managing the day-to-day aspects of short-term rentals, the speaker recommended finding a reliable cleaner, creating a checklist, and utilizing technology such as apps to streamline the process. Overall, the speaker's message highlights the potential financial benefits and efficiency gains of using Airbnb as a source of income.
Setting clear expectations is crucial for positive experiences: Be transparent about potential issues or additional costs to avoid negative reviews and maintain a successful business. Delegate tasks to focus on strengths and maintain productivity.
Effective communication and managing expectations are key to avoiding negative reviews and maintaining a successful business. Whether it's in real estate or hosting on Airbnb, it's important to be transparent with clients or guests about any potential issues or additional costs. By setting clear expectations upfront, both parties can have a positive experience and avoid any misunderstandings or dissatisfaction. Additionally, delegating tasks that you dislike or find boring can help you maintain a productive and energetic work ethic, allowing you to focus on what you do best.
Understanding local regulations and zoning laws is crucial for real estate investing: Failure to comply with local regulations and zoning laws can lead to costly remediation, ethical dilemmas, and potential destruction of non-conforming units. Always prioritize thorough research and clear communication to mitigate risks and ensure a successful investment experience.
In real estate investing, there are often challenges and complexities that require careful consideration and due diligence. For instance, if a property is advertised as having more units than it legally has, this can impact appraisal values and potentially result in costly remediation or even destruction of the non-conforming unit. It's crucial to understand the local regulations and zoning laws, as well as the potential financial implications, before making an investment decision. Additionally, being upfront and honest with tenants about ownership and management roles can help avoid potential ethical dilemmas and create a smoother landlord-tenant relationship. So, always prioritize thorough research and clear communication to mitigate risks and ensure a successful investment experience.
Managing a Property Management Company: The Role of a Necessary Barrier: Openly identifying as a property owner maintains professional distance and allows for consultation with partners before making decisions.
Having a property management company can be time-consuming, but it's a valuable role that provides a necessary barrier between landlords and tenants. The speaker shared his experience of hiding his ownership status in the past due to fear, but now he openly identifies as one of the owners to maintain a professional distance. This approach allows him to consult with partners or managers before making decisions, preventing potential issues. The speaker also recommended two books - "Confessions of a Real Estate Entrepreneur" and "Shoe Dog" - that inspired him and reaffirmed the challenges of entrepreneurship. Additionally, he mentioned his hobbies, which include traveling and learning to surf, as ways to balance his business life.
Focus on one strategy and master it: Successful real estate investors specialize in one strategy and become experts, avoiding distractions and increasing chances of success.
Successful real estate investors focus on one thing and get really good at it, rather than spreading themselves too thin with various strategies. Lack of clarity and inactivity are common reasons why some investors fail or never get started. Consistently putting effort into the market is crucial for hitting opportunities. For more information about successful investor Neil Collins, listeners can visit Latitude Realty and Property Management, email him at chooselatitude.com, or connect with him on LinkedIn, Facebook, or Instagram. To be a guest on the Bigger Pockets podcast, interested individuals can apply online at biggerpockets.com/guest. Remember, leaving a rating or review on iTunes, Stitcher, Google, or YouTube helps spread the word about the show and reach more potential investors.
Connect with investor-friendly agents on BiggerPockets for potential deals: Using BiggerPockets can help connect with agents, potentially leading to real estate investments, but always consult advisors and consider risks before investing.
Using the BiggerPockets platform at biggerpockets.com/deals can help you connect with investor-friendly real estate agents, potentially bringing you closer to financial freedom. However, it's essential to remember that investing in real estate, like any other asset, involves risk. Past performance doesn't guarantee future results, and all opinions expressed are individual and not indicative of BiggerPockets' endorsement. Always consult with qualified advisors before making an investment and only risk capital you can afford to lose. BiggerPockets LLC disclaims all liability for damages arising from the information presented in this podcast.
