Podcast Summary
New WYSIWYG system for posting photos and videos on BiggerPockets forums: BiggerPockets introduces a new system for sharing visual content, plans contests, and invites users to engage with young investor Kenny Estes
The BiggerPockets community now offers a more user-friendly experience for posting photos and videos on their forums, with a new WYSIWYG (What You See Is What You Get) system. Additionally, they plan to host contests and encourage users to share their properties or transformations. During this episode of the podcast, the hosts interviewed Kenny Estes, a young real estate investor who started at 18 years old and has a unique approach to investing. Listeners are encouraged to leave comments on the show notes page to engage with Kenny and share their thoughts. Kenny is the managing member of Pear Tree Properties and runs a blog at peartreeproperty.com. He also contributes to the BiggerPockets blog. Rent to Retirement, a company mentioned in the episode, offers the opportunity to buy turnkey rental properties for no money down through their investor loans with low rates and down payment options.
Maximizing Real Estate Investments with Vacasa and First American Exchange Company: Vacasa helps homeowners earn more revenue and enjoy peace of mind with full-service vacation home management, while First American Exchange Company assists investors in building rental property empires through tax deferral with 1031 exchanges.
Vacasa and First American Exchange Company offer valuable solutions for vacation home owners and real estate investors, respectively. Vacasa simplifies the process of owning a vacation home by providing full-service management, earning homeowners an average of 20% more revenue, and ensuring peace of mind with their hospitality-driven platform and around-the-clock support. First American Exchange Company, on the other hand, helps investors build rental property empires by deferring capital gains taxes through 1031 exchanges, providing expert guidance on simple and complex transactions. Whether you're a seasoned investor or just starting, these companies offer reliable and efficient solutions to maximize your real estate investments.
Lessons learned from early real estate investments: Investing in real estate requires caution and conservatism, especially for those starting out. Avoid relying on risky financing methods and focus on building savings and taking a measured approach.
Investing in real estate, especially when you're young and starting out, requires careful consideration of risk thresholds. The speaker shared his experience of investing in rental properties early on, before the 2007 market crash. He admitted that he and his partner relied too heavily on pro forma estimates and expanded too quickly, leaving themselves with insufficient cash flow and high debt when the market turned. To avoid similar situations, the speaker advises new investors to be cautious and invest conservatively, especially when they have limited resources. He warns against relying on creative financing methods that may seem low-risk in theory but could leave investors in a precarious position if things go wrong. Instead, he suggests building savings and taking a measured approach to real estate investing.
Prepare for the unexpected in investing: Consider potential setbacks, stay flexible, build a track record, and network to attract investors.
In investing, it's important to be prepared for the unexpected. When considering an investment, don't rely on everything going in your favor. Instead, consider potential setbacks and adjust your plans accordingly. This concept, known as stress testing, is common in the finance industry. The speaker shared his experience of buying properties with cash and later transitioning to using outside investor money for economies of scale. He emphasized the importance of building a track record and networking to attract investors. So, be prepared, stay flexible, and don't be afraid to ask for help when needed.
Building relationships and reputation are key to securing investments: Focus on engaging with the community, building a reputation, and applying a long-term, patient approach to investing in rural areas for passive income and retirement security.
Building relationships and establishing a track record are crucial for securing investments, whether it's in real estate or other ventures. Private investors are more likely to trust and invest in individuals they know and have a good impression of. This concept applies not only to rural real estate investing but also to larger platforms like BiggerPockets. Investors should focus on engaging with the community, participating in discussions, and building a reputation before asking for significant investments. Additionally, investing in rural areas can be a smart strategy for those seeking passive income and retirement security. Rural markets often exhibit more stable price appreciation and rent rates compared to urban markets, which can help reduce volatility and provide a more predictable income stream. As Warren Buffett, one of the most successful investors in the world, demonstrates, a long-term, patient approach to investing can lead to significant returns. By focusing on fundamental analysis, understanding the market, and maintaining a disciplined approach, investors can avoid chasing after the latest trends or "shiny objects" and build a solid, profitable portfolio.
Avoiding quick returns and focusing on long-term cash flow: Conservative real estate investments, like buying cash flow properties with high cap rates, provide steady income and help build a solid reputation. Overpromising specific returns can lead to instability and potential legal consequences.
Focusing on quick and potentially dangerous returns in real estate investments can lead to bubbles and instability in the market. Instead, it's recommended to adopt a more conservative approach, such as buying cash flow properties with high cap rates and holding them for the long term. This not only provides a steady income but also helps build a solid reputation with investors. It's important to avoid promising specific returns and instead, share historical data to give a clear picture of past performance. A cautionary tale from a real estate investor who promised 12% returns per year to his investors and ended up in jail due to a Ponzi scheme serves as a reminder of the risks and consequences of overpromising.
New investors might consider starting with stocks: New investors with limited capital can benefit from stocks due to lower costs, easier access to info, and higher liquidity. As they gain experience and savings, they can explore real estate for potential higher returns and wealth-building through physical assets.
While both real estate and stocks have their merits, they serve different purposes for investors based on their experience level and risk tolerance. For new investors with limited capital, it might be more beneficial to start with stocks due to lower upfront costs, easier access to information, and higher liquidity. As investors gain experience and build their savings, they can then consider investing in real estate for potential higher returns and the opportunity to build wealth through physical assets. However, real estate comes with higher transaction costs, longer time horizons, and lower liquidity. Ultimately, the choice between real estate and stocks depends on an investor's goals, resources, and risk appetite.
Partnering with an experienced investor for learning opportunities and economies of scale: New investors can benefit from partnering with experienced ones for education and cost savings, but it's essential to build a solid foundation before investing and understand the differences between investing and trading.
If you're new to real estate investing, consider partnering with an experienced investor instead of going it alone. This approach can provide valuable learning opportunities and economies of scale, potentially leading to greater returns. However, finding such an opportunity may be rare, and it's essential to build a solid foundation of knowledge and savings before investing. Direct mail marketing and wholesaling can be starting points, but they are jobs rather than investments. The key distinction lies in the holding period of the investment. When you invest, you're buying and holding onto an asset for the long term. Trading, such as wholesaling or stock trading, is a job where you're actively buying and selling assets for a profit, but not holding them for an extended period. Both have their merits, but it's crucial to understand the differences and choose the path that best aligns with your goals and resources.
Starting with little capital in real estate: To succeed in real estate with minimal capital, partner with a trusted investor or learn while already invested, but ensure trust and a solid track record.
Becoming a successful real estate investor with little to no initial capital involves more risk and time investment than many people realize. While the potential for high returns exists, the likelihood of finding a 50% off deal as a new investor is slim. Instead, investing your money with a trusted partner or learning the ropes while your money is already invested could be a safer approach. However, it's crucial to ensure that you trust the person you're investing with and that they have a solid track record. The real estate market can be unpredictable, and it's essential to approach it with caution and a solid understanding of the risks involved.
Partnering with experienced real estate investors for safety: Partnering with experienced investors can provide safety, but new investors should learn real estate skills to make informed decisions and vet potential partners effectively.
Investing in real estate with someone who takes a significant ownership stake can be a relatively safe bet, as they have a personal financial stake in the success of the investment. However, it's crucial to have a solid foundation of real estate knowledge before making large investments. New investors should consider either finding an experienced investor to work with or buying a property on their own, with the latter being a riskier option. To vet potential investors, examine their historical returns and look for evidence of successful investments in the past. However, understanding the skills necessary to analyze a personal investment, such as cash flow analysis and understanding equity, requires a higher level of real estate proficiency than simply vetting an investment. Sites like Bigger Pockets and podcasts can help new investors learn these skills and make informed decisions. Ultimately, the decision to invest actively or passively depends on individual goals and preferences. Some may prefer to learn the ropes and become experienced investors, while others may prioritize a passive income stream.
Exploring Real Estate Investing Options for Passive Income and Hassle-Free Management: Consider investing through platforms for passive income, explore alternative methods for deal sourcing and management, secure investments with home security services, and plan for potential rentals if unable to sell.
When it comes to real estate investing, it's essential to determine your goals and preferences before diving in. If your primary objective is achieving financial freedom through passive income without managing properties, consider investing with platforms like Connect Invest. For those struggling to find deals or tired of tenant management, alternative methods like short-term real estate investments or off-market deals using tools like PropStream can be viable options. Additionally, securing your investments with services like SimpliSafe home security can provide peace of mind, especially for those frequently traveling. Lastly, planning for the worst-case scenario, such as being unable to sell a property, by considering it as a potential rental can help mitigate potential risks.
Multiple exit strategies are vital for real estate investors: New investors should have multiple exit strategies to mitigate risks and ensure success in real estate deals. Funding deals through an LLC and investing personal capital alongside investors also strengthens the investment.
Having multiple exit strategies is crucial for real estate investors, especially for beginners. The market can be unpredictable, and having different paths to profit can help investors save themselves if a deal doesn't go as planned. Brandon and Heath from BiggerPockets emphasize this concept in their beginner's guide to real estate investing. Heath shares his personal experience of setting up a duplex with multiple exit strategies, ensuring a win-win situation regardless of the decision made. For those new to real estate investing, it's essential to remember that investing involves risks, and having a solid plan, including multiple exit strategies, is vital. Additionally, Heath and his team fund their deals through an LLC, raising funds every three months and investing the amount they receive. They also invest their own capital alongside their investors, ensuring everyone's commitment to the project's success.
Finding and managing reliable contractors is a challenge for real estate investors: It may take time and patience to find and establish a good working relationship with reliable contractors. Investors should be prepared to go through several contractors before finding a good one and should treat them well once they are found.
Finding and managing reliable contractors is a significant challenge for real estate investors, especially when starting out. The speaker shared his experience of hiring a property manager in Missouri while investing in South Bend and gradually increasing the responsibilities given to a general contractor. He mentioned that it took about a year and a half to establish a good working relationship with the GC, who now manages a team of 30 to 50 people. The speaker emphasized that contractors can be notoriously difficult to find and manage due to communication gaps and varying work ethics. He suggested that investors may need to go through several contractors before finding a good one and advised treating them well once they are found. The speaker also mentioned his own experience of being dependent on a few reliable contractors after owning hundreds of homes over the past decade.
The Arbitrary Distinction Between Accredited and Non-Accredited Investors: Accredited investors have more investment opportunities due to wealth, but investing knowledge and experience are not tied. Build a strong track record, brand, and network to expand accredited investor pool. Maintain strong risk management for all investors.
The distinction between accredited and non-accredited investors, as defined by the SEC, plays a significant role in the investment landscape. Accredited investors, who have a certain income level or net worth, are afforded more investment opportunities and leeway due to regulations that limit general solicitation to non-accredited investors. However, the speaker argues that the distinction is arbitrary and that investing knowledge and experience are not necessarily tied to wealth. For real estate investors looking to expand their pool of accredited investors, building a strong track record and brand, and networking through platforms like BiggerPockets, can be effective strategies. Ultimately, the exit strategy for conservative investors may involve continuing to build their portfolio in a Warren Buffett-style approach or selling their business at some point. Regardless of the approach, maintaining a strong risk management strategy is crucial.
Forming a REIT and Going Public as an Exit Strategy: Our team aims to create a REIT, requiring 100 investors, regulatory oversight, and $100M assets to go public, potentially doubling investors' investments. However, it comes with costs and risks.
...our team plans to create a Real Estate Investment Trust (REIT) and go public as our exit strategy. To form a REIT, we need at least 100 investors, each owning less than 15% of the company, and once established, we'll have shareholders, a board of directors, and increased regulatory scrutiny. To go public, we'll need over $100 million in assets. By doing this, our investors could potentially double their investment value overnight due to the higher returns compared to the average public REITs' yields. However, this is a potential outcome and comes with significant costs, such as hiring underwriters and investment banks, which could impact the value of the portfolio. Additionally, we're currently deciding where to invest based on population size and fair market value cap rates around 8%. We don't use rent-to-own. Instead, we believe in providing fair rents and allowing tenants to save and buy properties in the future.
Optimizing rent collection and real estate investing: Effective marketing for real estate investments and carefully considering debt versus potential returns are crucial for success.
When dealing with difficult tenants who owe rent, determining the optimal point to pursue legal action depends on the amount owed. Obtaining a judgment through the court process can be worthwhile for larger balances, but collecting the debt may prove challenging. For real estate investors looking to buy properties, marketing effectively is crucial. Utilizing professional signage on vehicles or other visible means can generate significant leads. Regarding personal debt versus investing in real estate, the decision depends on individual circumstances and priorities. If an investor is passionate about real estate and able to generate higher returns, it may make sense to start investing despite debt. Conversely, if the goal is to build passive income, it's essential to compare potential returns with interest rates on personal debt. Section 8 tenants can be valuable, as they generally pay rent reliably due to government backing, but managing them comes with additional red tape. For sellers with no equity in their homes, there may be limited options, but creative financing or partnering with investors could potentially provide solutions.
Stay focused on core competencies and avoid distractions: Successful real estate investors stay disciplined, commit to a long-term strategy, and focus on their core competencies to achieve success.
Successful real estate investors focus on their core competencies and avoid getting distracted by other complexities outside of their expertise. For instance, if owner financing is not your strength, it's best to avoid it and stick to what you're good at. Discipline and long-term vision are also essential traits for investors. Books like "Investing in Real Estate" by Gary Eldred and "The E-Myth Revisited" have provided valuable insights and knowledge. Kenny, a successful investor, recommends these titles. Additionally, hobbies and interests, such as triathlons, can provide valuable lessons for business and investing, as shown by Kenny's experience completing an Ironman race. Ultimately, staying focused, disciplined, and committed to a long-term strategy are the keys to success in real estate investing.
Investing in Real Estate through REITs: Long-term Perspective and Risk Management: Successful real estate investing requires patience, knowledge, and the right resources. Focus on risk management, long-term growth, and engage with the BiggerPockets community for valuable resources.
Investing in real estate, specifically through REITs, requires careful consideration and a long-term perspective. Kenny Estes emphasized the importance of not being swayed by get-rich-quick schemes and instead focusing on risk management and long-term growth. He also encouraged listeners to engage with the BiggerPockets community and take advantage of resources like the blog and YouTube channel. Additionally, the hosts reminded listeners to subscribe to the YouTube channel for more valuable content and to leave reviews and ratings on iTunes. Lastly, they promoted the use of BiggerPockets Agent Finder to help investors find investor-friendly agents and navigate the real estate market. Overall, the key takeaway is that successful real estate investing requires patience, knowledge, and the right resources.
