Podcast Summary
Building a successful real estate investment portfolio while working full-time: With resourcefulness and determination, use available resources and don't be afraid to seek help or opportunities to build a successful real estate investment portfolio
With determination and resourcefulness, it's possible to build a successful real estate investment portfolio even while working a full-time job. Erica Sleggar, today's guest on the Bigger Pockets Podcast, shares her inspiring story of investing in real estate while serving in the military. She built up her portfolio by using the resources available to her, including education and networking. David Green emphasizes this point with a quote from Tony Robbins: "You don't lack resources. You lack resourcefulness." As you listen to today's show, consider how you can apply these principles to your own life and investment journey. Use what you have to your advantage and don't be afraid to ask for help or seek out new opportunities. With resourcefulness and determination, you too can build a successful real estate investment portfolio.
Passive Real Estate Investing for Monthly Income: Invest in private real estate funds or buy turnkey rentals for passive income and potential capital appreciation. Options like PPR Capital Management and Rent to Retirement offer benefits for different investor types.
There are various ways to invest in real estate passively and earn monthly income without the hassle of managing tenants or properties. Two options discussed are investing in a private real estate fund like PPR Capital Management, or buying a turnkey rental property with no or low money down through a company like Rent to Retirement. Both options offer the potential for steady income and capital appreciation. For accredited or high net worth investors, PPR Capital Management has a strong track record and over half a billion dollars in assets under management. Rent to Retirement offers discounted new construction properties and investor loans with low rates and little to no money down. Erica's story illustrates the potential for real estate investing to provide financial stability and passive income, even while serving in the military.
Leveraging and delegating tasks in real estate investing: Identify your strengths and weaknesses, hire or delegate tasks accordingly, and maintain a good relationship with tenants by acting as a manager or another tenant, not a landlord.
When it comes to real estate investing, particularly house hacking, it's important to leverage and delegate tasks that make you uncomfortable, such as being the landlord or collecting rent. The speaker shared his experience of managing 16 units and the challenges he faced while living with tenants. He learned the hard way that keeping the landlord role hidden and acting as just another tenant or manager can help maintain a good relationship with tenants. However, not everyone enjoys being the bad guy, and it's essential to find someone who does and trust them with these responsibilities. The concept of leverage is crucial in real estate investing, and it's essential to identify your strengths and weaknesses and hire or delegate tasks accordingly. The speaker's story highlights the importance of learning from past experiences and applying those lessons to future investments.
Identifying dislikes for growth opportunities: Shifting focus from initial costs to long-term benefits can lead to significant financial gains through tax-advantaged investments
Recognizing and addressing your dislikes in a job or investment can lead to valuable opportunities. Erica's dislike for a certain aspect of property management led her to sell a 4plex and use the profits from a 1031 exchange to invest in a larger 18-unit complex in North Dakota. This strategy allowed her to grow her investments and increase her cash flow, demonstrating the power of leveraging government tax policies as a partner in real estate investing. The mindset shift from focusing on the initial cost to considering the long-term benefits of the investment can lead to significant financial gains.
The emotional satisfaction of paying off properties: Finding and keeping good management is crucial for real estate investing success, even more than location.
While paying off your properties may not make financial sense due to the loss of tax benefits, the emotional satisfaction some people derive from it can be significant. When it comes to finding a market to invest in, having a reliable and effective team, particularly good management, is crucial for success. The location does matter, but building a strong team and managing the business effectively can be even more challenging than finding the right location. The hardest part of investing in real estate, according to the speaker, is finding and keeping good management. Despite having good management, the speaker found it too time-consuming to manage them effectively and ended up selling their multifamily properties. The speaker's experience highlights the importance of having a solid team and effective management in real estate investing.
Beware of deferred maintenance in larger commercial properties: Investigate the repair history and tenant turnover when buying larger commercial properties to avoid unexpected deferred maintenance costs
When investing in larger commercial properties, it's crucial to be aware of potential deferred maintenance. Sellers may cut back on repairs and expenses to artificially increase the property's net operating income and profit. To identify this, look for tenants who have recently been installed before the sale and check the repair history. The longer tenants have stayed and the more recent the repairs, the better the condition of the property is likely to be. The speaker learned this the hard way when he bought a 126-unit apartment complex without fully considering deferred maintenance costs. Despite the mistakes, he views the experience as valuable and a lesson learned.
Start small, stack investments: Successful real estate investors grow their portfolios gradually by reinvesting profits from smaller deals into larger ones. Be cautious when evaluating properties, as initial numbers may not reflect all costs like insurance and property taxes.
Successful real estate investing often involves starting small and gradually building a larger portfolio over time. The speaker's story illustrates this concept, known as "stacking," where early profits from smaller investments are reinvested in larger deals. However, it's important to remember that not all information from sellers is accurate, and investors must carefully analyze potential properties beyond the initial numbers. Factors like insurance and property taxes can significantly impact the financials, and it's crucial to consider these aspects when evaluating larger investments.
Investigating facts to verify accuracy in multifamily property deals: Thorough due diligence uncovers potential issues, ensures accurate information, and leads to successful multifamily property transactions.
Due diligence is an essential part of the process when investing in multifamily properties. It goes beyond just trusting what the seller tells you and involves investigating the facts to verify their accuracy. This can help uncover potential issues that might not be apparent from the lease or other documents. For instance, a tenant might be paying rent consistently, but if they have fallen behind on deposits, it could indicate financial instability. Additionally, selling a property to a private equity firm can be a lucrative exit strategy, especially when looking for a more hands-off investment. Commercial real estate, such as Starbucks, daycare, quick lube, and medical office buildings, can be an attractive option due to the potential for automated income and reduced management requirements. Ultimately, thorough due diligence and careful consideration of investment goals can lead to successful multifamily property transactions.
Buying Commercial Real Estate with Long-Term Leases: Investing in commercial real estate with long-term leases from creditworthy tenants can offer stable income, easier financing, and a larger, more passive portfolio. Due diligence is crucial when considering lease length, rent, and tenant stability.
Investing in commercial real estate, particularly with long-term leases from creditworthy tenants, can provide more stable income and easier financing, even if the upfront cost seems high. This was highlighted in a discussion about buying a Starbucks property during a snowstorm in Arkansas, where the owner received numerous calls about maintenance despite the lack of proper equipment, contrasting the challenges of managing multifamily properties. The concept of buying the lease, not just the building, was emphasized, and the importance of due diligence on lease length, rent, and tenant stability was stressed. While there are risks, such as those posed by the COVID-19 pandemic, the potential rewards can lead to a larger, more passive and manageable portfolio over time. This was illustrated through the speaker's journey from a small 4plex to a collection of commercial properties. Contrary to the common belief that problems escalate with the size of the investment, the speaker's experience demonstrated that real estate can become increasingly beneficial as it grows.
Navigating Real Estate Investing with Triple Net Leases: Successful investors build equity and transition to fewer hurdles. Newbies: get a good attorney, read extensively, understand lease terms, options dynamics, and competition. Consider drive-thrus, national chains for lower risk.
Real estate investing, specifically in triple net leases, requires careful consideration and planning. Successful investors build equity and move into asset classes that offer fewer hurdles. Newbies should get a good attorney, read extensively, and consider factors like the value of drive-thrus, lease length, and options. Options, while beneficial, often favor tenants, so it's crucial to understand this dynamic. The competition in commercial real estate may not be as intense as in other sectors, but it's still important to be professional and consider setting up a virtual mailbox for a more polished image. Additionally, certain property types, such as drive-thrus and those leased by national chains, can offer attractive opportunities due to their potential for repurposing and lower risk. Overall, the key is to set clear goals, educate yourself, and approach investing with a strategic mindset.
Investing in service-based industries could provide a more stable income source: Consider investing in properties that house service-based businesses for a more stable and long-term income. Essential services are less likely to be replaced by technology or online sales.
Investing in service-based industries instead of goods-based industries could be a wise decision for real estate investors. This is because Amazon and other large corporations may be able to easily take over goods-based industries through online sales and teleworking. However, service-based industries, such as nail salons, car repair shops, and daycares, are more difficult for Amazon to replicate. Therefore, investing in properties that house these types of businesses could provide a more stable and long-term source of income. The investor in the podcast discussion even mentioned buying strip malls with these types of tenants. Additionally, the investor highlighted the importance of providing essential services that cannot be bought online or easily replaced by technology. This peace of mind is especially important for investors who may worry about the safety of their properties while they are away. For those looking to find motivated sellers and expand their investment opportunities, PropStream is a leading real estate data provider that offers access to over 155 million properties nationwide and various search filters to help find potential deals.
Securing funding for real estate investments amidst market challenges: Fundrise's new opportunistic private credit strategy offers high-demand bridge financing on quality assets, allowing top investors to secure funding and earn healthy interest rates. Automation is crucial for long-distance real estate investments, but local involvement is essential to avoid costly mistakes in property management.
The current market environment, with high interest rates and a liquidity crisis, has left many real estate investors in need of funding. Fundrise, America's largest direct investor alternative asset manager, offers a solution through its new opportunistic private credit strategy. This strategy provides high demand bridge financing on high-quality assets with creditworthy borrowers, allowing top real estate investors to secure the funding they need while investors earn a healthy interest rate. With over $800,000,000 in private credit deals completed and an average net interest of 10.8%, it's an opportunity not to be missed. Another key takeaway is that automation is crucial for those planning to retire and want to continue their real estate investments. However, attempting to manage a property management company from a distance can lead to costly mistakes, as one listener learned the hard way. The failure of his property management company was due to poor management, overspending on supplies, and a lack of local presence. It's essential to consider the unique challenges of property management and the need for local involvement before starting a long-distance business in this field.
Managing multiple rentals can be overwhelming, consider hiring a team: Outsourcing property management can save time and resources, but understanding financing and lender requirements is crucial for scaling up.
Managing multiple Airbnbs or small rental properties on your own can be overwhelming and inefficient. While it may seem cost-effective to avoid hiring property management, the time and resources required to handle day-to-day tasks, expenses, and turnover can quickly add up. Erica shared her experience of managing a few properties and the challenges they faced with outsourcing and profit margins. She emphasized that having a team and infrastructure in place is crucial for scaling up. However, even with larger properties, financing and lender requirements can vary greatly, making it essential to shop around and understand each lender's preferences. In Erica's deal, she bought a 46-unit multifamily property in Winston Salem through an off-market connection. She negotiated the price down from $1.25 million and is now working on improving the property to increase its value.
Beyond just price: repairs, coin-op laundry, and good relationships: Focus on potential profits, not just prices. Get sellers to make repairs, save on capital costs, and maintain good relationships for future deals.
Negotiation in real estate goes beyond just price. In the discussed deal, the buyer was able to increase the property's value by having the seller make repairs and install coin-operated laundry machines before the sale. This not only increased the property's Net Operating Income (NOI) but also saved the buyer from having to invest their own capital into these improvements. The buyer also emphasized the importance of maintaining a good relationship with a trusted loan officer for funding deals and the potential for long-term profit through holding and selling real estate. The key lesson learned from this deal was not to focus too much on what others paid for a property, but rather on the potential for making a profit in the deal for oneself.
Discovering Passion in Real Estate Investing: Finding a passion in real estate investing is essential for success. Reading and hobbies can inspire and provide valuable insights. The military offers programs to help service members transition into real estate.
Passion plays a crucial role in the success of real estate investors. Erica, a military spouse and commercial real estate investor, shared her recent favorite books, including "The Due Diligence Handbook for Commercial Real Estate" and "Free to Focus" by Michael Hyatt. Erica's hobbies include reading Louis L'Amour westerns and gardening. She emphasized that finding something you love and are passionate about is essential in real estate investing. Even if you don't enjoy certain aspects of the business, there are ways to make it work for you. Erica's story is inspiring, and she encourages those interested in real estate to keep trying and find their passion within the industry. You can connect with Erica on Facebook, and for more information, visit biggerpockets.com/show456. Don't forget to ask questions in the comment section or on YouTube. The military also offers programs like Skills Bridge, which pays service members to learn a new industry before transitioning out.
Real estate investing for military professionals: Connect with an investor-friendly agent through BiggerPockets Agent Finder, and be consistent in the market for successful real estate investing
Real estate investing is a viable way for individuals in various professions, including the military, to build wealth. Erica and David emphasized this point during their discussion on BiggerPockets Radio. They encouraged listeners, particularly those in the military, not to believe the myth that wealth can't be accumulated during their service years. Real estate, they argued, can do the heavy lifting. To get started, finding an investor-friendly agent is crucial. BiggerPockets Agent Finder is a free resource that helps investors connect with local market experts, making the process of navigating neighborhoods, analyzing numbers, and taking confident action much smoother. Remember, the key to successful real estate investing is not about timing the market but rather being consistent and staying in the market. As always, it's essential to do thorough research and consult with qualified advisors before making any investment decisions.
