Podcast Summary
The Importance of Building a Local Network for Real Estate Investing: Choose Bigger Pockets for online networking, upgrade to pro membership for more opportunities, attend local clubs and meetups to build a strong local network for successful real estate investing.
Building a strong local network is crucial for real estate investors. This was emphasized during the Bigger Pockets Podcast, episode 82, where hosts Josh Dorkin and Brandon Turner discussed bringing only one album and a CD player to a deserted island and the albums they would choose. While discussing their choices, they highlighted the importance of meeting local people and being part of a community, even in an online platform like Bigger Pockets. The hosts also mentioned the benefits of upgrading to a pro membership to access more networking opportunities and search for people in specific zip codes. They also encouraged attending local real estate clubs and meetups. The episode featured an interview with experienced investor David Krulak, who shared his insights and strategies. Overall, the episode underscored the importance of building a strong local network for successful real estate investing.
Maximizing Real Estate Investing with Experience and Innovative Tools: Experienced investors and innovative tools like DealMachine and rent to retirement strategies can significantly enhance real estate investing by providing efficient lead generation, no money down opportunities, and immediate cash flow.
Experience and innovative tools can significantly enhance real estate investing. David, an experienced investor and real estate broker from Pennsylvania, has bought and sold over 800 properties and shares valuable insights. Meanwhile, tools like DealMachine offer unlimited access to reliable contact information for lead generation, making the process more efficient. Furthermore, investing strategies like rent to retirement allow for no money down purchases of new construction rental properties, providing immediate cash flow, equity, and appreciation. By combining expertise and innovative resources, investors can maximize their potential in the real estate market. Listen to the show and connect with David on BiggerPockets for more insights. Additionally, consider exploring DealMachine and rent to retirement for advanced lead generation and investment opportunities.
Navigating unexpected challenges in real estate investing as a retirement hedge: Adaptability and resourcefulness are crucial in overcoming unexpected challenges in real estate investing as a retirement hedge
Starting in real estate as a retirement hedge can be a long-term investment with unexpected twists and turns. The speaker began his journey in software design but sought a supplementary income source early in his career. He found an opportunity at an auction for a house that the state was selling due to a redesigned highway interchange. With a 10% deposit and a quick lease termination, he secured the property, but the settlement took longer than anticipated. Facing homelessness, he persuaded the attorney general to let him move in before settlement by providing proof of insurance. This experience highlights the importance of adaptability and resourcefulness in real estate investing.
Creative Financing in Real Estate: Starting out in real estate with limited funds? Focus on financing and persist through initial setbacks.
Starting in real estate with limited funds can be achieved through creative financing. The speaker shared his experience of living rent-free in a house for six months while collecting rent from a roommate, all while the property was being settled. He emphasized the importance of financing in his early days of investing, using a $10,000 signature loan and bank financing for his initial properties. The speaker also shared an anecdote about negotiating a mortgage for a property despite initial rejection and unexpected complications at settlement. Through these experiences, he learned the importance of persistence and adaptability in real estate investing. For those starting out, his advice is to focus on financing and not to let initial setbacks discourage them from pursuing their goals.
Lack of proper due diligence leads to vacant units and additional costs: Effective communication and clear agreements with tenants are essential to prevent vacancies and additional costs in real estate investing. Request leases, credit checks, and other tenant information during the purchasing process.
Effective communication and proper due diligence are crucial in real estate investing. The speaker shares an experience where he failed to secure tenants in the middle of winter due to a lack of written agreements with the inherited tenants. This resulted in vacant units and additional costs for updates and improvements. To avoid similar situations, the speaker advises new investors to request leases, credit checks, and other tenant information during the purchasing process. Additionally, communicating clearly with tenants about their staying or leaving can help prevent unexpected vacancies. This lesson learned the hard way highlights the importance of thorough preparation and clear communication in real estate investing.
Inheriting bad tenants from previous landlords: Ensure proper tenant screening to avoid bad tenants, consider month-to-month leases for flexibility, or opt for long-term leases for stability
When considering renting out a property, it's crucial to ensure you're not inheriting bad tenants from the previous landlord. Bad tenants often don't have formal leases and can be evicted with short notice. Month-to-month tenants can be asked to leave with proper notice, avoiding the need for evictions. However, some tenants, even on month-to-month agreements, may cause significant problems. Some landlords prefer long-term tenants with year leases, even if it means a lower rent, for the stability and reduced maintenance responsibilities. Ultimately, the decision between short-term and long-term leases depends on individual circumstances and preferences.
Real Estate Investor David Krulak Discusses His Decision-Making Process for Selling Properties: David Krulak, a successful real estate investor, sells properties based on factors like property condition, location, and rental restrictions. He evaluates his rental inventory annually and doesn't build houses for himself on land development projects.
David Krulak, a full-time real estate investor, has an extensive portfolio that includes buy and hold, fix and flip, land subdivision, tax sales, sheriff sales, HUDs, and real estate brokerage. He has completed over 800 deals in his career, with 23 bought and sold in the previous year. Krulak's decision to sell a property is based on factors like property condition, location, and rental restrictions. For instance, he sold two condos due to their restrictive rental policies and good condition, making them easy to sell to owner occupants. Another property was sold to an investor who planned to rent it out, but Krulak didn't want to keep it as a rental. When it comes to his rental inventory, Krulak evaluates it annually to determine if any properties should be sold. His land development projects consist of properties intended for resale, and he doesn't build houses for himself on those subdivisions.
Assessing and selling underperforming properties: Successful real estate investors regularly sell underperforming properties for better opportunities, using a 1031 exchange to defer taxes on gains.
Successful real estate investors regularly assess their portfolio and sell underperforming properties to make way for better opportunities. The decision to sell is based on a variety of factors, including financial performance, location, and age of the property. A 1031 exchange is a strategy used to defer capital gains taxes when selling and buying like-kind investment properties. It involves identifying the replacement property within 45 days and closing the sale within 180 days. The proceeds from the sale must be transferred directly to the new property. You can trade up or down in value, and even buy multiple properties in a single exchange. However, any cash received above the sale price (known as "boot") is taxable. Consult a CPA for specific tax advice before engaging in a 1031 exchange.
Maximize wealth and minimize taxes with 1031 exchanges: 1031 exchanges allow investors to defer capital gains taxes, potentially buy larger properties, and eliminate taxes upon death. Consult professionals for guidance and consider combining with personal residence exemption.
1031 exchanges, a method for deferring capital gains taxes on the sale of investment properties, offer significant benefits for real estate investors. By deferring taxes and potentially repeating the process multiple times, investors can keep more money in their deals and potentially buy larger properties. Additionally, upon death, the accumulated gains are stepped up to their fair market value, eliminating the need for heirs to pay capital gains taxes. The IRS implements this provision as a way to encourage investment and stimulate the economy. However, executing a successful 1031 exchange is challenging due to the time constraints and difficulty in finding suitable replacement properties within the allotted time frame. It's crucial to consult with a CPA and attorney for guidance throughout the process. Furthermore, combining 1031 exchanges with the $500,000 capital gains exemption for personal residences can provide even greater benefits. Overall, the strategic use of 1031 exchanges can help investors maximize their wealth and minimize their tax liabilities.
Outdated real estate rules and proposals for change: Some outdated real estate rules, like the 45-day rule, may change to benefit investors, while proposals like indexing capital gains tax for inflation could reduce tax burden for long-term property owners. Technology tools can help find off-market deals.
There are outdated rules in place, such as the 45-day rule for real estate transactions, that some investors believe should be changed to better benefit the industry. Additionally, there's a proposal to index capital gains tax for inflation, which could significantly reduce the tax burden for long-term property owners. However, changing such rules requires a collective effort and challenging the entrenched interests in Washington. Meanwhile, there are opportunities to expand investments in tax-friendly locations like Turks and Caicos. Furthermore, technology tools like DealMachine and PropStream can help investors generate leads and find off-market deals more efficiently.
Subdividing land for profit: Subdividing land involves obtaining necessary approvals and permits to split a larger parcel into smaller parcels for sale, potentially resulting in significant profit
Subdividing land involves splitting a larger taxed parcel into smaller parcels, which can then be sold individually for a profit. This process, known as subdivision, can be done without physically building houses or developing infrastructure, and instead focuses on obtaining necessary government approvals and permits. Subdividing can range from dividing a single parcel into two, to developing larger tracts of land with protective covenants. For example, a buyer could purchase an acre of land with road frontage, subdivide it, and obtain approval for multiple building sites. This process can result in significant profit, especially when dealing with larger tracts of land. Additionally, therapy, as mentioned, can help individuals make time for what truly matters in life, providing clarity and reducing stress.
Dividing a 1-acre lot into two half-acre lots: Check local zoning, hire surveyor and engineer, submit plan for approval, record at courthouse for individual lot sales, significant costs and lengthy approval time.
Subdividing a 1-acre lot into two half-acre lots involves checking the local zoning ordinance first to ensure it's allowed. Once zoning is approved, hiring a surveyor and engineer is necessary to create a plan and submit it for review. Approval comes with recording the plan at the courthouse, allowing individual lot sales. Costs, including holding costs and engineering/surveying fees, can be significant, and approval time can be lengthy. Insights from someone who's been through the process, including potential costs and challenges, would make for an interesting article.
Real Estate Investing in Land Subdivision: Profitable but Risky: Start small in land subdivision, be aware of risks, explore tax sales, and network effectively for deals.
Real estate investing, particularly in land subdivision, can be profitable but comes with significant risks and challenges. One investor shared his experience of acquiring an unbuildable piece of land and turning it into a subdivision for 17 townhouses, which he essentially got for free. However, he cautions new investors to start on a small scale and be aware of the high risk involved, especially in areas with stagnant economies. Another niche the investor mentioned as favorable is tax sales, where investors can acquire property deeds at auctions. However, tax sales are also difficult due to varying laws and lack of competition, making it essential to understand the unique challenges of each state. Networking, business cards, and attending tax sales are effective techniques for finding deals. Remember, success in real estate investing requires patience, knowledge, and persistence.
Maximize Business Card Impact for Real Estate Deals: Fill both sides of business cards with valuable deal info, detailing what you seek, for a more engaging approach that builds a network of potential deal finders. Consistently dedicate to a sustainable deal pace and carefully evaluate opportunities to avoid losses.
Making the most of your business cards can significantly enhance your real estate investing journey. David, with over 800 deals under his belt, emphasizes the importance of filling both sides of your business card with valuable information. He suggests using the back to detail what you're looking for in potential deals, just like the pickers on American Pickers have a list. This approach not only makes your card more engaging but also helps build an "army" of people who can help you find opportunities. David also emphasizes consistency and long-term dedication, sharing that he's been buying properties for about a deal a month for the last 20 years. He advises against trying to do too many deals too quickly and instead focusing on a sustainable pace. Reflecting on his experiences, David shares that his biggest mistake was not being selective enough with the deals he pursued, resulting in some financial losses and wasted time. To avoid similar mistakes, investors should carefully evaluate each opportunity and consider the risks and rewards before moving forward.
High-risk real estate deals can lead to minimal returns and significant hazards: Focus on high-potential deals instead of taking unnecessary risks on hazardous properties, as insurance may not guarantee a profit and potential losses can outweigh gains.
High-risk real estate deals, like buying a house at a tax sale without proper insurance, can lead to minimal returns and significant hazards. The speaker bought a house for $50, but due to extensive damage, he could only sell it for $1,000. Despite making a profit, he wouldn't do it again due to the great risk involved. Insurance would have added to the costs without guaranteeing a profit. The Pareto Principle suggests focusing on deals with the highest potential returns, rather than taking unnecessary risks on potentially hazardous properties. When it comes to land deals, determining value is challenging due to various factors.
Comparing Apples to Apples in Real Estate Valuation: When comparing properties for valuation, ensure environmental factors are considered, set a limit at auctions, outsource to reliable contractors, assess abandoned property situations carefully, and conduct thorough tenant background checks.
When comparing properties for valuation, it's crucial to ensure you're comparing apples to apples. Environmental considerations, such as septic suitability and buildability, are essential factors to account for. Additionally, when buying at auction, setting a limit beforehand is vital to avoid getting caught up in the excitement and bidding higher than intended. Regarding hiring contractors for rental properties, outsourcing to reliable companies can save time and hassle, even if it might cost more. Lastly, when dealing with tenants who have abandoned a property, carefully assessing the situation before taking action, such as filing for eviction, is necessary. In the case of a tenant leaving behind few belongings, it's likely that they have vacated permanently, and the property may need to be cleared out. However, if they've left a significant amount of belongings, it might be worth attempting to contact them to determine their intentions before taking further action. When vetting potential tenants, conducting thorough background checks and verifying their employment and income are essential steps to ensure a good fit for the property.
Finding Reliable Property Managers and Tenants for Long-Term Success: Successful real estate investors prioritize reliable property managers, aim for long-term tenants, and maintain a strong work ethic. David shares his experience of decades-long tenant relationships and recommends books for inspiration.
Successful real estate investors, like David, prioritize finding reliable property managers for their out-of-town properties, aim for tenants with long-term commitments, and maintain a strong work ethic with perseverance. David shared his experience of having tenants who have been with him for decades and emphasized the importance of sticking with the business over the long term. He also recommended books such as "How I Turned $1,000 into $5,000,000" by William Nickerson and "Millionaire Next Door" for inspiration and knowledge. For fun, David enjoys reading, spending time with family, and going on vacations. The key to success in real estate investing, according to David, is not giving up and staying committed to the business. You can find out more about David and his business at centralpennlots.com or check out his upcoming book on Amazon and eBay.
David Krulak talks about his book and free chapter on Bigger Pockets: Listeners can learn from experienced real estate investor David Krulak by checking out his book and accessing a free chapter on Bigger Pockets.
David Krulak, a real estate investor and author, shared his experiences and insights on Bigger Pockets Radio. He expressed gratitude for the positive reviews of his book and encouraged listeners to check it out. Krulak also mentioned his chapter in "Real Estate Rewind" by Bigger Pockets, which is available for free download for Bigger Pockets members. The podcast hosts emphasized the value of the book and encouraged listeners to join the site to access it. Overall, the conversation highlighted the importance of learning from experienced investors and the benefits of being a part of a supportive real estate community like Bigger Pockets.