Real Estate Lab https://realestatelab.live This is your real estate investing lab room Thu, 13 Feb 2020 17:14:38 +0000 en-US hourly 1 https://wordpress.org/?v=5.3.2 Real Estate Lab will walk your through the real estate investing world with different real estate strategies to up your real estate investing game. Discover how you can create passive income to replace your current W2 job or keep it if you have a job that you love. Vee has participated in over $15M in real estate transactions in different capacity (wholesaler, flipper, property manager, deals closer, deals underwriter etc.) since 2009. He invested in 220+ units passively. Real Estate Lab will be a place for everyone to learn about the current real estate trend, real estate investing strategies, apartment syndication, self-directed IRA investing, buy private note/mortgages, flipping houses, buying tax lien certificates, marketing to find deals, 1031 exchange, raising capital, passive investing, turn key properties, buy and operate mobile home parks, creative financing strategies, creative deals structuring, tax strategies, etc. all from the freedom of your owner schedule. If you are a fan of Robert Kiyosaki, Napoleon Hill, Gary Keller, Jeff K. Johnson, etc. then this podcast is for you! Vee Khuu Vee Khuu info+5d9419aa37752c556955b8fa@mg.pippa.io info+5d9419aa37752c556955b8fa@mg.pippa.io (Vee Khuu) Vi Khuu Buy More Properties! Real Estate Lab https://assets.pippa.io/shows/5d9419aa37752c556955b8fa/1569987079722-ba4e63549d7f4288e8e17d1c431c94bd.jpeg https://realestatelab.live/episode-archives/ 16: Travis Watts – Financial Independence Through Passive Investing https://realestatelab.live/16-travis-watts-financial-independence-through-passive-investing/ https://realestatelab.live/16-travis-watts-financial-independence-through-passive-investing/#respond Tue, 11 Feb 2020 13:18:00 +0000 https://realestatelab.live/?p=519 Travis Contact: travis@ashcroftcapital.com https://www.facebook.com/travisjwatts www.linkedin.com/in/traviswatts1234 https://www.biggerpockets.com/users/TravisWatts Instagram @passiveincometravelers Show Notes [00:00:38] Schedule a call with me at www.CallwithVee.com [00:01:04] Check out my interview with Erik Smith from Fitness and Finance Podcast at www.FitnessNFinance.com [00:02:12] Tickets for BEC20 available here: http://bit.ly/31D16Ho – Use code “GOALS20” to save 20% at checkout [00:03:59] Travis started his investing journey...

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Travis Contact:

travis@ashcroftcapital.com
https://www.facebook.com/travisjwatts
www.linkedin.com/in/traviswatts1234
https://www.biggerpockets.com/users/TravisWatts
Instagram @passiveincometravelers

Show Notes

[00:00:38] Schedule a call with me at www.CallwithVee.com

[00:01:04] Check out my interview with Erik Smith from Fitness and Finance Podcast at www.FitnessNFinance.com

[00:02:12] Tickets for BEC20 available here: http://bit.ly/31D16Ho – Use code “GOALS20” to save 20% at checkout

[00:03:59] Travis started his investing journey with the book Rich Dad Poor Dad – https://amzn.to/31M360c

[00:07:04] Travis shared info on his first passive transaction. He put too much emphasis on a Pro-forma.
Pro forma is financial statement produce based on certain assumptions and projections.

[00:07:31] You are not investing so much in the deal but the team.

[00:08:28] Travis talks about his investing process. He starts with vetting the sponsor/ operator. Then looks at the market and the deal itself.

[00:09:36] Travis dives into how to vet a sponsor.

[00:12:19] What questions should you ask the operator? You can also download a guide of all the questions to ask at www.ashcroftcapital.com/passiveinvestor.

[00:14:33] Travis shares the red flags to look for when vetting someone

[00:18:28] How Travis work on his deal flow

[00:21:48] How to find what conference to attend to find good operators.

[00:28:14] Travis shares a day in his life

[00:34:46] Travis shares his last thoughts on what investors should pay attention to before going in a deal

Transcription

Travis Watts 0:03
I mean, you really can’t be good at everything. You might kill it on one of those projects and you might fail another one. And I’ve seen that unfold firsthand with numerous groups. So I look for groups that have that consistency.

Vee 0:17
Welcome to the show. You are listening to The Real Estate Lab Podcast. In this lab. we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.

Vee 0:38
It’s an amazing day to be alive and to invest in real estate. My name is Vee Khuu and you’re now listening to my show The Real Estate Lab Podcast. Hey I cannot wait to share with you about today’s guests. But first, if you haven’t done this already, let’s schedule a quick chat with me. Just a quick 10 minute phone call. You can head on over to the www.call withvee.com to set that up.

Vee 1:04
Also, I was recently interviewed by my good friends, Erik Smith of Fitness and Finance podcast. Eric is an awesome financial advisor. Be sure to check out his podcast at www.fitnessnfinance.com.

Vee 1:19
Let’s get back to today’s guests. Our guests started investing in 2009 and is currently the Director of Investor Relations of Ashcroft capital. He’s a full time passive investor having invested in over 27 syndications between 14 firms. Ladies and gentlemen, our guest today is Mr. Travis Watts. Travis now dedicate his time to educating others in the world of investing and has made it his mission to share passive investment strategies in order to help others achieve and maintain wealth in real estate, and he also love traveling the world with his wife. On a side note, Travis and the rest of his peers at Ashcroft Capital will be at the best ever conference in Keystone, Colorado.

Vee 2:12
Check out the show notes for ticketing links and discount code. And now here’s my conversation with Travis Watts.

Vee 2:25
Hey, welcome back to another episode of The Real Estate Lab Podcast. I have Travis Watts from Ashcroft Capital here with me. It’s great to have you on the show here, Travis.

Travis Watts 2:36
Hey Vee. Thanks so much for having me today. I appreciate it.

Vee 2:39
No, with the best ever conference around the corner. I know you’re super super busy. So really appreciate your time here. Let me just, I typically want to ask the guests about something that they have done recently. And so what’s your most favorite food that you ate in Thailand?

Travis Watts 2:58
Yeah, my wife and I love Travel. So we were in Thailand about not a year ago and man, we ate Pad Thai almost every single day across that entire trip. So there’s not a tremendous amount of food options per se over there. And at the time we were vegan, so that made it really difficult. So a lot of pad thai.

Vee 3:19
Okay, you know, I start with that questions because you for work now even you travel a lot this to some cool places and your, your schedule was really, really hectic. So what was it like before you start this whole journey? Was life is this life, the life that you always wanted when you went down this path?

Travis Watts 3:39
Well, it’s kind of a funny story, really. I you know, back in 2007, 8, 9, I knew I wanted to get involved with real estate. I ended up starting in 2009. And all I really knew was I was fascinated by this concept of passive income and cash flow. Right.

Travis Watts 3:59
I’d start with like a lot of folks, probably the Robert Kiyosaki’s books and Rich Dad Poor Dad and all that kind of stuff. And I was just so intrigued by the by the concept, but I ended up going about achieving that in the completely wrong way. In the beginning. That’s the way that I see it.

Travis Watts 4:17
So later in my process around 2015 I shifted over to investing in real estate syndications where I could be a limited partner in a deal, where a bunch of folks are pooling money together to buy bigger assets for those that aren’t aware of syndications. And I could literally and finally be completely passive in my investing approach. That is what allowed me number one to leave that oil field job and have a better quality of life and pursue work more meaningful to me. And number two, for my wife and I to travel a whole lot more, and it freed up a lot of my time, actually, so quite the opposite of what it was.

Travis Watts 4:17
Anyway, I did a lot of active single family stuff. I was doing some flips and vacation rentals. And really what was happening is I was building myself a job on top of the oil field job that I had at that time, which was really just kind of a paycheck play at I worked you know, hundred hour work weeks away from home. Out in the weather. I worked overseas in Saudi Arabia for a while There’s a lot of crazy stuff. But long story short, I had no time to be dedicating to real estate, but I loved real estate and I feel like it’s the best way to build passive income and cash flow.

Vee 5:37
Now, were you always in the oil industry?

Travis Watts 5:40
No, I wasn’t I did a handful of jobs. But you know, just miscellaneous stuff before the oil field. And then after I did a handful of things just that I wanted to pursue for just self education and self development. So instead of just going to work for the paycheck, which, you know, yeah, I paid quite well as the six figure job. But you also had to sacrifice literally your entire life to do it. I was never home and overworked and you know, 14 hour days, all that kind of stuff. And so, you know, it could only go on so long, right? I couldn’t see myself staying in an industry like that for 30 plus years.

Vee 6:17
Definitely. So you invested in your first syndication in 2015. You said?

Travis Watts 6:22
Right. Yeah, I started basically selling off all of my single family portfolio I had and transitioning just one by one as I would have that liquidity event upon sale to syndications. So just selling one house and putting that and maybe two or three different syndications where your properties your single-family home properties, were they in the Denver area and different part? They were all up and down the front range of Colorado for those familiar Fort Collins through Commerce city, Henderson Brighton Denver all over, but yeah, just Denver ish.

Vee 6:57
Okay, so can you tell me some more details about your first syndication that you invested in?

Travis Watts 7:04
Yeah. So you know, one thing that I kind of look back on. And I think, in hindsight, I would have done this a whole lot differently. But the first couple of deals that I did, I put way too much emphasis on a pro forma, which is just kind of the the expectations for the project, the projected returns, all this kind of stuff. And I was taking that information face value, thinking, well, hey, you know, these are some pretty sweet numbers.

Travis Watts 7:31
But what I fail to realize is, you’re not so much investing in the deal. As much as that is important, you’re investing in the team that is actually going to be executing the deal. And so what ended up happening in those first couple is they were they were newer operators, and they ran into a handful of things that popped up they didn’t know how to handle and the easiest path out for them was just to put the property up for sale and exit. So thankfully, we ended up with exiting at a profit, so I can’t complain too much. But you know, you go in with the expectation, it’s going to be a five to seven year play, and you’re going to have this cash flow rolling in year after year. And then, you know, 18 months later, it’s all over. And you’re starting over scratch, which probably was a good thing. But that was my lesson learned.

Vee 8:19
So what was something that you did in that deal? And you now no longer do besides, you know, looking at the performer for its face value?

Travis Watts 8:28
Yeah. So now kind of what my process is, is I start with vetting the sponsor and the operator, I feel like that’s most important at the end of the day. The second thing that I’m looking at, and it’s almost a tie between is between the market that it’s in and the deal itself, both are hugely important. I would almost go as far as to say that the operator sponsor then the market then the deal last, and that’s the process that I take.

Travis Watts 8:57
The theory behind that is if you’re working with an experienced operator with a track record that’s done this over and over again, has the proof and the numbers to show you, they specialized in that niche market, all these kinds of things, they’re going to be doing a good deal. I mean that that’s the assumption. I’m not saying I would just, you know, do a deal because of that, you still have to vet everything out. But in general, that tends to be kind of the play, and the approach that I take.

Vee 9:23
So then, can you share? So you said, You vet the sponsor? Then you vet the operator? vet the market? And then the deal? Can you share what you do when you vet a sponsor?

Travis Watts 9:36
Yeah, exactly. So there’s a number of things. And I think even I mean, I left a couple elements here out I should probably just in transparency probably mentioned this first before you even get to that point, I would sit down this is this is what I failed to do in the beginning of my investing career in real estate that I wish I would have done sooner. But literally sit down, get to know yourself, reflect inward a little bit. Get To know your goals and your why, you know, if you want passive income, why do you want passive income? How much passive income okay? If you have that much passive income, what would you do with your time, you need to be asking yourself these questions and they’re not going to come easy, it’s probably not going to come in one sitting. But these are conversations to be had with a partner, spouse, or just by yourself.

Travis Watts 10:23
And then defining your investing criteria, right? So like, if now you’ve got your goals outline and why you want to do it, but what’s your criteria? Are you going to take an approach of I want to go invest in self storage, I want to go invest in multifamily. I want to go fix and flip houses I want to you know, so then it’s kind of defining the model that you want to chase after, for me it’s mostly multifamily. I do invest in other spaces like self storage and ATM machines and notes and other things, but it’s like 80% multifamily focused, then we’re getting to basically the team.

Travis Watts 11:00
So the things that I loosely mentioned, there are track record experience and then looking for consistency of business plan, it is a maybe more of a personal preference. This is something I look for. And my theory is, there’s a better likelihood of execution and a lower risk associated with a group that does nothing but the same thing over and over and over and over again, they found what works, they get real good at it. They build a connections and their network around it. And they just keep trucking along versus a group that says, well, we’re going to do a multifamily deal here, then we’re going to do a ground up construction over there, and then some self storage on the side.

Travis Watts 11:44
And, and the theory there is that, I mean, you really can’t be good at everything. You might kill it on one of those projects and you might fail another one. And I’ve seen that unfold firsthand with numerous groups. So I look for groups that have that consistency. Then it’s meeting with them right writing down your questions. When you’re presented a deal, it’s going to have a lot of information about the markets projections and rent growth and hold period and all this stuff. So most your questions should be answered from that. But still write down additional questions that are important to you.

Travis Watts 12:19
Such as what if we go into a recession? What does that mean for this project? Or what do you guys suspect you’ll do if that were to happen? Or, you know, I noticed some vacant land around this unit. What if somebody builds another apartment complex next door? how might that affect this business plan? Things like that. So you’re just trying to get genuine answers that make sense to you from the sponsor. Nobody has a crystal ball. No one can tell you exactly. But just to feel comfortable with those responses, I think would be a very important thing to do.

Travis Watts 12:52
And the last thing I’ll say about the sponsors, just simply getting a gut check. If you can meet face to face, that’s always the best. If you can’t make be doing a zoom call or you know, an online webcam type thing. If you can’t do that, at least do a phone call or two. And maybe they have some exposure out there. Maybe you can YouTube them and there’s some videos and speaking events they’ve done and you’re just trying to overall feel out the person make sure they seem trustworthy, genuine, forthright, honest, all that kind of stuff, and that they’re being conservative. I guess I left that out look for, you know, conservative approaches in the business plan, not very high, aggressive, quick turnaround, stuff like that.

Vee 13:30
Do you have a list of questions that someone should be asking an operator?

Travis Watts 13:36
I actually do so it’s in a free passive investor guide that any of your listeners can download. And you can find that at ashcroftcapital.com/passiveinvestor. There’s a whole bunch of them and there’s some visuals to go along with it. It’s just much better presented in that form. And you can kind of scroll through like common QA and how to vet sponsors and things like that. So again, that URL is ashcroftcapital.com/passiveinvestor.

Vee 14:10
That’s good. And if you want to send Travis an email also, I just want to mention, his email is travis@ashcroftcapital.com . Now, let’s go back to the topic of vetting the sponsor, you have done a lot of passive deals up to now, what are some of the red flags that you have seen from people you have vetted so far?

Travis Watts 14:33
Yeah, the first one would be lack of experience. But there’s a caveat to this. I mean, everybody’s got to start somewhere, right? Everyone’s got to do their first deal and I’m all for it. And but here’s the thing I look for, if that’s going to be the scenario, that they’ve got somebody on their team, or maybe a mentor or somebody looking over their shoulder to help with the underwriting and the numbers and you know, that does have the track record and/or the experience and guys this is just from personal experience. The newest operators I invested with the business plans myself, the more experienced operators have been fantastic. That’s not always going to be the case. That’s no form of guarantee. But that’s one thing to definitely consider track record and everything else that we discussed. So red flags would be, we’ve done one or two deals, we haven’t taken any full cycle we’re only six months into that kind of stuff I like to see a little bit more ideally, a deal that’s gone all the way through they bought it they did their value add plan and then they had a disposition or sale and now they can share with you those numbers and say, you know, we whatever we needed our investors, you know, 25% annually or something like that for a few years. The other things are I like confidence in an answer. That’s to a difficult question. So so when you when you ask a sponsor Hey, what if we go into another 2008 2009? recession? What affects next year? What does that mean? What a big red flag would be? Well, you know, I mean, that’s not going to happen. Well, you know that that kind of thing.

Vee 16:15
Let me ask you this like, because I asked that exact same question. And the sponsor answer was that well, I cannot go into underwrite a deal thinking about a recession, because it may or may not happen, you know, if I kept on thinking like that, then I may not be able to take down the deal. pretty confident answer, but then to me, like, what am I What are you saying to me now?

Travis Watts 16:42
Yeah, I don’t I don’t like that answer. I don’t like that response. It’s got to be thought through. Obviously, like I said before, nobody has a crystal ball. No one can answer that, you know, in a very defined definite exact way. But just to have a plan, say, well, we put you know, a 10 year debt structure on a Five Year business plan, we’re hoping to actually sell it and three, you know, we’re already buying at this margin, we’ve got a 20 year track record of rents being, you know, whatever in this range or the occupancy being stabilized, you know, I just like a little bit more depth to it than just all I haven’t thought about it or Oh, we didn’t underwrite to that, or it may or may not happen, or I don’t think it’s going to happen. Those aren’t good answers to me. It’s whatever you’re comfortable with. Maybe that’s a good answer for somebody else.

Vee 17:31
So no, no, definitely not. I mean, it rubbed me the wrong way when I heard them like, you sounds a little reckless.

Travis Watts 17:38
Yeah, well, and you gotta think too, since I started investing in the space in 2015. There are so many people that have jumped on this bandwagon. I would say most of the sponsors out there at this point are new, not brand new, maybe but you know, within the last couple years or something like that. So I mean, I’m on everybody’s deal list. I get deals daily. And it’s like I said, you got to know your criteria, know why you wrote that criteria, know what your focuses, and then you know, I’m deleting 90% of those because they just don’t match what I’m looking for. So that’s why that’s kind of the first step is getting to know yourself.

Vee 18:18
So then when you, you know, when you have that many deals come to your desk, what do you do when you underwrite a deal for yourself so that you know whether or not you want to get in?

Travis Watts 18:28
Yeah, I mean, it’s kind of just just a checklist, really. So it’s my already know, myself and my goals and my why I already know the my criteria. And by the way, let me let me just expand on criteria because I just keep throwing that out there. But what does that mean? So here’s an example of what your criteria might be. I look for value add B class multifamily assets from 200 to 600 units in the Dallas Fort Worth markets with a five year hold period and monthly distributions. That’s pretty specific. That’s pretty defined. You don’t have to go that defined. You could be, you know, that’s how defined I go with it and each face. But that’s an example of knowing your criteria.

Travis Watts 19:18
`So now when I get an email tomorrow, and it’s, hey, we have this new exciting opportunity in Phoenix and its ground up construction pass, right? Simple as that. I don’t even have to look at it. So that helps a lot, because you can really get caught up in analysis paralysis. I did this a lot in the beginning, because I was so new, and I got all these deals sent to me. I didn’t know which one to choose. And so I’m looking at the pro formas. And I’m just picking off the numbers. I’m saying, you know, this deal is 10%. This deal is 8%. I’m just doing the 10. Right, that’s a higher number. And that was a big mistake.

Vee 19:53
So let’s say a deal pass your checklist. Do you actually sit down and underwrite the deal with the T12 And all the financials documents,

Travis Watts 20:03
what I usually do is I’ll ask for if they’re not already included, which usually they are in a very detailed prospectus or summary. But always ask for those, and just kind of it kind of gets back to that general concept of trust, but verified. So I’m not going to be able to verify everything but you know, when they’re saying we’re projecting, you know, 5% rent increase, you know, annually in the sub market, right? I’m just getting on Google and I’m going to CBRE and all these different websites and just kind of double checking their their stats and kind of what that submarket specifically is doing, looking at comps, not just taking what they put in a prospectus at face value. But again, this is the last stage of the process. It’s already met my criteria. It’s already in a market that I like it’s already with a group that I know I’ve already had the conversations and so now we’re just kind of getting to the final details before sending in funds.

Vee 21:03
And for the listener, you know who’s new into space and wanting to get in, where is a conference that people can find experienced operators at?

Travis Watts 21:15
Yeah, there’s man every year, there’s just more and more conferences. I’m blown away. I can’t even keep up. I’m a big conference guy. always have been. I’m just a huge advocate for self education and expanding your network and all that kind of stuff.

Travis Watts 21:29
So, so Ashcroft Capital and Joe Fairless. That’s the best ever conference that’s actually coming up February 20th, to the 22nd 2020 here this year. After that, there’s just a handful a lot of them happen out in Dallas, but just get on Google and just search for multifamily conferences.

Travis Watts 21:48
And I mean, there’s got to be 15 – 20 of them a year. It’s just outrageous. So most of those are good. I usually look for attendance count, and if they’re not putting that on the side, I’ll usually call someone that’s like organizing that event, just kind of get an estimate. And the reason is sometimes you go to these really small events and it’s not worth your time if you’re going to go travel and get a hotel and rental car and the whole mix. You know if there’s 50 people that show up, it’s more like a real estate meetup. But yeah, so 500 plus attendees is ideal. And that just gives you more exposure, right? You’re going to meet more people, you’re going to have more presenters usually, and get a lot more out of that event.

Vee 22:28
I’m glad you brought that up. Because my first conference that I went to, was in Cleveland, Ohio in 2011. Just at that time, I was trying to expand the market in Denver, and at that time I went to it was about 15 to 18.

Travis Watts 22:47
Now you got those and like every city is just look up a real estate Meetup group, right? There’s like 1000 of them. But yeah, these bigger conferences are are getting bigger and bigger every year as more people kind of jump on this bandwagon, both on the passive side like I do, and both on the active side trying to do their own deals. So that’s usually kind of a mix of, you know, 50-50 depending on the conference.

Vee 23:08
Can you talk about why you pick passive, over active in this space?

Travis Watts 23:14
Yeah, I think there’s a lot of advantages to active but for me, it was just a time constraint. I just didn’t have the time to dedicate to it. I set out to do 50 or 100 single family homes. That was my goal. And I quickly realized after 6,7,8 homes, whatever it was, that all of a sudden, it’s a part time job and it’s about to turn into a full time job. And so that was not very scalable. And yes, I put it you know, property management on site and all that, but it’s still not scalable. In my opinion, I still had to keep track of all the receipts, I still had the same issues that would that would come up and then HVAC unit blows up and there goes your cash flow for the whole year. And so you’re making no money out of it and I just got so fed up and frustrated with with that process and and not to mention, I definitely have to point this out. I wasn’t good at it. Like I had to look inward and be like, hey, there’s people around me doing this like three times better than I am. You know, here I am flipping a house for 25 K and someone over there is making 150 K. It just wasn’t my thing. I’m not a handyman. I don’t like dealing with tenants, you know, so I had to contract everything out. It got very expensive and it was just a headache. So for me and for a lot of working professionals, Doctor, dentist, lawyer, Attorney, engineer, software sales there. These are the types of folks typically that are doing syndications like I do as a limited partner, I’ve just been very grateful that I was able to eventually get to the point where I could do that full time. So now I consider myself just full time limited partner, investor. So that’s that’s a whole different world that you can break into overtime.

Vee 24:55
So now you you work for Ashcroft Capital as Investor Relation person?

Travis Watts 25:02
Yeah, exactly. So earlier when we were talking about loosely on just financial independence and whatnot. So what the whole deal was was I got the benefit of leaving the oilfield job a job I despised and hated and wasn’t good at in the whole deal to pursue more meaningful work.

Travis Watts 25:18
One of the first things I did is I went to go work for a large brokerage firm will say, I don’t know if I should put their name on the podcast, but anyway, and so I you know, I got a series 7, series 63 I got license and, you know, it’s like stocks, bonds and mutual funds. I was thinking, Man, if I could learn the paper asset world and then I could learn or I already kind of knew real estate and I could combine the two, I would just be this you know, financial guru, so to speak, that was kind of my mindset.

Travis Watts 25:46
It really didn’t resonate well with me. I didn’t like that industry at all. So you know, I left like a year later. And then I went to go work for syndication firms just to learn kind of from the inside out how this whole process works and all that kind of stuff. And then so so my affiliation here with Ashcroft, I do a lot of live events for Ashcroft. And so yeah, it’s investor relations in the sense that, you know, I’ll be a panelist or speaker, I’ll have, you know, you’ll find me behind the Ashcroft Capital booth at an event. And I’m just helping share, I mean, I’ve done nine deals with them personally. And so a big part of my portfolio. And so I just share kind of, you know, personal experiences being an investor and kind of just spread the word that way. So, to me, that’s very impactful, it’s very meaningful to be able to, you know, connect people to the right resources and but, you know, I help real estate investors on all levels and on bigger pockets and, you know, I do a blog and it’s a lot about the fire movement or financial independence. And, you know, if someone wants to know how to house hack or or how I did it, you know, I can just share that experience, and that’s very rewarding to me.

Vee 26:54
That’s awesome. And so, you don’t actually let’s say you don’t work for Ashcroft actively because you just you know doing event sharing your knowledge and talking to people. So you don’t necessarily work with Joe on a day to day basis. But for the investor who is listening to the show if you want to meet the kinds of the likes of Joe Fairless, then the guy that I know works for Joe, John Casmon really good operator, you should definitely go check out best ever conference. And that’s besteverconference.com

Travis Watts 27:27
Yeah, I think they shorten it to bec20.com. Yeah. Okay. So I’d be both but

Vee 27:35
bec20.com. Now, go back to your job now. Actually, can you tell me what’s a day in your life like now?

Travis Watts 27:45
Yeah, so I like I said previously, I’ve always loved attending conferences, attending network groups, just expanding my network just mingling with folks and just listening to panelists and speakers. I love that stuff. Even if we’re not talking real estate, if Like we’re, my wife and I are going to a Tony Robbins event, you know in March and I just love it. It’s lovely there.

Vee 28:05
The one in San Jose?

Travis Watts 28:06
Yeah, exactly. Are you going?

Vee 28:08
No, I’m not. I’m going to another mastermind of someone who was in. Okay, Tony Robbins mastermind.

Travis Watts 28:14
Okay, cool. But so so a day in the life of me it’s chaotic. It’s a I just fly around. I travel a ton. My wife works for an airline. So naturally we travel a lot. Hence where that came from. And so yeah, like I said, you might run into me at an event or be like an Ashcroft booth. You’ll see me there. Just come say, hey, just mingle network, and I do some speaking stuff. I do a few, you know, podcast things. I attend some local real estate meetups, but, you know, it’s just kind of where’s my time best spent and, you know, it’s kind of just a flexible schedule. I don’t have a defined schedule. I’m not a W2 worker or a nine to five or whatever. It’s just sort of, I’m just always on the go. It’s a fluid process.

Vee 29:00
So then What’s your goal with with all of those events that you go to? What’s your end goal? Looking for more deals more connections?

Travis Watts 29:08
Yeah, good question I intend on always being a passive, limited partner investor, I found it just to be a great risk reward type of investment. And I just don’t want to go back to being active again. I don’t want to go flip a house, I don’t want to go do my own deal and be a general partner. I just don’t. And so yeah, I don’t know. I’ve done what 27 deals that hopefully in the next 10 years, I’ve done, you know, 100 deals, and I just want to stay on that path and have the flexibility and the freedom to travel. And, you know, we’ll see kind of where where my wife’s career goes, and when she wants to kind of pull the plug on that and then who knows.

Vee 29:50
So now you’re waiting on her.

Travis Watts 29:52
Well, she loves her job, and it’s great. And I mean, she works with a tremendous team and it just it doesn’t feel right to quit. I mean, she could if she wanted to, but so yeah, we’re kind of in this hybrid space where we’re both kind of doing our highest and best and helping people. And you know, we’re surrounded by a great team. And so it’s just a good place to be. So it’s hard to say, I really don’t know. But I know I’ll stay passive as an investor. I know that.

Vee 30:19
That’s great. What are you most excited about right now?

Travis Watts 30:23
Oh, you mean besides of the best ever conference? Shameless plug.

Travis Watts 30:30
I am most so we’re about to go to Costa Rica, just after the Tony Robbins and then we’re looking at going to Bali, Indonesia, maybe later in the year. So I just I love travel both of us we just were fanatic about travel and just love experiencing different cultures and different food and just getting that kind of experience. So other than you know, of course, I mean, truly and wholeheartedly. I love helping people on a daily basis. That’s so true. That’s above all in any form or fashion. And that’s just how my day unfolds. People set up calls with me and we talk about whatever they want to talk about. Usually it’s real estate. And then sometimes we get sidetracked on the travel. But yeah, that’s what I’m excited about helping more people expanding a reach connecting people with the right folks in the industry, and experiences.

Vee 31:23
So let’s say in 10 years, when we’re when you’re done with all this investing, you’re having massive amount of cash flow coming in from your passive investing. What do you want to do at that point, then, say your 10 year plan? What do you see yourself going?

Travis Watts 31:40
Well, you know, we’re right at the point my wife and I, where we don’t have kids, but it’s coming and so we’re not going to wait too late, too late. And so it’s so hard to predict that stuff, you know, or I mean, are we gonna have one kid 234 I don’t know where we gonna live don’t know. You know, are we going to live here domestically or internationally in 10 years, I don’t know. So it’s just literally impossible to say. But I can say that we’re loving kind of what we’re doing now. And so no crazy changes in the immediate future.

Vee 32:12
Don’t I mean, it’s an awesome, awesome lifestyle what you guys have right now, I mean, it should be the goal that everyone should aim for, is to be like you and be able to just go to conferences or do whatever you want just travel, do anything you want in the free times, and then still have that cash flow coming in. And that’s the beauty of being a passive investor.

Travis Watts 32:37
Exactly. And I’m a big advocate for financial independence, whether we’re talking the fire movement, financial independence, retire early, or whether we’re just talking financial independence. I mean, I’d love for everybody in the US to reach that point sooner than later. And you can go you can build that through a multitude of different models out there. The best one that I found for us has been the syndication model. But the whole thing behind it is, when your passive income exceeds your living expenses, you now have freedom to quit your job if you want to quit, or take more risks and your job in a good way, and kind of be a little more outspoken and make a difference there, you could switch to part-time work, you could travel more, you could spend more time with family, you could be more creative and get more into art, you could be more charitable, you could launch a charity, that all these kinds of things. I mean, you look at like, just to use a public example, like a Bill and Melinda Gates, they’re running the Gates Foundation, you know, that’s what that’s their life purpose. That’s what they still work full time. But they’re choosing to spend it on something impactful and meaningful instead of just logging in to the office of the cubicle and doing the grind and then you know unwinding over the weekend.

Vee 33:56
So then I see a future in the Travis and Angelica foundation.

Travis Watts 34:04
There you go. There you go. Yeah, absolutely, man. I mean, what like, you know, there’s different thresholds, right. There’s like when you barely pass financial independence, then there’s like when you have a little bit of margin past financial independence, then that’s like when you really hit the wealth and impact stages of financial independence. That’s often where that comes from. And, yeah, for anyone pursuing this path, I think that’s very possible.

Vee 34:30
Is there any things that they should pay attention to right now, before they go into a deal, besides the things that we talked about so far? There, and what did I leave out? What’s the most important thing that you think I left out?

Travis Watts 34:46
I think what’s on a lot of people’s minds right now is where we’re at in this economic cycle, right? You hear so much about the stock market and how we’re at all time highs and how we’re in the longest Bull Run and all this kind of stuff and What does this mean? For real estate? What does it mean for stocks? What does it mean for bonds? So you know, this stuff, it takes some research and there’s, you’ll hear 1000 different opinions out there whether you know, what’s what’s about to happen next, nobody knows.

Travis Watts 35:15
But the reason I like value add B class multifamily, sometimes C class and the reason I like self storage and the reason I like ATM investing, it’s I don’t want to say it’s uncorrelated to the market, because that’s not true, but it is a lot less volatile, a lot more predictable. And a lot of these deals that we’re buying, we can look back if the sellers got the financials, we can see how the property performed in 2008 2009. And you will see in multifamily specifically, there’s usually just a slight downturn in occupancy, but I mean slight I mean it like let’s say it was 95% in 2006, and then it was 88%. In the Great Recession, ultimately, you know, your breakeven occupancy might be 60 or 65, or something. So it’s a fairly conservative play at the end of the day. It’s workforce housing, it’s affordable housing, its middle income housing. And I mean, I think we all agree that’s highly in demand, you can’t afford to build new product, and then go charge 800 900 bucks a month and rent, you just can’t make the numbers work. So this inventory is limited. And so yeah, I don’t know. I mean, you can’t change that, you know, until cap rates are 1%. I mean, there comes a level where there’s too much risk involved. But I still see opportunity today, even if we’re heading into recession. So something to be aware of think about risk, obviously, that’s very important. But to me, it’s like, you know, I could go buy an index fund and it could lose 50% in the next downturn. And in my opinion, that’s less Likely, you know, in an asset, like affordable housing or self storage.

Vee 37:04
Yeah, the end of the day, you still have to live somewhere.

Travis Watts 37:06
Yeah, I mean people do and the thing is, you know you so there’s different classes of multifamily, A, B, C, D. A is like luxury, new build high end amenities, highest rents, best neighborhoods, lot of those folks in a recession, lose their jobs, take pay cuts, whatever. They’ve got to move somewhere else. So they’re moving down to a B class product. And in some of Bs are going into Cs, but at the end of the day, yeah, there’s always a demand for mobile home parks, cell storage and affordable housing.

Vee 37:39
Awesome, Travis. Now, before I let you go, I have just one last questions. I know we’re short on time here. Just one last question before I let you go.

Travis Watts 37:49
Yep.

Vee 37:49
What’s something that you’ve said no to and your life is now better because because of it?

Travis Watts 37:56
Wow. I have said no to Investing and things I don’t understand or know, an example of that I had a buddy who was investing in the crypto space. And I don’t know, it’s like when I didn’t follow it too closely, but it was like he wanted me to start investing in it when the Bitcoin was like it. I don’t know, 16 or 18,000. And then like a week later, it was at 10 or something. And so, and I had a lot of liquidity at that time, and I’m so glad I didn’t take that advice, because it would have been an immediate 40 50% drop. So invest in what you’re comfortable with and what you know what makes sense.

Vee 38:36
Oh, my God, you dodged that bullet, huh?

Travis Watts 38:39
I did, man. It was tempting, because I’m like, you know, nobody knows. Right? It’s so new and but, man, yeah, I did dodge that one.

Vee 38:49
Good job, man. Well, thank you so much for your time. Travis. I really appreciate you coming on and share your knowledge with the audience today.

Travis Watts 38:56
Alright Vee, Thank you. Appreciate it, man.

38:59
That’s the end of the show. Don’t forget to subscribe leave a five star rating in the review on iTunes for The Real Estate Lab Podcast. Until next time, have a prolific week.

Be sure to check out other episodes from the Real Estate Lab Podcast.

The post 16: Travis Watts – Financial Independence Through Passive Investing appeared first on Real Estate Lab .

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https://realestatelab.live/16-travis-watts-financial-independence-through-passive-investing/feed/ 0 Travis Contact: travis@ashcroftcapital.com https://www.facebook.com/travisjwatts www.linkedin.com/in/traviswatts1234 https://www.biggerpockets.com/users/TravisWatts Instagram @passiveincometravelers Show Notes [00:00:38] Schedule a call with me at www.... Travis Contact:



travis@ashcroftcapital.com https://www.facebook.com/travisjwatts www.linkedin.com/in/traviswatts1234 https://www.biggerpockets.com/users/TravisWatts Instagram @passiveincometravelers



Show Notes



[00:00:38] Schedule a call with me at www.CallwithVee.com



[00:01:04] Check out my interview with Erik Smith from Fitness and Finance Podcast at www.FitnessNFinance.com



[00:02:12] Tickets for BEC20 available here: http://bit.ly/31D16Ho – Use code “GOALS20” to save 20% at checkout



[00:03:59] Travis started his investing journey with the book Rich Dad Poor Dad – https://amzn.to/31M360c



[00:07:04] Travis shared info on his first passive transaction. He put too much emphasis on a Pro-forma. Pro forma is financial statement produce based on certain assumptions and projections.



[00:07:31] You are not investing so much in the deal but the team.



[00:08:28] Travis talks about his investing process. He starts with vetting the sponsor/ operator. Then looks at the market and the deal itself.



[00:09:36] Travis dives into how to vet a sponsor.



[00:12:19] What questions should you ask the operator? You can also download a guide of all the questions to ask at www.ashcroftcapital.com/passiveinvestor.



[00:14:33] Travis shares the red flags to look for when vetting someone



[00:18:28] How Travis work on his deal flow



[00:21:48] How to find what conference to attend to find good operators.



[00:28:14] Travis shares a day in his life



[00:34:46] Travis shares his last thoughts on what investors should pay attention to before going in a deal







Transcription



Travis Watts 0:03
I mean, you really can’t be good at everything. You might kill it on one of those projects and you might fail another one. And I’ve seen that unfold firsthand with numerous groups. So I look for groups that have that consistency.



Vee 0:17
Welcome to the show. You are listening to The Real Estate Lab Podcast. In this lab. we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.



Vee 0:38
It’s an amazing day to be alive and to invest in real estate. My name is Vee Khuu and you’re now listening to my show The Real Estate Lab Podcast. Hey I cannot wait to share with you about today’s guests. But first, if you haven’t done this already, let’s schedule a quick chat with me. Just a quick 10 minute phone call. You can head on over to the www.call withvee.com to set that up.



Vee 1:04
Also, I was recently interviewed by my good friends, Erik Smith of Fitness and Finance podcast. Eric is an awesome financial advisor. Be sure to check out his podcast at www.fitnessnfinance.com.



Vee 1:19
Let’s get back to today’s guests. Our guests started investing in 2009 and is currently the Director of Investor Relations of Ashcroft capital. He’s a full time passive investor having invested in over 27 syndications between 14 firms. Ladies and gentlemen,]]>
Vee Khuu 1 39:03
15: Paul Moore – The Perfect Investment! https://realestatelab.live/15-paul-moore-the-perfect-investment/ https://realestatelab.live/15-paul-moore-the-perfect-investment/#respond Mon, 03 Feb 2020 13:47:36 +0000 https://realestatelab.live/?p=514 Show Notes Paul’s Contact Info: www.WellingsCapital.com Twitter: @PaulMooreInvest https://www.biggerpockets.com/users/PaulTMoore Email: Paul@WellingsCapital.com [00:01:32] IF you want to stick with your resolution and goals, read Atomic Habits by James Clear – https://amzn.to/38ZBqHq [00:02:22] Paul’s book is called The Perfect Investment: Create Enduring Wealth from the Historic Shift to Multifamily Housing – https://amzn.to/2ScvBj7 [00:04:35] Paul realizes that his degree in Petroleum...

The post 15: Paul Moore – The Perfect Investment! appeared first on Real Estate Lab .

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Show Notes

Paul’s Contact Info:

www.WellingsCapital.com

Twitter: @PaulMooreInvest

https://www.biggerpockets.com/users/PaulTMoore

Email: Paul@WellingsCapital.com

[00:01:32] IF you want to stick with your resolution and goals, read Atomic Habits by James Clear – https://amzn.to/38ZBqHq

[00:02:22] Paul’s book is called The Perfect Investment: Create Enduring Wealth from the Historic Shift to Multifamily Housing – https://amzn.to/2ScvBj7

[00:04:35] Paul realizes that his degree in Petroleum Engineering tied to oil prices. 

[00:05:14] A few years after getting his MBA, Paul started to work for Ford Motor Company.

[00:05:46] Paul and his friend started a staffing company. 

[00:07:02] Paul explains the differences between investing and speculating.

[00:08:29] True wealth are our assets that produce income.

[00:09:19] Commercial real estate’s value formula.

[00:11:53] Warren Buffett Model

[00:13:03] Paul mentioned Gary Keller’s book. The One Thing – https://amzn.to/37SLrGj

[00:13:35] Adding value to self-storage units.

[00:18:42] Paul explains how well self-storage units did in the last downturn.

[00:21:34 – 00:23:45] How to research what area needs more self-storage units.

[00:24:39] How to research the operator.

[00:33:50] Things to look for during due diligence of a self-storage unit. 

[00:38:19] Learn to pull the plug quickly

[00:45:16] Paul suggests finding a book on senior living and read

Transcription

Paul Moore 0:03
Now the different the opposite lesson is what a lot of, of our guests on how to lose money have learned as well. And that is never give up. Which is kind of funny. Because some of those lessons have been, you know, the fact that if they would have quit in the year three, they never would have got the abundance that they got in your four and five and six. And so it’s really hard to know I think it’s wisdom, and many years or decades of experience that helps you know the difference between pulling the plug early and never giving up.

Unknown Speaker 0:39
Welcome to the show. You are listening to The Real Estate Lab Podcast. In this lab. we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.

Vee 1:00
It’s a great day to be alive and to invest in real estate. My name is Vee Khuu. And you are now listening to my show The Real Estate Lab Podcast. Let’s take a moment to say goodbye to January, at the release of this episode, one month of this new decade had come and gone. Are you still on track with your goals or your New Year resolution? What resolutions? You know, the one that you made on the first of this year? Yeah, that one, hey, if you’re not on track, it’s not your fault. It’s your system.

Vee 1:32
That’s what I’ve learned recently from James Clear author of the book Atomic Habits, this is a must read. Go ahead and get it right now. For the rest of you out there with awesome systems in place, I hope you’re out there still crushing it wherever you might be listening to this recording from. I would love to hear from you regarding your goals and your resolution. Let’s hop on a call, shall we? Get on my schedule at www.callwithvee.com that is V with two E’s and we’ll make it happen. Cool bean? Let’s get back to our episodes today.

Vee 2:09
Our guest graduated with an engineering degree and MBA from the Ohio State University. He is the co host of a wealth building podcast called How to Lose Money?

Vee 2:22
He’s the author of a book called The Perfect Investment Create Enduring Wealth from the historic shift to multifamily housing. He also appeared on HGTV helped with the development of a Hyatt Hotel, Managing Director of Wellings Capital and has his own live show every Friday on Bigger Pockets. Our special guest today is Mr. Paul Moore. Paul and I would chat about investing versus speculating, what type of assets will give you true wealth? What is the perfect investment for you? And the Warren Buffett motto that his team at Wellings Capital is using your influence epic show today. Let’s get it rolling with Mr. Paul Moore of Wellings Capital.

Vee 3:14
Hey, welcome to another edition of The Real Estate Lab Podcast. It’s an honor to have you here with us, Paul, thank you for making the time to join us today.

Paul Moore 3:23
It’s great to join you Vee. Thank you for having me on.

Vee 3:27
Hey, so, a lot of people know that you have been involved in the real estate world for quite some time, maybe in the late 90s to early 2000. Can you actually take a trip down memory lane and go way way back to say the time when you were eight years old? What was it like growing up in your household?

Paul Moore 3:47
It was I didn’t know a single entrepreneur. And I don’t even know if I knew what the word meant. It’s funny I everybody I knew worked at a factory or an office building and everybody’s father worked there. And I think I met one entrepreneur, my dad’s pharmacist, and I went to with him to the pharmacy and noticed that he just seemed to own the place. But he also worked there. And I’m not sure if he had a business or just a job because he looked like he was tired and he worked there all the time. But, you know, when I when I eventually got into college, I started thinking, I think I’d like to be an entrepreneur and I eventually ended up there

Vee 4:31
Was it at the time when you went to the Ohio State University?

Paul Moore 4:35
Yeah, I went to Ohio State I got an engineering degree, first of all, Petroleum Engineering degree, which was my first mistake. And then I when I got out, I made a good move. I was going to get a Masters in petroleum engineering and decided this is really tied to oil prices. I think I’d be better off getting a generalist degree like in business and so I went and got an MBA, at the last minute I changed. I’m so glad I did, because I went to Ohio State and there I got to actually take an entrepreneur class, which is really unusual class that no one talked about that back then in the 80s.

Paul Moore 5:14
And so I took a class on entrepreneuring, a friend of mine took it with me and we both got to Ford Motor Company a few years later, and we both found ourselves trying to start a side business. Honestly, quite often, we were working on that on evenings and weekends, and we loved Ford, but it was kind of boring for people who had a drive to be entrepreneurs. We eventually both left Ford and started our first company back in 92.

Vee 5:44
So what was that company?

Paul Moore 5:46
It was a staffing company. A lot of people don’t know what the term PEO means, but professional employer organization. And basically we do outsource human resource management. We did all the payroll taxes, benefits. Workers Comp unemployment insurance helped with hiring and firing and employee handbooks and all that for small to mid sized companies. And by doing that, we basically gave the employees and the owner a much better employment experience and better benefits. And we got paid a fee to do that.

Vee 6:19
And so how long did it take you to switch from doing that to real estate? And what was the reason behind it?

Paul Moore 6:28
So we actually I was fortunate enough to be finalists for an Entrepreneur of the Year in Michigan, two years in a row in the mid 90s. And a publicly traded firm heard about us and they acquired our company. And so I found myself before my 34th birthday, with a couple million dollars in the in the bank account and not having the first clue about investing but I thought I’m an investor now and I went out and wasted a lot of money.

Paul Moore 7:02
I actually did not understand the difference between investing and speculating, you know, Vee investing is when your principal is generally safe. And you’ve got a chance to make a return and speculating is when your principal is not at all safe, and you’ve got a chance to make a return and I actually confuse the two and I made a lot of money along the way, but I lost a lot of money unnecessarily as well. I learned a lot of lessons. And anyway, about, let’s see, three years later, I started flipping houses with a friend. And that grew into an obsession that led me down a long path through building ground up construction, doing a subdivision, eventually building a large multifamily property that we actually managed as well and then even a hotel before I jump back into what well We’re doing now.

Vee 8:00
So can you tell us a little bit what you’re doing now and why you make the switch to, to this field instead of the flipping business?

Paul Moore 8:11
Yeah, you know, when I was flipping houses, I always needed to do another deal to make money. And when I was doing the subdivision, we always had to get another piece of land or sell another lot. And when I was I actually had a real estate broker business as well. And we always had to sell another house to make money.

Paul Moore 8:29
But you know, Vee, true wealth are ours is assets that produce income, true wealth, and that’s what I wanted. And when I realized that commercial real estate had a completely different potential, it really intrigued me and I found it’s even better than I ever thought. If your Chip and Joanna Gaines Jr. and you can take a $300,000 house and finish the attic and finish the basement and add on to it and put on beautiful gold plated fixture not that you would. But if you did, and you spent half a million dollars beefing that house up, you had $800,000 in it, and you think you can sell it for $800,000. But the neighborhood is all $400,000 homes, chances are you’ll be limited by comparable properties.

Paul Moore 9:19
That’s how residential real estates value by comps. But commercial real estate Vee is entirely different. I’m getting excited thinking about it because it’s based on a value formula that says the value is the net operating income divided by the rate of return or also known as the cap rate. And so we can actually force appreciation on the property quite dramatically by increasing the net operating income and sometimes by even compressing the denominator in the equation, the cap rate and by doing that, we invest in lots of properties that have been able to increase in their equity value 50% or even 100% in a year or so.

Paul Moore 10:08
And it’s the key is buying from mom and pop sellers. And these sellers, these mom and pops don’t have the resources or the knowledge or even the desire to really maximize the returns and the value. And then beefing them up running them professionally, bolting on some extra ancillary services, ancillary sales and then selling to an institutional investor, who will pay a premium, which means basically a reduced cap rate. And that is the formula we are using. And so you asked what we’re doing now. So my company Wellings Capital, I wrote a book on multifamily investing a number of years ago, it’s still selling quite well. And it was called the perfect investment but oddly enough, the perfect investments not so perfect anymore if you can’t find any deals and multifamily at the time of this recording at least Vee is really overheated.

Paul Moore 11:08
And so we found that there are other asset sub classes, like self storage, and mobile home parks that have all these mom and pop sellers. And you can pay a very nice price to them a fair price. But you can significantly upgrade them, increase the value, increase the equity to the investors and have a phenomenal asset on your hands. And so we decided to expand into self storage and mobile home parks a couple years ago, but we said yeah, now I don’t think we would invest with ourselves. We we wouldn’t trust ourselves to do this because it’s late in the cycle. We know how to do it on paper.

Paul Moore 11:53
But you know Vee we’d never done it. We didn’t have a team who walked through the last one or two recessions. And really knew how to navigate this type of thing. So we decided we wanted to go on a quest to find best in class operators. So that’s what we did. And so we now our company Wellings Capital invest with those best in class operators. We trust them to have the deal pipeline them to get the debt, them to manage and operate. And we and our investors get the benefits. It’s sort of like the Warren Buffett model. Buffett doesn’t make ice cream. Buffett doesn’t design and sell insurance policies. He doesn’t build mobile homes, but he benefits from all these experts in those arenas. And that’s what’s made him the wealthiest and most successful investor on the planet. And so that’s the model we are operating under at Wellings Capital.

Vee 12:50
So now we actually have Paul Moore, the new Warren Buffett.

Paul Moore 12:55
No, I didn’t say that but I do love that model. And I do recommend That everybody stay in their lane.

Paul Moore 13:03
You know, Gary Keller, the most successful real estate broker on the planet taught us the one thing, one thing means focus on what you’re really good at, and outsource everything else. And that’s what he does well, and that’s what I want to do.

Vee 13:19
Yeah, so the topic that you just brought up is really interesting. The superpower of commercial real estate, right? So talk about mobile home park and self storage units. Just Exactly. How do you go about adding value to them?

Paul Moore 13:35
You know, I chuckled. When I first heard about value add Self Storage, I thought, Well, wait a minute. I love apartment value adds I mean, we can change the flooring and the lighting and the fixtures and the cabinets and beautify these apartments. But how do you beautify? How do you add value to four pieces of sheet metal and a concrete floor and a door?

Paul Moore 13:58
Well, there’s actually about 40 different ways to add value to a self storage facility. I’ll give you a quick example. We invested in one in Colorado, your state, and the seller was quite a mom and pop. In fact, the seller would place anxious phone calls to my friend, the operator who acquired this facility. They would call at four in the morning and talk for like two hours about all the things they were nervous about in selling this property. And my friend the the buyer became this person’s personal counselor, financial planner, and it seemed that the seller really trusted my friend.

Paul Moore 14:45
And when he acquired the property in Colorado, it had 80% occupancy which isn’t that bad, and he was able to raise it to 92% in the first six months. It also had 80% delinquency, which means four out of five tenants weren’t paying or were paying late. Well, he was able to lower that 80% delinquency down to 5% in six months. He also added a showroom that sold locks, boxes, tape and scissors and that added money to the pot. He also was able to raise rates 25% because they were below market that raised a lot of revenue. And I think really significantly, he bolted on something called U haul. He actually added truck rentals to this facility and just that alone added about $4,000 a month in revenue. Now let’s do the math on that Vee, $4,000 a month in added revenue with no capital outlay and no significant operational costs. That’s $48,000 a year.

Paul Moore 15:57
Now let’s use our formula that I mentioned the superpower formula of commercial real estate, the value is the net operating income 48,000 a year divided by the cap rate. And that cap rate he acquired at, I’m not even going to tell you about the increase or excuse me the compression in cap rate. Let’s just go with the cap rate he purchased it at which was 7%. So take 48,000 divided by point 07. That’s $685,000 in value, he was able to add at least on paper from adding U haul. That was just an operational change. He also did all the other things I mentioned him more. And so what happened is the facility when he acquired it was $2.9 million. And he was able to increase the value to about four and a half million dollars in just six months. That sounds great. That sounds Sounds like about a 50 or 55% increase in value. But it’s better than that. Because he only had about a million and a half in equity, a million and a half was was the purchase price was debt or less. And so that million and a half in equity, the bankers didn’t get their hands on that $1.7 million increase. The equity holders got it all. And so the $1.5 million in equity just went up by over double to about three or 3.2 million. And that’s in just six months. That’s a true value add story. And the great news is, for a company like my friends, who has an acquisition pipeline, and a group of people working the phones, they get opportunities like I just described almost every week.

Vee 17:52
That is fascinating to hear. I first heard about self storage back in 2009. And it was a good idea back then. However, as you remember, the crash happened, you know, in 09. So a lot of the mom and pop Self Storage operator were basically got wiped out by the crash. So another topic that I heard you talk about was the economy is about to crash or the crash is coming. So how do you protect yourself against something like that with storage facility, because in the downtime, people are not going to pay the rent in self storage, they would rather pay for say, to stay in a mobile home, or to stay in an apartment unit.

Paul Moore 18:42
Yet statistics say that overall Self Storage did very well in the last downturn. In fact, similar to mobile home parks, which you mentioned, they resisted, they had a slight downturn, but overall they did very well. Here’s one of the reasons if I’m renting, a $1,000 apartment to you and I raise your rent by 6%. You’re basically signing a one year contract to pay $60 more a month that’s $720 you might move rather than pay that. But if I’m renting to you a $100 storage unit, and I raise your rent by 6% Well, that’s only a $6 commitment because it’s a month to month lease. So most people would just not going to spend a Saturday rent a U haul get their friends to basically spend a day of their life to move their junk, I mean their treasures down the street. I was just being silly down the street to save $6 a month especially when they typically think you know, I’m going to be out of here in just a few more months anyway.

Paul Moore 19:51
Now during a recession, some of the 4000 square foot homeowners are downsize into a 2000 square foot home or a 2000 square foot homeowner might be downsized into an apartment. Some might be downsizing the mobile homes, and for a very small amount of money, they can store their stuff. And they do. So that’s what happens during a recession and a good time. People are filling up their Amazon cards, their Walmart carts, and they’re actually buying more stuff and they need a place to store it. And so that’s one of the reasons Self Storage is fairly recession resistant. I want to make a caveat here though Vee. Self Storage is micro, I should say micro local. And so while I could, Why I could say to you that self storage is overbuilt in a whole lot of markets across the country, which is true places like Boise, Idaho, Nashville, or overbill on self storage. There are sub markets within those areas that are under built like you could go to Nashville and See that it’s overbuilt, but you could go to Bellevue, which is a close in suburb on the southwest side of town. And it has virtually no self storage. And it would be a great place to build or buy Self Storage if you could find it. So Self Storage can be overbuilt, like apartments. But right now, it’s still a good time. If you know the right operators, it’s a great time to invest.

Vee 21:25
So a follow up questions to that is, how do you do your research to know what area need more storage units in what area don’t?

Paul Moore 21:34
when we were investing in multifamily, we will only only want to be in cities with a million or more least half a million, but Self Storage is quite different. There are about four things we look for on the surface. And if these four things are good, we’ll dive deeper. But those four things, number one would be the square feet of storage in a given radius. Now if that’s a if it’s a dense urban area, it might be this one mile radius. In a normal suburban area, it would be a three to four mile radius and a rural area, which we don’t ever recommend investing in. It could be a 10 mile radius. And so the metric we’re looking for, would be about seven square feet of self storage per person in a given radius. So let’s say a suburban area, three mile radius, we’re looking for seven square feet of self storage per person, man, woman and child or less, and that’s the national average now, so that means if it’s like 10, or 12, we might say, that’s maybe a little overbuilt. And if it was like one or two square feet, then we’d say oh, that’s really under built because there’s a higher demand and some of those people are probably going outside the area.

Paul Moore 22:55
A second thing we’re looking for is the occupancy and the current facilities. And of course, if it’s if it’s 100%. And it’s like I said that first metric hit, that’s another good sign. A third thing we’re looking for is the traffic on the road. If it’s on a location that has 30,000 cars per day, like I 25 going through your area, then that’s a really good thing. We also want it to be very visible on that road. It’s one thing to have a great road, but it’s another thing to be if it’s behind a hill or behind a Walmart parking lot, you can’t see it. The fourth thing we’re looking for is the income in the area. It doesn’t have to be super high income, but we want it to be at least an average income level or higher.

Vee 23:46
Right. So you don’t want it to be in a an area where the poverty is just below the state poverty level.

Paul Moore 23:52
Yeah, that’s right. I want to look at the city and state lines and see, you know, make sure that we’re above that.

Vee 23:58
What about crime rates. Do you feel comfortable having it in a high crime area?

Paul Moore 24:03
Yeah, we would dial in further if those four metrics were hit, and we would look at things like crime rate, zoning, the amount of land that can be developed nearby, making sure that we’re not going to get a competitor next door, things like that. We want a lower crime area for sure.

Vee 24:21
And so when so that’s for the property when you are looking to purchase. What about when you are looking to invest with an operator just like your company is doing, Paul? What are the things that you look for in that operator to feel comfortable enough to move forward?

Paul Moore 24:39
That’s a great question. You know, Warren Buffett bought, he actually invested I believe it was billions of dollars to help acquire ABC from from the seller to with capital cities in 1979. And then they sold it for very, very large profit to Disney in the 90s. And he made that decision on a 15 minute phone call. That was it. He didn’t do any more due diligence than that. And the reason was, he actually knew the buyer. He knew the operator really well. He completely trusted him. He’s been quoted as saying he was the best business owner/manager that he knew of in the whole country. And so in a 15 minute phone call, he was willing to invest and he made out really big with that because the operator was right.

Paul Moore 25:32
We spend a lot of time getting to know our operators, we fly to some of their locations unexpectedly. We fly there expectedly we show up at their office, we talked to their employees we talked to investors will talk to ex investors if we can find one to talk to. We’ll see how they talk about their investors, their employee, their spouse. We want to see that they had a track record that started well before The great recession that they didn’t just get into this and in the rising tide since 2011, to now, we want to see that they have a W2 staff that they’re not just a bunch of independent contractors all on their own. We want to look at the type of debt that they use. We want to look at the leverage amount. We want to see you know, what their attitude is about what happens in a downturn and how quickly they plan to sell. We look at criminal checks, background checks, all kinds of things like that, and we go on gut feel too. We had a potential operator wants that everything checked the boxes, he looked great. But we had a funny gut feeling about him and we didn’t invest.

Vee 26:47
So the point is, if you feel some, if you have some funny feeling in your gut, you just want to move on. You don’t want to even proceed any further.

Paul Moore 26:56
It’s really hard to say no based on having No tangible reasons. But I really believe that we were designed with an innate sense of knowing in our gut. When somebody as a shyster not always, obviously, a lot of people been taken in by people and been wrong, but often we can sense something, you know, they say, our brain. And I guess, I guess you could say our spirit somehow picks up on like, two or 3000 nonverbal signals that people have, whether it’s the way they’re standing or the way they, their move their hands while they’re talking, and the way they pause and their sentence, all kinds of things our brain can pick up that we don’t even know but it leaves us with a feeling like something’s funny here.

Paul Moore 27:49
I don’t know if I want to invest with this person. And usually, well, most amateur investors, I should say, override that and they just look at the numbers on paper and they say, Oh, this is my chance to get wealthy. And they override that funny feeling they have. I’ll be really honest with you here Vee, a lot of ladies are much, much better than guys at this, I find that guys are more willing to override the gut feeling or they don’t even have the gut feeling. But a lot of wives of investors that I know some of them are investors too, but a lot of times the wife or a lady in general has much better antenna and they pick up on these things and so I love it when my wife can meet anybody we’re going to invest with cuz she can often see through them faster than I can. And of course, we don’t invest in those cases.

Vee 28:52
Alright, so for your own business, how how are you finding these operator you just go to networking events or they call you How does it typically work out for you?

Paul Moore 29:04
Yeah, that’s a little tough. We’ve actually met some through referrals. There’s a couple people that I know and really trust who have been investing in these arenas for years or even over a decade. And I get advice from them on great operators are also there’s a couple websites out there that review large syndicators, and you can go and learn about great syndicators from these folks, and you can find out who’s great who’s not. It’s a little harder to get on there and to learn all about that, but that’s, that’s something you can do.

Paul Moore 29:44
There’s also crowdfunding sites. Now that may not sound like a place you want to meet an operator. But if you go to crowdfunding sites like realty mogul or fundrise, you can actually see List of operators and that doesn’t mean they’re all good. Good, some of them aren’t. But at least you can get a list on there and maybe you’ll find one, you’ll go to their website, and you’ll really realize that you really resonate with them. We met our best in our favorite operator that way on a realty crowdfunding website. That’s what I was trying to say. And through that crowdfunding website, we just got to know them personally. And we’ve had great respect for these guys. Now.

Vee 30:30
It’s interesting that, you know, this is a strategy that you are doing, because most of the investor that I talked to, they want to operate the project, they want to be the GP and raise money, but you are on the other side, you’re looking to just bring the funding in to the most trusted operator that you can partner with. Hmm. So what’s your philosophy behind that?

Paul Moore 30:59
We had to decide, do we want control? Or do we want the very best investment opportunity and best investment experience for our investors. And so since we didn’t have a team, who had been through the Great Recession, or through a couple recessions, and these asset classes that with these strategies, we thought we’d be better off being a middleman and finding the best people we can that have outsized returns, and that also treat their investors well, and who would even give us a premium for investing with them who would give us you know, a larger share of the pie and that’s exactly what we look for.

Paul Moore 31:44
Again, I’ll go back to Warren Buffett, Warren Buffett, like I said, doesn’t make ice cream or sell, you know, he doesn’t design insurance policies or mobile homes, but he actually invests and he’s made billions and billions of dollars for himself and his investors, through trusting these great operators, and trusting them to be experts in what they are focused on.

Paul Moore 32:10
Again, I go back to Gary Keller’s one thing focus on what you know, and outsource the rest to others. I was talking to an oral surgeon recently in the Pacific Northwest and he said, I’m building a retirement portfolio of 20 rental homes. And then he got to talking about and he sounded more and more depressed. And then he said, I actually, I’m only on house number three, and it’s driving me completely crazy. I I’m getting calls from tenants in the evening and I’m actually calling painters in the afternoon between surgery. I just can’t keep this up. Like there’s no way I want to manage 20 houses. He said effectively, he said, Why am I working harder than I need to to make less than I could?

Vee 32:59
I’m smiling coz one of my friends is having that exact problem.

Paul Moore 33:03
It’s very common, you know, a lot of people who think they want to build a single family portfolio, abandon that plan. And they eventually go back and they invest either as a syndicator themselves or with a larger syndicator. Very, very common.

Vee 33:21
Right. And I want to go back to the Self Storage Facility a little bit. I want to find out what other aspects Do we have to pay attention to, when we go into buying a facility or ourselves, let’s say I’m the operator, I’m brand new. I have this project, I need to be comfortable to go talk to someone like you to bring in the fun. What are maybe two or three things that I need to pay attention to? Especially doing the due diligence period?

Paul Moore 33:50
Yeah, so one thing I would look for is where’s the meat on the bones? Is there a showroom? Is there an opportunity to add a showroom? Is there room to park several U haul or Penske trucks that you could that you could advertise and manage their actually they do the advertising you just manage the trucks. Is there an opportunity to upgrade the facility you know, improve the marketing at a website.

Paul Moore 34:19
Here’s a big one. Is there any acreage Is there any land available to build an extra facility on we recently invested in a self storage facility that amazingly was on a great road, but it sat back and there was a huge, huge grassy area between this four lane road and the facility and some people said they didn’t even notice it there all the times they drove by. Well, what the operator did that we invested with is they paid a fair price for it. And then they built a large beautiful office and a climate control facility in the front of that, and by building the climate control facility on that acre and a half or whatever in front, they were able to expand capacity. The land didn’t really cost them anything because the land was already part of the purchase. And they were able to add a beautiful show room and office and do better advertising all in one fell swoop and by so doing that it was a huge value add and it’s going to be a great upside for investors.

Paul Moore 35:30
Another thing we’re going to look for, like I said before, is you want to make sure that you’re not going to get a whole lot of competitors around you. And one thing to look for is, you know, be careful there’s not a Kmart or Sears or Toys R Us empty building nearby because those can be a really discounted facility for someone to come in and build self storage. You know, a friend of mine, AJ Osborne built he actually bought a Super Kmart in Reno, Nevada. He sold off a lot of the parking lot to a multifamily developer. And he had the building and he cut it in half, believe it or not to make more exterior storage. And he built out all the inside. Of course it already had climate that already had flooring, lighting, everything was there. He built out the inside, he had two and a half million dollars in it. And he had 5 million in debt. So seven and a half million total Vee. And when it was 40% occupied, last December he got an offer from an institutional investor. Remember he only had two and a half million cash and he got an offer of $25 million for this facility and he turned it down. He wants more and he thinks he can get more once they’re at 100 or 90 plus percent occupancy and I think they’re there now

Vee 36:59
this is officially one of my most favorite worst story. This is crazy. 40% occupancy and he had it in for about 7 or $9 million. And

Paul Moore 37:12
yeah, he had seven half million dollars total in it and he got an offer at 25.

Vee 37:18
Wow, you cannot achieve this with apartment. There’s just no way someone would pay you at at 40% occupancy.

Paul Moore 37:26
Exactly. Because they were increasing an occupancy about four or 5% every month. And so on the track they were on they were going to be at 90% occupancy in another year or two. Very, very, actually, it would have been a year or less. And that’s exactly what happened.

Vee 37:45
Oh my God, that’s that’s good. That’s good to hear. Now, Paul, you have been doing real estate for a long, long time. Now. What is the most profound lessons that you’ve learned so far?

Paul Moore 37:56
There’s been quite a few. I’ve got a wealth building podcast. called How to Lose Money Vee. And we talked about the pain, the losses, the failures that many of us have along the road to success. And so, one lesson I learned and this is going to sound really funny, but is you need to learn to pull the plug quickly.

Paul Moore 38:19
We invested $390,000 in a non real estate property, unfortunately, it was a wireless internet company. And we built that if we would have just pulled had the courage to pull the plug, about a year in we could have returned at least half the money to ourselves and our investors. But we trudged on for seven years and never really turned a profit. And so we shouldn’t have learned to pull the plug sooner.

Paul Moore 38:49
Now that different the opposite lesson is what a lot of of our guests on how to lose money have learned as well and that is never give up. Which is kind of fun. Because some of those lessons have been, you know, the fact that if they would have quit in year three, they never would have got the abundance that they got in your four and five and six. And so it’s really hard to know I think it’s wisdom. And many years or decades of experience that help you know the difference between pulling the plug early and never giving up. Those are a couple lessons.

Paul Moore 39:25
Another one I learned I already shared. And that is the difference between investing and speculating. It’s really important to know the difference. If I said this to a young investor, if I said, low risk leads to low return, high risk leads to and of course, the young investor would say high return, but that’s not true at all.

Vee 39:46
It could be no return.

Paul Moore 39:48
Yes, high risk, high risk leads to no return or possibly high return. And so if you want to take high risks, you have to realize that you might end up worse off. And you might want to get to a place where a lot of us have gotten to, and that is we stop swinging for the fences. And we start trying to hit singles and doubles. I had a friend named Bruce. And Bruce spent 18 years like average of six hours a day training to be a professional baseball player. And Bruce spent one year I think he was in double A minor leagues. He spent one year he said I’m just going to focus on hitting home runs. He hit more home runs than that that year than he ever had before. He also had the most strikeouts and the worst batting average. And he actually set went backward in his career because he stopped trying to hit singles and doubles which he was very, very good at. And he started trying to hit home runs and a lot of investors realize after they get in their 40s or 50s or later That they would rather hit singles and doubles all day. You know, it may not seem like it, but that’s what Warren Buffett’s very good at.

Vee 41:07
You know, it’s interesting that you said that because I think Babe Ruth has the same story. You know, he got straight out a lot. And in baseball, especially if you got a 300 you’re really good hitter.

Paul Moore 41:21
Yeah.

Vee 41:22
300 you’re really good hitter. And I think it’s the same with real estate. If you get a home run, you know, from time to time. That’s good. But if you can get single double, that’s fine, too.

Paul Moore 41:36
Yeah, it really is. It’s really true. Jeff Zuckerberg from Facebook, of course, asked Warren Buffett. He said, what are your strategies? Not that hard, Warren. why doesn’t everybody imitate you? And like I said he was talking to Warren Buffett. And Warren said, Oh, no, no, no, people won’t generally imitate me. No one wants to get wealthy that slowly

Vee 42:01
overnight success that’s that’s like the go to slogan now every everyone one overnight success, but no one wants to put in the grind that make it an overnight success.

Paul Moore 42:12
That’s right. You are correct Vee.

Vee 42:17
And Paul, knowing what you know now and the wisdom and experience you have now, what would you have done different with that wireless deal?

Paul Moore 42:27
Well, I mean, I would have stayed in my lane. You know, I heard for years people tell me, I’d be raising money for this deal or that deal. And I’d have people say, Oh, no, no, I’m not going to invest in that, whatever that was. Because I don’t know anything about it. And I said, Yeah, but we know all about it. Well, blah, blah, blah. And I realized that it’s really, really important to stay in your lane and if you’re going to diversify, great, but diversify among things, you know, a lot about not things You know nothing about especially, don’t keep trying to start companies and growing them in new areas that you just are learning about as you go, you’ll always be working very long hours. And you will always have uncertainty in your future.

Paul Moore 43:18
And, you know, honestly probably strike out more than if you just pick something when you’re young and stuck with it. I had a friend. I have a friend named Barry who was running for governor of Colorado, about a year and a half ago and he was rubbing shoulders with lots of super wealthy, super successful people. And he said, You know, he said, These people aren’t any smarter. They don’t have any better education really than we do than the average person out there. The average successful person, but these Uber successful people typically have one thing in common. He said they focused on a goal. When they were very young, and they never strayed from that, and they said no, probably 10,000 times to potential distractions, and they stayed focused on that, and they got used to the monotony of success, you know, the monotony of success Vee is when you’re doing something that becomes very boring. You do it over and over and over til you’re really, really good at it. And that’s what he said. And I’ve taken that to heart. You know, I realized that people like Bill Gates decided as a teenager, he wanted to be involved in technology. And he said no to tons of potential distractions to stay focused on what he was good at, and he became the wealthiest man in the world.

Vee 44:44
That’s right. That’s right. Now, fast forward to present time. What exactly is that you are focusing on right now you’re most curious about right now.

Paul Moore 44:56
I am most curious. So I’m most focused on mobile home park investing, Self Storage investing and I still have an interest in multifamily. I’m just waiting for it to cool off. Now what I don’t know about and I’m most curious about is another asset class called senior living.

Paul Moore 45:16
It’s obvious that the demographics are there to support senior living. Go out and look for a book on senior living. I don’t think you’ll find one. I think it’s still a fairly right market to invest in. I’ve had two or three people I know who have looked into it and said that there’s a huge opportunity to invest. Now, I will say that what bothers me is one of the things that makes mobile home park investing so good. I know it may be confusing. I’ll explain. mobile home park investing is great for so many reasons. One of them is the fact that six out of 10 people who retire or who turned 65 I should say 10,000 of them turn 10,000 people turn 65 every day six out of 10 have less than $10,000 saved for retirement. How can that be in the wealthiest country in history? Less than 10,000 saved for retirement. So it really does drive the mobile home park success, because a lot of those people have Home Equity they’re willing to trade it in, and they’re willing to buy a mobile home and significantly drop their daily and monthly expenses. But if that’s true, who’s going to invest in a three or four or $5,000 a month Senior Living apartment? Well, I guess it’s the other four out of 10. But that’s the one thing that bothers me. And if I ever get serious about looking into senior living, I’m gonna have to get an answer. Sort of that question.

Vee 47:02
That’s, that’s interesting. You know, a few months back in one of the masterminds that I’m in, we actually had this discussion. And the verdict from that was that you’re not investing in an asset class like real estate, you’re actually investing in a business where you have to have employee, you have to have nurses. And if you’re not good at running a business, you shouldn’t even get involved with that. So that was the verdict of of that group. And then I heard what you just brought up right now is that, hey, a lot of seniors are actually going to mobile home park, maybe that’s a better way to go. Compared to the senior leaving route, but you make a lot more money from the senior living option. You can. There’s a guy here locally, he has a few facilities, just single-family home and he divided them up, to beds and he just gets Few grand per bed per month.

Paul Moore 48:01
Is that right? Well, that’s an interesting model. I’m sure that would be worthwhile to look into. I know a lot of folks are really looking into this now, but I haven’t heard of anybody doing exactly that. That’s so what do they have like a house manager or somebody just who basically just administers that property?

Vee 48:22
Correct? Yes. So you have a house manager, and then you have staff that comes in to take care of the seniors. And if you have big homes, you can afford to hire chef, massage therapists provide a lot of other services to the seniors that that live there. Well, just collect a lot of it is subsidized by the state. So you’re getting a lot more money.

Paul Moore 48:47
Yeah. Well, that’s that’s, that’s really, really interesting. And I think that that subsidy by the state might be the answer to my question as well.

Vee 48:57
I’m trying to find the course. I’ve heard of this course from another podcast, Gene Guarino, and he runs the workshop for risk residential assisted living homes out in Arizona, and he does it a few times a year.

Paul Moore 49:19
Well, sounds good.

Vee 49:22
So let’s go back to our our podcasts here. One last question, Paul, before I let you go, I know that you used to work at Ford Motor Company in Michigan. You’re really passionate about Ford.

Paul Moore 49:35
Yeah, I love Ford.

Vee 49:37
So what’s your most favorite car from Ford?

Paul Moore 49:41
Well, I mean, Can I count the Jaguar XJ series?

Paul Moore 49:45
Any word on the jaguar in the at least for a number of years, a lot of years. And I actually just a friend of mine, who’s a real estate investor as well just pulled up in a Jaguar XJ the other day and I was really impressed. asked, and it was almost like a limo. And he said, yeah, this was a 2005. He had, he’s really meticulous. So he had a looking almost brand new. And he said that he got it for an unbelievably low price. And I guess jaguars have incredible depreciation. And so if I can count that, that’ll be it. If I can’t count that, it would absolutely be the Ford Flex. My family is the proud owner of our second Ford Flex. And we’re very happy with it.

Vee 50:36
I thought you were going to answer the F 150. Because that’s the most car owned by millionaires in the US.

Paul Moore 50:45
Is that right? I did not know that.

Vee 50:48
Yeah, I saw that article few years ago. And it was the most popular car owned by millionaires in the US

Paul Moore 50:56
You’re kidding.

Vee 50:57
Yeah, I mean, millionaires drive Ford F150

Paul Moore 51:01
That’s amazing. did not know that, good to know.

Vee 51:05
Well, Paul, thank you so much for your time here today with the podcast. I really appreciate you coming on with us.

Paul Moore 51:12
Absolutely. It was a real honor to be here Vee and I really wish you the best and everything that you’re doing and I wish your listeners the best as well. Thanks. It’s really been an honor.

51:23
That’s the end of the show. Don’t forget to subscribe, leave a five-star rating and review on iTunes for The Real Estate Lab Podcast. Until next time, have a prolific week.

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https://realestatelab.live/15-paul-moore-the-perfect-investment/feed/ 0 Show Notes Paul’s Contact Info: www.WellingsCapital.com Twitter: @PaulMooreInvest https://www.biggerpockets.com/users/PaulTMoore Email: Paul@WellingsCapital.com [00:01:32] IF you want to stick with your resolution and goals, Show Notes



Paul’s Contact Info:



www.WellingsCapital.com



Twitter: @PaulMooreInvest



https://www.biggerpockets.com/users/PaulTMoore



Email: Paul@WellingsCapital.com



[00:01:32] IF you want to stick with your resolution and goals, read Atomic Habits by James Clear – https://amzn.to/38ZBqHq



[00:02:22] Paul’s book is called The Perfect Investment: Create Enduring Wealth from the Historic Shift to Multifamily Housing – https://amzn.to/2ScvBj7



[00:04:35] Paul realizes that his degree in Petroleum Engineering tied to oil prices. 



[00:05:14] A few years after getting his MBA, Paul started to work for Ford Motor Company.



[00:05:46] Paul and his friend started a staffing company. 



[00:07:02] Paul explains the differences between investing and speculating.



[00:08:29] True wealth are our assets that produce income.



[00:09:19] Commercial real estate’s value formula.



[00:11:53] Warren Buffett Model



[00:13:03] Paul mentioned Gary Keller’s book. The One Thing – https://amzn.to/37SLrGj



[00:13:35] Adding value to self-storage units.



[00:18:42] Paul explains how well self-storage units did in the last downturn.



[00:21:34 – 00:23:45] How to research what area needs more self-storage units.



[00:24:39] How to research the operator.



[00:33:50] Things to look for during due diligence of a self-storage unit. 



[00:38:19] Learn to pull the plug quickly



[00:45:16] Paul suggests finding a book on senior living and read







Transcription



Paul Moore 0:03
Now the different the opposite lesson is what a lot of, of our guests on how to lose money have learned as well. And that is never give up. Which is kind of funny. Because some of those lessons have been, you know, the fact that if they would have quit in the year three, they never would have got the abundance that they got in your four and five and six. And so it’s really hard to know I think it’s wisdom, and many years or decades of experience that helps you know the difference between pulling the plug early and never giving up.



Unknown Speaker 0:39
Welcome to the show. You are listening to The Real Estate Lab Podcast. In this lab. we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.



Vee 1:00
It’s a great day to be alive and to invest in real estate. My name is Vee Khuu. And you are now listening to my show The Real Estate Lab Podcast. Let’s take a moment to say goodbye to January, at the release of this episode, one month of this new decade had come and gone.]]>
Vee Khuu 51:26
EP 14: Roni Elias – How Litigation Financing Helps Fight Your Case https://realestatelab.live/ep-14-roni-elias-how-litigation-financing-helps-fight-your-case/ https://realestatelab.live/ep-14-roni-elias-how-litigation-financing-helps-fight-your-case/#respond Fri, 31 Jan 2020 05:04:25 +0000 https://realestatelab.live/?p=510 Summary Roni Elias’ Contact Info: Email: Roni@YourTCP.com Website: www.YourTCP.com Show Notes [00:03:11] Meet Roni in person at the Best ever Conference in Keystone Colorado (https://bit.ly/36utBb8) Use coupon code “GOALS20” to save 20% at checkout [00:04:08] Roni and his company donates to Hands Along The Niles (https://www.handsalongthenile.org/) [00:11:39] Roni starts talking about litigation financing. [00:13:16] Roni shares...

The post EP 14: Roni Elias – How Litigation Financing Helps Fight Your Case appeared first on Real Estate Lab .

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Summary

Roni Elias’ Contact Info:

Email: Roni@YourTCP.com

Website: www.YourTCP.com

Show Notes

[00:03:11] Meet Roni in person at the Best ever Conference in Keystone Colorado (https://bit.ly/36utBb8)

Use coupon code “GOALS20” to save 20% at checkout

[00:04:08] Roni and his company donates to Hands Along The Niles (https://www.handsalongthenile.org/)

[00:11:39] Roni starts talking about litigation financing.

[00:13:16] Roni shares examples of how litigation financing works

[00:19:11] Roni explain why his company will only fund a case but will not step in as the lead litigator

[00:24:17] Ronis talks about what he looks for in a case to decide whether or not his firm will fund that case

[00:27:27] Roni shares example on a repayment structure

[00:31:29] Roni breaks down the differences in using litigation financing from a firm such as TownCenter Partners vs using a contingency law firm

[00:33:40] Roni tells us the reason behind why his firm doesn’t provide litigation financing in certain states

Transcript

Roni Elias 0:03
We have a short time on this earth, you know we’re it’s not infinite. So I think the year 2020 is gonna be a massive year of growth for us. I don’t want to steal, you know, Grant Cardone 10X line, you know I don’t know if he would be, you know, at 10 x multiple, but we think it’s going to be a multiple of growth and then use that not only as a multiple growth for us as a company and a team but also as a multiple growth, give back. So we can truly, you know, make a difference in as many lives as possible with our work.

Unknown Speaker 0:37
Welcome to the show. You are listening to The Real Estate Lab Podcast. In this lab. we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.

Vee 0:57
Hey hey hey It’s a great day to be alive and to invest in real estate. My name is Vee Khuu and you’re now listening to my show The Real Estate Lab Podcast. Hey, it’s the third day of the lunar new year, the year of the rat. As I’ve shared with you on the first episode of my podcast, I’m Chinese so while you’re listening to this episode, I’m enjoying all the festivity all this celebration going on with the New Year 恭祝大家 身壯力健 新春大吉 新年快樂 万事如意 Chúc tất cả quý vị thính giả một năm mới an khang thịnh vượng và vạn sự như ý.

Vee 1:35
Alright, enough with the New Year greeting. Let me share with you about our guest for this episode. He is the lead asset manager of TownCenter Partners. He has worked in litigation cases reaching over nine and a half-billion dollars in recovery, manage a portfolio of over 520 million dollars in real estate assets at a previous firm. Our guest today received a Bachelor of Science Degree in Business Management from NSU, an MBA from Ashworth, JD from FAMU College of Law and LLM from Loyola University of Chicago School of Law. He holds multiple real estate licenses in Florida, DC, Maryland, Virginia and also holds a CCIM designation. He is also Florida Supreme Court certified family County Circuit appellate mediator and Florida’s qualified arbitrator. He’s going to share with us about a concept called litigation financing today. Our guest today, ladies and gentlemen, is Mr. Roni Elias. It’s a totally foreign concept to me at first, what is it? Why should you care? Well, you will find out soon enough from this episode. If you want to meet Roni live in person, you should go to the best ever conference in Keystone, Colorado from February 20th through 22nd of 2020.

Vee 3:11
He will be a speaker among an awesome speaker lineup such as Jeff Adler from Yardi Matrix. Matt Faircloth, author of the book called Raising Private Capital, Building your Real Estate Empire using other people’s money and Scott Trench, CEO President of Bigger Pockets, you can check out the rest of the lineup at www.BEC20.com. That is B EC with the number 20 dot com. Alright, let’s dive right into my conversation with Roni Elias.

Vee 3:52
Hey, welcome to another episode of The Real Estate Lab Podcast. I have Roni Elias here with us today. It’s an honor to have you here with us, Roni

Roni Elias 4:01
Thanks so much for having me on and very excited to do this with you today.

Vee 4:08
Now, Roni, I understand that you do a lot of giving back and one of the programs that you give money to is the Hands Along The Nile, what’s your connection with them?

Roni Elias 4:20
Sure, Hands Along The Nile. It’s a great organization, they predominantly help a lot of refugees, extreme people who are living I mean, in very, very poor situations, predominantly in the Middle East and so forth. And you know, the great thing about the organization, you know, they just help folks so of all backgrounds, all religions, and that just, unfortunately, due to either socio-economic reasons, or you know, the refugees are so forth. They’re just in such dire straits. They need assistance and not only, you know, do they get what you and I consider just salad, just normal stuff, you know, food, water and so forth. But they help try to train them. And you know, figuring out what is something you could do, how to get a job, you know, language skills and so forth. So it’s a great organization, and they do a lot of great work overseas in really very poor impoverished areas or where these folks definitely need a lot of assistance.

Vee 5:30
And you mentioned the Middle East a few times, are you from that region?

Roni Elias 5:36
The funny thing about it, I was born in Sudan, but my family’s background is in Egypt. And you know, I try to travel once a year or so forth. And, you know, just when you go back and you kind of see some of the conditions, folks are in, you can see it’s truly dire conditions that people are in.

Roni Elias 6:00
I mean, we would, you know, if we took, you know, whatever you want to consider here to be the worst of conditions, I think over there, it’s much even worse than that. So just trying to help those folks and, and it’s not just trying to help with it, hey, you know, here’s some food and money or whatever is, you know, trying to take that concept of, you know, what can we do to help truly make a difference in these folks’ lives and that’s really been through the programs they have, try and teach people skills, you know, of how to make something they can sell, you know, or trying to get a job and so forth. So, they can make a difference not only for themselves but their families and also trying to assist with educational purposes, because, unfortunately, a lot of people there, you know, probably after fifth or sixth grade in those areas, sometimes you know, there is no schooling and so forth, because they just have to go work to help put food on the table for the family.

Vee 6:30
And that’s, that’s awesome. And you. So you were born from Sudan and your family roots from really from Egypt?

Roni Elias 7:15
Correct

Vee 7:16
Right?

Roni Elias 7:16
Yeah.

Vee 7:16
Correct. So

Roni Elias 7:18
it was great, you know, moved around a lot as a child and then finally came here to the states in 89.

Vee 7:27
In 89, do you still remember the language at all?

Roni Elias 7:30
You know, as I always joke around, you know, yeah, the language that we speak is Arabic. So you know, how I usually say yeah, I can speak Arabic, but it’s kind of the word we use is macassar. Which just when you train select translate to English, it’s broken. So like, you know, it’s not 100% great Arabic but at least you know, hey, I can get to the toilet and you know, we can have a conversation and joke around a bit, and so forth. So, but yeah, I can somewhat, you know, get a full conversation out with folks and so forth. And, you know, English has become extremely as it has for many years. But also, I mean, right now with all the international stuff happening in Egypt, a lot of people speaking English over there also.

Vee 8:28
That’s great man. So, Roni Salaam Alaikum

Vee 8:36
No the reason I start with that is because you are a lawyer, so I just want to show the audience that not all the lawyers are sharks they have hearts too. And, you know, with the stuff that you do is truly truly amazing.

Roni Elias 8:52
No, I mean, you always have to give back and make a difference. You know, we’re we’re we’re very Teamwork oriented, we’re very much about making a difference with you know, not only our work, but you know, we also you have to give back, you know, I think if you were, you know, to follow some very, you know, wherever you want to call them either smart, very business successful folks, and if you try to kind of dissect quote unquote, their DNA, you’ll notice, you know, one thing that they consistently do is, you know, maybe you want to call it you know, they reap what they sow and so forth. But they, there is a portion of them that always gives back or wants to help folks that that need assistance. I think that’s a very important point to try and be successful in life and also, you know, just how we should all operate.

Vee 9:53
Yeah, definitely. We should always like Robert Kiyosaki said you always just have to give back because The moment you start giving back, you will get more reward from either the world or from people who, you know, you’ve been given to, you know, the more you give, the more you will get back.

Roni Elias 10:13
Oh, definitely. And, you know, there’s, I’m not the smartest person always in the room, but, you know, it’s it’s truly teamwork. I mean, you’ve got to build, you know, talented team around you and work with folks who are committed and, you know, can kind of work hand in hand with you to kind of help carry the whole team to that next level. And I think, you know, that can be translated easily into a real estate or into, you know, hey, we’re a manufacturing company. And, you know, we, we build cogs, and you know, how do we go from building a, you know, a million cogs a year to, you know, 10 million cogs a year. I mean, You really need to have a talented team with you.

Vee 11:03
Yeah, teamwork is a big thing. And just like anything in life, you cannot do anything by yourself and be a huge success. You’re, you’re limited by time, you’re limited by your energy manpower. So having a team is really great. And with that I want to transition over to your company now with Town Center partners, you are an Asset Manager at this company. And you have worked in litigation for a long, long time. So can you tell me a little bit about your niche right now with litigation financing?

Roni Elias 11:39
Sure. What we try to do is, you know, the worst thing you’re probably to ever have to deal with is getting a lawsuit and that could be I even think of it even the person who’s going to file the lawsuit. Nine times out of 10 they really don’t want file like, they would like to see, hey, I didn’t want to be in this situation, or let’s see how can we resolve it, and so forth. So what we do is we come in, and we say, we’re going to try, we’re going to turn your lawsuit, which is an expense item. Because you know, every month, you’ve got to write a check to your attorney. Or if you’re lucky enough, maybe you’ll find an attorney who can take it on a contingency fee basis. And all that means is, they’re going to tell you, hey, if we win this case, I will get a percentage of the possible winnings if we don’t win the case, you owe me nothing, and so forth. And in those situations, you know, there still might be you know, you have to pay for some expert witnesses. Or you might just because you’ve been harmed from this other company or individual. You still need, quote-unquote, cash in the door. And that’s kind of where we come in, you know, trying to take our what we do is litigation finance and you know, let’s say, you know, in the in the wheelhouse of real estate, some very prime examples that we’ve been involved in is the following.

Roni Elias 13:16
Let’s say you know, you’re a syndicator or you’re an apartment complex owner, God forbid, one day one of your buildings burns down. And let’s say that building has 16 units in it. And as you can imagine, now, the income of 16 units is done, call up, you know, Ring ring to Hi, Mister or miss insurance company, I’ve suffered the damage. You know, I am a loyal client of yours. I’m paying they come out and you know, the contractor comes in says okay, hey, to rebuild those 16 units is going to cost you know, and million dollars just to use a round number, insurance company says, ah, I don’t think we agree with that number, you know, what we think it’s worth, you know? $600,000.

Roni Elias 14:13
So, or we’re only willing to pay 600,000. So the person who is going to build it is telling you it’s going to cost a million dollars. And yeah, of course, you’re dealing with contractors, there’s some fluff here and there. But you know, there ain’t 40% of fluff. So now you have two options. Insurance Company only wants to pay you 600,000. So there’s a $400,000 hole. You know, one you could just say, yeah, I’ll take the 600,000 and then you’ll figure out how to make up the 400,000. Or you tell the insurance company, listen, here’s my cost. Here’s what it is. You have a policy you need to order, honor the policy. And if they tell you know, we’re not going to You know, pay you more than 600,000. Unfortunately, the only other situation you’re left in is you have to go and sue them.

Roni Elias 15:08
So you’ve filed the lawsuit against this insurance company. In the meantime, the bank, who has the mortgage every month tells you Hey, I know this happened. It’s an unfortunate incident, but we still want our mortgage payment on the first of the month. So we come in and we help fund your shortfalls. And then once you are successful, we would get repaid back. But if you are not successful in that lawsuit, no harm no foul, we then took on that financial loss so we step in and become your biggest cheerleader and give you that financial firepower to push your case forward. legally and ethically.

Roni Elias 15:56
We don’t tell you hey, you tell Mr. Mr. Insurance Company, we’re not taking a penny more than a million. We don’t exercise any control decision making on the lawsuit or anything like that, that’s left up to you. It’s your case. And that’s left up to your attorney to decide how to move the case. So we’re not exercising any control or decision making. So people love it, you know, you’re still in the driver’s seat. Someone has now giving you that financial firepower to push your case forward and so forth. Because the unfortunate thing is the other side, which is 99.99%, always some type of Fortune 500 or or extreme high net worth, company or individual.

Roni Elias 16:48
Their goal is to use time as an enemy for you because, you know, things in the court court system don’t move the fastest. They can drag things out, they can make a cost prohibitive and by doing that, every month, they know you’re out there burning money. Plus you, you’re losing money coming in the door, that they can get some type of discount against you. And we think that is not the proper way to do things. So that’s why we come in. And, you know, give folks that financial firepower and get them through this tough time so they can make an informed decision. They’re not kind of stressed or, or they’re like, Oh my gosh, I’m gonna do another two or three months of bleeding money here, or there robbing Paul to feed Peter. So that’s kind of an example that has worked really well in the real estate sector.

Vee 17:48
Man, Roni, I have to tell you the whole time you were describing that issue, I actually went through that exact same thing, but at a much smaller scale. I I had an eight unit to deal with and half of my building burned down. Yeah, so I had to do the same thing, but I didn’t know you exist. So I did everything myself, you know, having to fight with the insurance company and get every penny back at the end, we still did not recoup all the money that we needed to fix up the building.

Vee 18:26
So we still have to luckily it was just three of us partnering on the deal. So we each had to put in a little extra to you know, cover that that gap. But what you described there I have a few follow up questions for you if you don’t mind

Roni Elias 18:42
Yeah.

Vee 18:43
Okay. So, typically, you people say that no one care about your money more than you. So in your case, you saying that you fund the litigation, but the client is in control and the clients Council has to make the decision together with your client. Why not take the driver’s seat also and go through the litigation process yourself as a company? Because you are funding this, right?

Roni Elias 19:11
Correct. Because there there’s a lot of legal and ethical rules. At the end of the day, we are a financial firm. So we are just the best way to look at it. Let’s imagine me and you are at, you know, a football game together. Okay. And the team that’s, let’s say, you know, there’s the team on the left is, you know, red, the team on the right is green. The green is the plaintiff. They’re the one who was hurt. And the red is the insurance company.

Roni Elias 19:47
So we just give a check over to the green team. And they decided, hey, we’re gonna bring this type of player we’re going to do this type of actions and so forth. We don’t just sit on the sidelines, and are the biggest cheerleaders for you know, go green, go green. There’s a lot of legal and ethical concepts that come into play when you try to step into the shoes of the plaintiffs and control the litigation which causes problems for everyone. And another reason why we don’t First off, we can’t do it legally. And there’s a lot of ethics issues, but another reason why, even if for some reason we could, we would not want to do it. It’s our core principle. You suffered a damage and by you, I mean, the plaintiffs. And it’s your case, you decide what you think is a fair, reasonable offer, and, you know, take it forward from there with the guidance of counsel.

Roni Elias 20:55
You know, this is a very talented attorney. You have on your case, they have done very well before, take their guidance and you know, make a decision, you know, Hey, can you take x? Or if you don’t want to take x, no problem. The courthouse was built for a reason. And it was built to, you know, a jury of your peers will decide, was this defendant acting badly or not? You know, that’s what course houses were built for their for deal with cases. So come up and go forward. It has been our experience when we step in and help folks with that financial firepower. They’re able now to make a better informed decision. The other side then starts to see Oh, these folks don’t look stressed. You know, they’re not wanting to you know, take you 50 or 70 cents on The dollar, and then they really start to make some serious offers, which again, it’s up to the plaintiffs to take it or, you know, hey, we’re going to trial and, you know, we’re going to see what the jury decides from there.

Vee 22:17
So in your case, when you have funding the plaintiff, what’s the smallest case size that you will do? And what’s the kind of upper limit that you will do?

Roni Elias 22:27
Sure, I would say it’s kind of, you know, the range is massive. So we focus anywhere from $5,000 to a million dollars, that’s quote, unquote, our sandbox. And that’s where we have done extremely well. You know, we have a, we have a lot of colleagues in the space. So what we’ll do is, if someone calls us up and says, hey, I’ve got to sue fortune 500 company, I need, you know, $30 million. Well, already in my head, I’ve got one or two Colleagues I already know, I’ll tell him Okay, listen, I don’t I don’t want you to give me any privileged information but try, you know, paint me the, from 30,000 feet What happened? Then they’ll say that up. I was like, Listen, all right, I’m gonna go ahead and get you in contact with today, john doe. XYZ company. And at least I’ve got you in contact with someone specifically at this much larger funder. You know, go talk to them, good luck, hope, hope it works out. And again, that’s, you know, if we can’t take care of you, for whatever reason, it doesn’t fit with us or, or you know, it’s too big or whatever. We’ll try to connect you with someone else. And then, you know, we wish you all the best and hopefully, it works out and that’s kind of, you know, again, why we’ve had good relationships, you know, with with other funders, you know, some folks send stuff to ask because hey, it’s too small and We send stuff to them because you know, it’s, it’s too big everyone kind of plays in their sandbox and what they’re good at.

Vee 24:08
Okay, so besides the funding amount, what other things? Do you look at a case to assess what you will take on and what you will not take on?

Roni Elias 24:17
Sure, We’ll look at, you know, the facts will look out, okay, where is this case being filed? Because there’s some states we just don’t fund in. Like, I’ll give an example. We are we don’t fund in Maryland, we don’t find in Illinois and so forth.

Roni Elias 24:34
So we’re going to do kind of a very deep dive into the matter into the facts to kind of, you know, understand, hey, what got us near today, we are in 2019 at the end of 2019. Sometimes some of the lawsuits that we jump into they can be going on for three or four years, so we have to quickly digest, you know, sometimes and there’s you know stuff that even happened right before the lawsuit that caused the lawsuit. So we have to digest years of data to understand, you know, what got us to where we are today. And then, you know, we do our own internal right up of the matter, saying, okay, hey, you’re the contract calls for x, that the law says Why? And, you know, here the fact patterns that led us up to it, at the end of the day, you know, here is how the court has ruled previously on some cases. And, you know, here’s where there’s possibly some difficulties in the matter. And we review that all internally. And we quickly make a decision to say yes, we want to move forward on the case or no, we don’t and you know, Here are the terms that we’re willing to move forward on dollar amount, repayment structure and so forth.

Roni Elias 26:09
At the end of the day, these are not loans, because, you know, a loan puts a requirement on payment. These are just how we classify them and how everyone usually else does it. They’re non recourse advances. So, you know, let’s say, john doe moved in that lawsuit against the insurance company. And God forbid, you know, he lost the lawsuit, and we had funded him $100,000 no harm, no foul, we took that hundred thousand dollar loss. You don’t owe us anything, and so forth. So we’re truly here. If you think about it, we’ve come in believed in your manager giving you that financial strength to move forward and believe so strongly in your matter. Hey, we could get zero. And you know, we didn’t become a partner in, in your business or, or whatever. We just can’t believe that in your case and wanted to push it forward. And we felt that, you know, it would be, you should win and it makes economic sense for all the parties involved.

Vee 27:21
Can you talk about your repayment structure? How does that look like?

Roni Elias 27:26
Sure I can’t, because every case is so different. I can’t tell you, hey, so forth, I can try to give you a little bit of information. How we usually work is we’re going to fund you XYZ dollars could be anywhere from 5000 to a million dollars.

Vee 27:43
All right

Roni Elias 27:43
what happens is, every six month the repayment is increasing. So you know, let’s say if we find someone in December, you know, let’s just say sometime in June is you know, That would be the first initial amount deal. Now nothing is deal until the case settles or you win or whatever. So we’re all what we do is it’s is Alright, hey, two years from today, or, you know, six months from today, we refer back to the contract and we look at the time period. And if you’re within the six months, you owe that amount. Now, if the case does not settle, you lose it, you know, we don’t even need to look at the contract. It’s a very simple number zero. And, you know, that’s it. We, of course, always tell people, you know, litigation finance is not something that is cheap. I mean, this is not like, hey, you’re going out to the bank and you’re going to get a loan for five or 6%. You know, this is very expensive money. And the reason why it’s very expensive is because, you know, lawsuits are, you know, first off, no one really wants to put money and say, Okay, now let’s, you know, we’re, we’re fighting against each other and so forth. And, two, you might have a great case, but doesn’t mean you know, the court or the jury or whoever agrees with you, you know, again, you know, a jury of your peers doesn’t always mean you know, things are going to go your way. So there is very high risk, you know, things can still go south. And that’s why, you know, we always caution people, but at the end of the day, I think if you if you look at the industry as a whole, it has boomed, I mean, it’s now a multi billion dollar industry litigation finance and it has helped people who otherwise might not have been able to move their case forward, or they understand listen right now. I have 100% of zero. And why do I say that because at some point they’re going to run out of money or they can’t push this case forward, or maybe even from day one, they really can’t push the case forward. And they can say, Okay, well, maybe, you know, by the time I have to pay the litigation funder, okay, I gave up 20 or 30%. So I got 70%, you know, of a 100. While I was maybe in the beginning, you know, 100% of zero so, I think once people kind of sit down and and see where things are, it truly that they usually make the, of course, they talk with their attorney and their accountant and, and then you know, whatever decision they choose, it’s theirs, but I think people have continued to make the decision. litigation funding is something that truly works.

Vee 31:04
So Ronnie, tell tell me this. It sounds it sounds like the structure is very similar to if someone had a strong case and they went to law firm with contingency instead of going to your firm like Town Center partners, what’s the benefit of going with a litigation funding firm as opposed to a lawyer who has contingency?

Roni Elias 31:29
Well, you know, it really comes down to Okay, what’s going on with your business? And also, how is that set up with the lawyer because sometimes some law firms will tell you Okay, yeah, we’ll do contingency. But it’s up on you to cover the costs of experts or it’s upon you to cover you have some type of XYZ cost. So that’s where we might come in or They’ll tell you, I sure will cover everything, you know, when we’re going to do 33% plus you have to reimburse us for for costs. But the problem then starts to happen is that defendant has damaged you. And, you know, every month that goes by, you’re, maybe you’re, you’re bleeding, like, for example, like that building. It burnt down, you know, 16 units, and let’s say, you know, $1,000, a unit that was $16,000 coming in revenue a month. And you know, every month that goes by, you’re losing money. So you’re going to start to deplete cash reserves. or something’s going to start to happen where maybe you need to, like in your situation where, you know, hey, we have to do a capital call, everyone has to put money in, well, what happens if you know you can’t really put money in? So that’s where we come in, and kind of keep The business afloat, or you know, cover some type of expenses for the case. So it can continue to go forward.

Vee 33:09
That’s great. That’s great. Now, I just want to remind everyone, if you are in a situation where you need to get litigation funding, make sure make sure you go to Roni’s website, and that is yourtcp.com as www dot your TCP. com. Now Roni, I just want to go back to what you said earlier, for instance, you says you don’t fund in Maryland and Illinois. What’s the reason behind that?

Roni Elias 33:40
Sure, the very simple reason why we don’t do that. Maryland and Illinois have treated litigation funding, like bank loans. So one we would have to become, you know, pretty much organized like a bank and you know, Dark again, a lot of bad things can happen to us. And, and the case is because we’re not organized as a bank and so forth. So we just took it and says, okay, as much as we want to help folks in that state, the state legislation has made the decision to do XYZ. So unfortunately, we can’t be involved in those states. And that’s really the reason why because we just don’t. The goal is the end of the day is this. This capital infusion is supposed to kind of move the case forward and move everything forward. We don’t want the litigation funding to be a problem, or it creates again, you know, like we talked about teamwork. We are a team with our, you know, with the client who’s the plaintiff and the plaintiff law firm. We don’t want to create a situation where we start to become antagonistic towards each other, or so forth. So that’s why I’ve just for those reasons, one, stay away from, you know, Maryland, Illinois examples.

Vee 35:14
Are the other states that have laws like that.

Roni Elias 35:17
Yeah, Colorado is one. Mississippi is another. There’s a couple. That’s why I kind of when you go to our website, if you if you scroll to the bottom, there’s a couple of states, Vermont is another that have taken this legislation and, you know, we’re not going to complicate that the, it’s on the books, it’s been decided, you know, there’s nothing further to talk about it. But, you know, for those reasons, that’s why we kind of shy, shy away from those matters in those states.

Vee 35:51
And just to clarify question, then, when you talk about those states, are you talking about the company that was formed in those states or the property located in those states.

Roni Elias 36:02
It could be it could be either or it could be like, let’s say, for example, john doe, LLC is a Maryland LLC. So we’re not going to be able to fund it. Or let’s say, you know, john doe owned that apartment complex in his own name, and they’re a resident of Maryland, uh, you know, they’re the driver’s license is Maryland and you know, they pay Maryland taxes and so forth. So because john doe is a resident of Maryland, we unfortunately are not going to be able to fund him. And then usually, you know, a lot of people follow kind of the states that we don’t fund it. So again, you know, every everyone understands these rules and kind of, you know, doesn’t doesn’t want to get caught up, having to deal with, you know, the legislature and the courts. In that state because you know, they’ve already made the decision, hey, you’ve got to be set up as a bank, and you have to follow bank rules. And and, you know, we’re not a bank and you know, these are not loans. So that’s why the best way is to say, okay, hey, we’re not operating in that state.

Vee 37:19
Doesn’t matter if, let’s say in this in a case of a syndication and you have LPs from, from Maryland, does it matter, or no?

Roni Elias 37:30
no, because at the end of the day, it is the entity that is, let’s say that entity was, let’s say, you owned a large apartment complex in Florida, Vince Young forwarders. Very hot and everyone loves the sunshine state. So you own 300 units and let’s say john doe, LLC is a Florida LLC, but it’s got some investors from Maryland. Those are the LPS but the LLC that was hurt and the property The owner is a Florida LLC, and so forth. And, you know, that is that is the entity that is bringing a lawsuit more than likely in Florida, I guess, you know, whatever insurance company so that would be not a problem to fund and so forth. It’s just because of those other states. We have to be very cognizant of the rules because they’re at. And what’s happened is some people did fund there and then, you know, the courts came down extremely hard on those funders.

Vee 38:36
Got it got it I understood now. So, you know, before someone come to your company and yourself to ask if you could fund their case, what are some of the things that the operators can do to present a strong case to your team so that you could fund their, their trial or their case?

Roni Elias 38:56
Sure. One, what we like to do is, it’s Very simple sometimes will say, point just either you have two options, you can go to our website and fill out a funding request right there. Or you can call us up and set up a time to speak with us. And then we’ll kind of, you know, go through our points. We understand folks are you know, sometimes people are stressed and you know, there’s a lot of things they’ve got to deal with, when we when they’re dealing with a lawsuit. The first thing that, you know, we would want to know is okay, have you filed your lawsuit, who’s your attorney, who’s the parties and give us kind of the 30,000 viewpoint? from there? If all that, let’s say for argument’s sake, all that has happened, who say, Okay, next thing, what we’re going to do is we’re going to execute some of the common NDA, so we can try to all the conversations we have with you is protected, and you don’t have to worry that you know, hey, we’re gonna do something with this information. In The other side can’t try to hear this discussions and so forth.

Roni Elias 40:06
And then from there, the next step would would more than likely happen is we’ll say, okay, we’re going to go ahead and set up a call with your attorney, would you mind just kind of reaching out to them and saying, hey, it’s okay to talk to us, we probably do one or two phone calls with the attorney. And then from there, we’ll reach back out to the plaintiff and say, okay, we’ve made a decision. Yes, we want to get involved in the case, or No, we don’t. And then from there, there’s probably some more documents, we start to request, and then we make the offer of the terms and so forth. The usual, you know, if it’s a small matter, we can sometimes turn it around in a day. But if you’re talking, you know, a substantial mag are usually what we tell people from start to finish. It’s a two week process. And, you know, the only way that process gets pushed out longer, it’s just because we’re requesting documents, and we’re not getting it. Or sometimes, you know, the attorneys and trial, because you know, they’re a good attorney, they got other things going on. So we kind of have to just wait till they finish the existing trial they’re in, and then we can have conversations from there. But usually, it’s a very team oriented type of process. I mean, everyone kind of, you know, is working to a goal to make the funding happen. So it can can push the case in the next level. So everyone kind of, you know, accommodates everyone’s schedule. I mean, we’ve done calls at, you know, seven or eight o’clock at night, you know, on the weekends, whatever we can do to try to help accommodate the process. We do that so we can try and move things forward.

Vee 41:51
Okay. So, your company typically deal with the plaintiffs and you said 99% of the time your defendant is Big insurance company or some big fortune 500 companies, can you share with us, what are the common common myths about fighting these big enterprises?

Roni Elias 42:11
I wouldn’t say there’s, I’m almost gonna flip out and say there’s myth bouncing, you know, there’s some things we have consistently seen as the same tactics that they have done. And those tactics are, you know, to use time as a, as an enemy for the plaintiff. I think that is what we have consistently seen. And sometimes what we’ve seen also is, you know, this action might have, depending, you know, when is the year end books of the company, like let’s say if the company runs books from August to July, it will just happen that, you know, this bad act happens in June or July, and then it turns out to be Well, the reason why the plaintiff was damaged her in that time was it made, you know, either you know, that division or it made the PnL look better, because someone was wanting to make sure that you know, they get their bonus, or stuff like that. So we’ve kind of seen those type of things happen a lot, just because someone comes up with, you know, the bright idea, let’s take advantage of the of this XYZ, plaintiff and you know, hey, we look, then we will, you know, we hit our numbers or exceeded our numbers and, you know, everyone’s going to get their bonuses and so forth. And now say the last thing is, at the end of the day, you know, these big companies, they’re just people, you know, yes, you are, you know, international conglomerate, publicly traded blah, blah, blah. There are people that work there and the you know, unfortunate thing is, you know, people can sometimes do things that are not the right thing or the ethical or or you know, or the business prudent approach to doing things. So, that’s why you know, unfortunately these type of situations happen and so forth. So, you know, I always kind of joke you know, if you kind of remember the, the old days or when, you know, a doctor kind of had that little black bag and you know, they kind of open it up and, you know, they can pull out their stethoscope or so forth. I can tell people Hey, where do like that little black bag, you know, you pull us out if you need, you know, a scalpel, you know, we’re fine precision tool, or if you need to pull out, you know, a sledge hammer, then, you know, take a salad and use this as a sledgehammer because, you know, hey, we want to start you know, video, deposing all of these people, and you know, hey, it’s very expensive to do video deposition. Then you might have to fly, you know, if you’re, you know, your lawyers in XYZ state, but you know, there’s people all over the country got fly, there’s, you know, that starts to become serious money. But um you might not be able to get people on a video tape saying, Oh, yeah, it was, you know, we we did this action because you know, john told me to do it and he said if we didn’t do this action, no one was gonna get their bonuses. I mean and then once you get down there video tape I mean that’s that’s very damning for the other side. So that’s the great thing about us, you know, we’re, we’re just a tool, we leave it up to the plaintiff and their lawyer to decide how to use this tool to move the case forward.

Vee 45:48
So when you fund someone sounds like you’re giving a carte blanche to the attorney of that side to determine what to do to win the case. Almost

Roni Elias 46:01
well for the attorney does whatever he thinks is right. When it the best way to look at it, he’s the cap, he or she is the captain of the ship. They decide, Yo, I’m going to do X, Y, Z. I’m gonna we’re not making any decisions on what to mean that we’re just kind of, you know, what, every 90 to a 120 days when we will follow up and say, Okay, listen, give us a case status of what’s going on, you know, what’s, what’s happened so far, what’s the next you know, when’s the next if there’s a mediation? When’s the next court date and, and getting some documents and so forth. So we can kind of get a very detailed case update of what’s happening. But other than that, absolutely. The plaintiffs and the points of law law firm are in full Controlling, and they’re driving the ship, not us.

Vee 47:03
So at no point do you want to jump in and say, Hey, I don’t think this is going at the right direction, maybe you want to look at something else.

Roni Elias 47:10
We have to be very careful about that, you know, that’s not not our, not our place, if they say, you know, if we’re asked for, you know, some type of, you know, hey, where have you, you know, where are you seeing going on out there will will kind of share some information that’s not, you know, nothing privileged or anything that so forth. But again, that’s some of the due diligence that we’ve done upfront, we’re, we’ve looked at this lawyer, or this law firm and said, Okay, yeah, this is someone that has a solid track record, or they understand the issues of the case very well. And they know what, what’s going on because that’s at the end of the day. The lawyer here she is carrying that case so I mean, they’ve got to be able to eloquently explained the issues, you know, cut through the BS cut through the other sides trying to maneuver or mess the picture up. So it’s, yeah, there was a reason why we only wanted to offer him 600,000 their contractor was ridiculous. He was you know, whatever. You know, there is no, the other side never says how Yeah, you guys? Yes, we were, we were trying to pull a fast one. Our bad. They’re always going to have defenses and arguments to make. So how the plaintiffs law lawyer or law firm can kind of cut through those arguments and you know, presented in a very sometimes you know, we love the kiss method, keep it simple, stupid, you know, buying a present, this is just a very simple Matter, you’re on your Hey, we had a policy we were good to, you know, they told us pay $10,000 every month for this expensive insurance policy. We did that for multiple years. The policy says we have up to Xyz dollars, we were well below it. The contractor who, you know, is not my brother came out and told me it’s a million dollars to to do it. Other than that, I don’t know what, where I can tell you, it’s a million dollars to do it. You know, they just want to pay 600,000 you know, they need to honor the policy and the terms of their own policy and pay us a million dollars. So we found great success when sometimes folks can take care of take no matter what type of subject or or so forth and keep it kind of very simple and very controlled. So folks don’t get caught up inside issues indicates, which is usually what we try to see the other side does it tries to confuse the court or talk about, you know, 10 other different issues that have nothing to do with, you know, hey, we’re here for an insurance check payment. It can’t be any simpler than that.

Vee 50:27
And I just want to follow up with what you said there earlier about privilege. So when when someone become a client, do they have attorney client privilege with your firm or your just simple financials and you don’t have any privilege because

Roni Elias 50:42
we’re not a law firm. So we don’t practice law. We don’t you know, we don’t run into anything. But what happens is because our communications become attorney work product, or fallen there that attorney work product doctrine. They’re protected because this has to do with litigation, you’re already in a lawsuit. we’re communicating with your lawyer and so forth. So it falls all under something called the attorney work product doctrine. So it’s protecting, and there’s been some cases out there where the, where the other side will say, okay, Hey, are you working with a litigation funder? You might say yes. And then you know, the other side will immediately say, well, we want all of your communication with that funder. And the courts have ruled, no, they don’t need to turn that information over, it’s protected. And, you know, that really doesn’t have anything to do with it. You know, it doesn’t. It doesn’t matter if, you know, My Cousin Vinny is funding them or, you know, Joe Schmo from New York is funding them. You know, we’re focused here on the facts and so forth. So there’s been alive great case fall that has come out to protect the communication so forth.

Vee 52:01
That’s great. Awesome. Ronnie, thank you so much for your time today sharing a mountain of knowledge with us. Now, before I let you go, just have one last question for you.

Roni Elias 52:11
Sure thing

Vee 52:12
What’s your goal for 2020?

Roni Elias 52:14
I think the goal for 2020 is grow and expand. And, you know, give back also on a massive level, you know, I think, Hey, we’re, we have a short time on this earth, you know, we’re, it’s not infinite. So I think 2020 is going to be a massive year of growth for us. I don’t want to steal you know, Grant Cardone 10 x line, you know, I don’t know if he would be, you know, a 10 x multiple, but we think it’s going to be a multiple of growth and then use that not only as a multiple growths for us as a company and a team but also as a multiple growths to give back so we can truly kind of, you know, make a difference in as many lives as possible with our work.

Vee 53:01
Awesome Roni, thank you very much shukran. Now, if you’re listening to this podcast and you want to get a hold of Roni and his company, make sure you go check out www dot yourtcp.com or you can email him at roni@your tcp.com. Once again, thank you for your time, Ronnie,

Roni Elias 53:21
thank you have a wonderful rest of your day. And again, it was a true pleasure. And thanks so much for your time.

Vee 53:29
That’s the end of the show. Don’t forget to subscribe, leave a five-star rating and review on iTunes for The Real Estate Lab Podcast. Until next time, have a prolific week.

The post EP 14: Roni Elias – How Litigation Financing Helps Fight Your Case appeared first on Real Estate Lab .

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https://realestatelab.live/ep-14-roni-elias-how-litigation-financing-helps-fight-your-case/feed/ 0 Summary Roni Elias’ Contact Info: Email: Roni@YourTCP.com Website: www.YourTCP.com Show Notes [00:03:11] Meet Roni in person at the Best ever Conference in Keystone Colorado (https://bit.ly/36utBb8) Use coupon code “GOALS20” to save 20% at checkout [00... Summary



Roni Elias’ Contact Info:



Email: Roni@YourTCP.com



Website: www.YourTCP.com



Show Notes



[00:03:11] Meet Roni in person at the Best ever Conference in Keystone Colorado (https://bit.ly/36utBb8)



Use coupon code “GOALS20” to save 20% at checkout



[00:04:08] Roni and his company donates to Hands Along The Niles (https://www.handsalongthenile.org/)



[00:11:39] Roni starts talking about litigation financing.



[00:13:16] Roni shares examples of how litigation financing works



[00:19:11] Roni explain why his company will only fund a case but will not step in as the lead litigator



[00:24:17] Ronis talks about what he looks for in a case to decide whether or not his firm will fund that case



[00:27:27] Roni shares example on a repayment structure



[00:31:29] Roni breaks down the differences in using litigation financing from a firm such as TownCenter Partners vs using a contingency law firm



[00:33:40] Roni tells us the reason behind why his firm doesn’t provide litigation financing in certain states







Transcript



Roni Elias 0:03
We have a short time on this earth, you know we’re it’s not infinite. So I think the year 2020 is gonna be a massive year of growth for us. I don’t want to steal, you know, Grant Cardone 10X line, you know I don’t know if he would be, you know, at 10 x multiple, but we think it’s going to be a multiple of growth and then use that not only as a multiple growth for us as a company and a team but also as a multiple growth, give back. So we can truly, you know, make a difference in as many lives as possible with our work.



Unknown Speaker 0:37
Welcome to the show. You are listening to The Real Estate Lab Podcast. In this lab. we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.



Vee 0:57
Hey hey hey It’s a great day to be alive and to invest in real estate. My name is Vee Khuu and you’re now listening to my show The Real Estate Lab Podcast. Hey, it’s the third day of the lunar new year, the year of the rat. As I’ve shared with you on the first episode of my podcast, I’m Chinese so while you’re listening to this episode, I’m enjoying all the festivity all this celebration going on with the New Year 恭祝大家 身壯力健 新春大吉 新年快樂 万事如意 Chúc tất cả quý vị thính giả một năm mới an khang thịnh vượng và vạn sự như ý.



Vee 1:35 Alright, enough with the New Year greeting. Let me share with you about our guest for this episode. He is the lead asset manager of TownCenter Partners. He has worked in litigation cases reaching over nine and a half-billion dollars in recovery, manage a portfolio of over 520 million dollars in real estate assets at a previous firm. Our guest today received a Bachelor of Science Degree in Business Management from NSU, an MBA from Ashworth, JD from FAMU College of Law and LLM from Loyola University of Chicago School of Law.]]>
Vee Khuu 53:34
EP 13: Bernard Reisz – What Everyone Should Know About QRPs & UDFI Tax https://realestatelab.live/ep-13-bernard-reisz-what-everyone-should-know-about-qrps-udfi-tax/ https://realestatelab.live/ep-13-bernard-reisz-what-everyone-should-know-about-qrps-udfi-tax/#respond Mon, 20 Jan 2020 04:29:00 +0000 https://realestatelab.live/?p=503 Bernard Reisz CPA is the founder of 401KCheckBook.com which gives investors direct control of their tax-sheltered funds for real estate equity and debt opportunities using checkbook controlled IRAs, QRPs, Solo 401K(s) and Checkbook Life Insurance. He’s also the founder of AgentFinancial.com which provides tax strategy, entity, and financial services to real estate professionals, including real...

The post EP 13: Bernard Reisz – What Everyone Should Know About QRPs & UDFI Tax appeared first on Real Estate Lab .

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Bernard Reisz CPA is the founder of 401KCheckBook.com which gives investors direct control of their tax-sheltered funds for real estate equity and debt opportunities using checkbook controlled IRAs, QRPs, Solo 401K(s) and Checkbook Life Insurance.

He’s also the founder of AgentFinancial.com which provides tax strategy, entity, and financial services to real estate professionals, including real estate agents, real estate investors and mortgage brokers.

SHOW NOTES:

[00:07:01] Bernard explains the different types of QRPs out there.

[00:11:17] Bernard explains how to correct a mistake you make in a checkbook 401K.

[00:12:40] Bernard explains about prohibited transactions

[00:13:21] What are the differences between IRA and 401K?

[00:15:02] Bernard explains the rules required to have a solo 401k.

[00:21:51] You have to include someone in a 401K plan only when they work a minimum of 1000 hours per year for your business.

[00:25:36] Traditional IRA, you can put in on an annual basis of $6,000. With QRPs, you can put in $56,000.sz

[00:26:33] Bernard explains UBIT and UDFI.

[00:30:49] Bernard explains how UDFI tax works.

[00:43:33] Cannabis businesses qualify for QRPs.

FOLLOW BERNARD REISZ:
Websites: https://www.401kcheckbook.com
LinkedIn: https://www.linkedin.com/in/bernard-reisz-cpa/
Consult and Free Entity Formation Call: https://bit.ly/2Rw9N1v
Email: Bernard@ReSureFinancial.com

Join our free Facebook Group at www.EastWestVentures.com/AIMS

Listen, subscribe, rate and review:
Apple: https://apple.co/2BdPdeJ
iHeartRadio: https://ihr.fm/2MPxyAu
Sticher: https://bit.ly/2pUgd0v
Listen Notes: https://bit.ly/2JtpZxi
TuneIn: https://bit.ly/2NhRCe2

Bernard Reisz - What Everyone Should Know About QRPs and UDFI Tax

Transcript

Bernard Reisz 0:03
Recognize that you are in control of your financial destiny, whether or not you realize it or whether or not there are people around you that are, you know that are trying to take control of your financial destiny. Ultimately, you’re going to be a beer, the risks and consequences and rewards. So you should take charge of it.

Vee 0:31
Welcome to the show, you are listening to the real estate lab podcast. In this lab. we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.

Vee 0:50
It’s a great day to be alive and to invest in real estate. My name is Vee Khu and you’re now listening to my show the The Real Estate Lab Podcast. Hey it’s the 3rd week of the New Year. Are you on track with your goal? What is your goal for 2020? Mine is to buy a mobile home park this year. If I can support you and your goal in any way, hey, please do not hesitate to reach out to me. You can get to me at vee@realestatelab.live or you can simply schedule a call at www.callwithvee.com Alright, I’ll guess what today came highly recommended by Yonah Weiss. He is the founder of 401kcheckbook.com, which give investor like yourself direct control over your retirement funds. He’s also the founder of agentfinancial.com, a company that specializes in tax strategy, entity and financial services to real estate professionals. Before the launch of his company ReSure LLC, our guests serve as director of whole metrics partners. Our guest today is Mr. Bernard Reisz. In today’s episode, we will discuss about a tax that you might have to pay and are not aware about. If you’re using a self-directed IRA to invest in real estate, pay attention. If you have any kind of retirement account or QRPs qualified retirement plans, make sure to pay close attention to this episode. Now before I get going, make sure you hit the subscribe button, leave a review and give me a five star rating on iTunes. If you haven’t yet, make sure to check out our free Facebook community at www.eastwestventures.co/aims. Ok let’s dive into our episode today with Mr. Bernard Reisz.

Vee 2:54
Hey, welcome to another episode of The Real Estate Lab Podcast. We have an awesome awesome guest today. He is is so special, he has so many titles that I don’t even know where to begin with. Bernard, are you are a CPA CPCU ARM and ACI what are all the letters means? All right?

Bernard Reisz 3:14
CPA is very recognizable CPA certified public accountant, CPCU, ARM and ACI are all risk management designations. So those relate to taking a really deep dive into risk and insurance, but not in the way that people generally think about insurance. It’s about really about understanding and managing risk, knowing and understanding how insurance companies operate. So it’s a deep dive into risk management.

Vee 3:42
So how did you get involved in the insurance side and also get involved in the CPA side the two things are not even related.

Bernard Reisz 3:50
That’s what you think. Absolutely. I thought it’s a fair question. So for the most part, I’m really into analysis, taxes, financial stuff. And recognizing that all this stuff, all this financial stuff is really interrelated. And there really is a very specific tax aspect to this, because insurance companies actually have some really, really great tax advantages. So insurance companies get to do some pretty cool stuff. We could probably do a podcast about that in its own right. But the idea is to sum it up in a really, really in a nutshell, when you pay your insurance premiums for your liability insurance. The company takes in say you pay $1,000 in premium.

Bernard Reisz 4:38
Well, the company took in $1,000, the insurance company, but they may only pay that out never or over 20 years, 30 years right turns company takes in hundreds of millions of dollars of premium each year and or billions of dollars, with the expectation that they’re going to pay some of it out over time. But guess what they get to take a tax deduction this year for just about all of that money. So you taken a billion dollars of revenue, but you don’t pay taxes on it this year, because you tell the IRS, this is money is not really profit, because our actuaries tell us that over the next 50 years, we’re going to have to pay out a big chunk of this. So therefore, they get a tax deduction, they don’t have to recognize that revenue. So insurance companies are really neat for a tax purpose. And frankly, that’s really how I got into this in the first place is really to from the tax side. But to really do anything properly, you got to understand every component of it. And for that reason, I had to learn and master every nuance insurance and risk management.

Vee 5:43
So how do we on the real estate side, do the same as the insurance company, what are the some of the vehicles that you have been studying and you see that his car is really is an awesome strategy to shelter some of his tax?

Bernard Reisz 5:59
Yeah, there are So many different vehicles and as somebody from real estate strategies, I think we may know perhaps the good ones to focus on our qualified retirement plans and self directed IRAs. But of course, in different scenarios, you know, real estate investors, we may be talking about using S Corp. C corporations, and other entities and other tax strategies, be they 1031 exchanges cost segregation. You know, so many different things that real estate investors can use or should consider using. But everybody’s got a different investor profile. But, you know, tax shelter retirement accounts really apply to everybody, especially to people that are considering investing passively in real estate. For those people, what they have to think about are QRPs, self directed IRAs, and I think that’s a good topic that should appeal to the broadest array of listeners.

Vee 6:53
So for QRP, and self directed IRA, is QRP just a fancy name for solo 401k?

Bernard Reisz 7:01
That is a great way of presenting it. Technically it isn’t. In practice it is. Man, I’ll explain to you what I mean by that. QRP really stands for qualified retirement plan, which encompasses just potentially an infinite number of tax sheltered accounts. So just some examples of qualified retirement plans are 401k plans defined benefit plans, cash balance plans, profit sharing plans, so there really are so many types of qualified retirement plans. And in the industry, that’s abbreviated as QRP. But when it comes to using qualified retirement plans for real estate, to my knowledge, anybody that’s talking about using a QRP is talking about using a solo 401ks, even though you know, they may not call it a solo 401k what’s being discussed is a solo 401k. So while QRP again, can technically refer to almost any type of retirement plan, when we talk about the real estate investment arena, we’re talking about solo 401k.

Vee 8:10
Okay, so can you talk about some of the similarity and the differences between solo 401k QRP and a self directed IRA?

Bernard Reisz 8:20
Yes. the you know, there are a lot of similarities, but there are some very important differences. And QRP, 401k you know, has some benefits over using an IRA. At the same time, you have to qualify for that. So, while everybody can have a self directed IRA, or what we focus on, you know, was the checkbook control, IRAs, we actually get the money in a bank account. You know, it’s something that everybody can have, but the QRP 401k has some very specific requirements and in practice, most of most of us, you know, most of us will not qualify for solo 401k. More Americans than ever do qualify for it. And if you qualify, it definitely want to use a solo 401k. But for everybody out there for everybody, a self directed IRA can work. So let’s talk a bit about what each of those are and what it takes to qualify for each one of those. And if I may ask you, Vee do you have any prior experience with QRP 401k?

Vee 9:25
Not for not 401k or QRP but self directed IRA for sure. I’ve been doing this for about 10 years now. And I’ve sent a numbers of people over to a custodian here in town to set up the self directed IRA account to lend money out.

Bernard Reisz 9:43
And have you do you have any experience with you know, checkbook? 401k CheckBook IRA. So an IRA it actually gives you direct control of the money in a bank account?

Vee 9:55
Yes. And I learned very quickly that I don’t want to keep on doing that, because if you do something wrong, where you do a prohibited transaction, your IRA account is done.

Bernard Reisz 10:08
Yes, that is and that’s true. That’s a great point. One thing that everybody’s got to be aware of when using any of these types of accounts are the prohibited transaction rules. So whether you’re using a 401k, or some self directed IRA structure, you’ve got to be aware that prohibited transaction rules, in practice, will not have, you know, an IRA. Actually, this is one of the good areas to talk about. One of the benefits of the 401k over the IRA. So in an IRA, if you engage in a prohibited transaction, that kind of broken the IRA, that’s it, it’s not an IRA anymore, but inside of 401k, if there is an inadvertent prohibited transaction, it can be corrected. So in an IRA prohibited transactions cannot be corrected. In a 401k prohibited transaction, prohibited transactions can be corrected. And so there’s much, much, much greater safety when using a checkbook 401k versus using an IRA. And

Vee 11:13
so how do you correct a mistake like that in a 401k?

Bernard Reisz 11:17
So in a checkbook 401k, you’re able, two things are able to kind of just undo it, you’re able to undo it and the tax potential tax on it is 15%. Kind of as whereas in an IRA, it just is the end of the IRA when the prohibited transaction happens. And have you ever seen any prohibited transaction? You know, maybe it’s not a question to be live with, but you know, what kind of prohibited transactions are you concerned about that can show up inside of an IRA?

Vee 11:46
Well, what what we were trying to do before was that understand you cannot loan money out vertically so you’re you to your child or to your parents. You can do sideway to your Brother and your cousins. So we actually went to so my business partner and I, we went to different workshops to learn in depth about self directed IRA about 10 years ago, and the rule has for prohibited transaction, I believe are still the same, but the tax code change. So a lot of things I’m not up to date anymore.

Vee 12:21
But we were just trying to see if there are clever ways to play with the tax code. Since it’s so much out there. I’m sure you can find some loophole that you can play with it. And you can get the money out of the IRA account sooner without paying no penalty.

Bernard Reisz 12:40
And did you and I guess you learned when it comes to prohibited transactions, it’s always worth erring on the side of caution. It’s just not worth taking chances with the prohibited transaction rules. There are certain things that can fall into a gray area. But in general, we say there’s so many things that you can do without lending money to your child. parent, you know, there’s so many, you know, just do the lending to an unrelated party, and everything is great. So there’s so much opportunity that going, it’s not worth there’s no reason to ever consider taking a chance with the prohibited transactions. That being said, you know, there’s just much greater safety in using a 401k because the prohibited transactions can be undone.

Bernard Reisz 13:21
And to take that further, let’s talk a bit about some of the other distinctions between the 401k and the IRA. So an IRA is something that just about any American can have, but a checkbook 401k has to be tied to a business. Only a business can sponsor can create a checkbook 401k or any other qualified retirement plan. So the first condition that would be looking for for somebody to set up a checkbook 401k is to ensure that they have a business and a business has to be a certain type of business. So it can’t be somebody who has investments does not have a business for the purpose of creating a checkbook 401k for the purpose of checkbook 401k, you need the kind of business that’s an active trader business, not an investment. Another thing that we encounter oftentimes is people that will think they’ve got a business because they have an LLC. From the IRS perspective, an LLC does not create a business, it’s having business activity. So if you’ve got business activity, but you have no LLC, you can have a checkbook 401k. But if you’ve got an LLC, and it’s kind of just sitting there, and you’re not actually engaging a business activity, then you cannot, you cannot create a checkbook 401k. So that’s the first component of it. Again, it’s having a business understanding what does and what does not constitute a business.

Vee 14:43
Okay, so let me stop you there for a second here. Can you define the level of activity needed? So for instance, if I’m just like a direct sales, network marketing, I just joined some company. I have a business and I may or may not make money but you know, as active business?

Bernard Reisz 15:02
Yeah, that’s a great question. And there is no definitive answer to that. That’s the truth. A business can be part time. And the IRA says as much the courts tell us as much we know, a business can be part time. But and a business doesn’t have to make money to be a business. That’s really about engaging in an activity with some measure of consistency for the purpose of generating profit. You don’t have to actually generate a profit technically, but if you never generate a profit, it may not be a business. But just to give you some extreme examples. Have you ever heard of Uber?

Vee 15:33
Yeah.

Bernard Reisz 15:34
Have you ever heard of wework?

Vee 15:36
Yes.

Bernard Reisz 15:36
But are those businesses?

Vee 15:38
I would say no, because they.

Unknown Speaker 15:42
Okay.

Bernard Reisz 15:44
Right. So these are bonafide businesses that are losing money, right? They’ve never made a profit. They’re losing billions of dollars, billions and 10s of billions and hundreds of billions of dollars, but it’s a business. So those are businesses. So again, just to illustrate a business does not have to make money. But as you say, you know, somebody is doing something sporadically and it doesn’t make any money. You know, if the IRS ever looks at that, they may say, hey, this is not a business. So definitely, you know, if you have something that’s not clearly a business, that’s kind of a side hustle, you want to either be able to show that you’re really doing some hustling. And it’s nice for if you’re making money. But, you know, obviously, bottom, every business, every startup business loses money, you generally take some time to, to be profitable. So the bottom line is, there’s no definitive answer. But if if you’re engaging in something, consistently, you know, pursuing a profit, it’s a business.

Vee 16:45
Okay, I want you to take it to another extreme here. Let’s say I create this business. And I understand that the IRS is you at some point have to make a profit. Otherwise if your hobby is not a business, right, so I’m trying to see if I just have a business and I lose money for a few years. I created this QRP for that business then I go out of business, create another company another business. Can I create another QRP?

Bernard Reisz 17:16
couple of things you can you can use the same QRP actually. That’s the truth. You can you actually use the same one. But to be clear, if a company never makes money, it doesn’t necessarily become a hobby. The hobby rules are there to give the IRS the ability to look at something and say this was never a business but right. We work almost ran out of money. Right? They were running. They were run out of money today. They were just bailed out right by Japanese banks?

Vee 17:43
Right.

Bernard Reisz 17:43
I heard wework run out of money and shut their doors. The IRS could never have come to wework and said you’re a hobby. Your 401k plan is was not a 401k plan. You are not entitled to any business tax deductions. Right? If some if the IRS says something as a hobby, you lose all your business tax deductions, you lose so many things. So it’s the the IRS has the ability to say, Hey, that was not a business that was a hobby. And the fact that you never make money is just kind of one of the circumstantial things that the IRS may say, this looks like it was never a business because you never made money. But when something is clearly a business, it’s a business, even if you never, never never become profitable.

Bernard Reisz 18:26
So it’s, it’s more of like a clue. You know, if somebody somebody does something for years, and they’re never profitable, and otherwise, it doesn’t look like a business because they, you know, they only spent an hour a month on it. That’s when the IRS will say, this is not a business. You don’t have a profit motive here. You’re not trying to make money because it doesn’t look like you’re trying to make money. To recap, even if you never make money, you’d still say Hey, that was a business right? If you created a QRP for that business, that means you’re taking the position. This is a business. I’m trying to make money here. I have a profit motive. If it doesn’t work out, well, hey, we know most startups go out of business. That’s what happens. It will you know, it’s a business. And if you eventually start a new business, of course, you can have a QRP for that business as well.

Vee 19:11
That’s great. That’s awesome. Okay, so let’s go back to your point earlier. So to have a QRP, you need to have a business. So and we have just defined what’s the businesses and you could have, you can make money or not as long as long as you have business activity you qualify, and what else?

Bernard Reisz 19:29
So you’ve got that right that business activity, which means you’ve got a profit motive, and you’ve got some measure of consistency.

Bernard Reisz 19:35
`Now being that the most economical way to do this is to do this with the QRP for a solo business. We’re generally looking for somebody that has a business that does not have any employees, full time employees that are not owners of the business. So let’s clarify that. What are we trying to get over here and why does this make it Why is this qualifying attribute? Well, QRPs or your regular company 401k plan can have lots of risks and costs associated with it. There’s a lot of compliance work that has to be done for your standard QRP. But the reason why that’s the case is because the IRS and Congress are trying to protect the company employees, the people that are not the business owners, so they make all sorts of compliance rules. And if you break the rules, the penalties can be severe.

Bernard Reisz 20:27
But when you’ve got a business where the only participants in the 401k plan, the only participants in the QRP are owners of the business, Congress says, Hey, we don’t have to protect any employees over here. Anybody that’s in this company has an owner or a spouse of the owner, you know, married to one of the owners, so we don’t have to protect anybody here. We can kind of put aside all those rules, all that compliance work just goes away when there are no employees that are not business owners. So to sum up, the second thing we’re looking for, we’re looking for that kind of business where the business only people in the business that are working full time are owners of the business. So that’s number two.

Vee 21:10
What about in a situation where you are the owner and you’re running this business, but you have 1099 employee?

Bernard Reisz 21:16
So as long as a truly 1099 employees, that’s okay. Because they’re not 1099 employees, you’re either 1099 or an employer.

Vee 21:25
Right?

Bernard Reisz 21:26
Exactly. That’s the idea. So a 1099 is an independent contractor. They’re not really part of your business. And right, you can imagine, think about this way, right? Do you have to every company uses contractors, so they have to include those contractors in their 401k plan? No, of course, of course not. So if your company’s using contractors, you don’t have to include them in the 401k plan. Now that’s a question in and of itself, right. If somebody is right, think of it this way.

Bernard Reisz 21:51
The only people that you have to include in a 401k plan are those that work 1000 hours per year or more. Somebody’s working, doing 1099 contract work for you for thousand hours, um, you may want to consider are they really a contractor or an employee, which is a question of itself. But so long as they’re not employees, they’re 1099 contractors, you’re all good.

Vee 22:12
Okay, so that’s number two, you need to have, like a business where you’re the owner and you don’t have employees.

Bernard Reisz 22:19
That’s right now you can have partners, you got business partners, because they’re also owners of the company. And you ideally want them each to own at least you know, at least 5% of the business. So so long as you that’s the scenario. Again, if you have part time workers that do less than 1000 hours per year, you can have that solo QRP. So that’s really it the two requirements. And again, with today’s side gig economy, more Americans than ever can have the solo QRP. At the same time, I venture to say most Americans still cannot because you have to have your own biz trade or business and not have any employees. So So while we set up these checkbook solo 401ks, and we want to set them up for as many people as we can, it’s very important to be cautious about getting this set up if you’re not a good fit for it.

Vee 23:10
Have you ever seen anyone screw up so bad where a 401ks, you know, they just have to pay the penalty to 15% penalty consistently.

Bernard Reisz 23:20
Oh, absolutely not. I have never seen that. I’ve seen things that should not have been done, but I’m going to leave that for off the air discussion.

Vee 23:31
I was going to ask you just you know, see what’s the most creative way someone have came up with to you know, use this QRP?

Bernard Reisz 23:38
Yeah, it’s not there’s not it’s not that there’s so much room, you know, with the creativity side, because when the rules there are fairly clear. And and we feel it’s not worth taking chances with them. It’s not worth taking liberties of this and it’s almost like a total, shall we say? cognitive dissonance. me know people. If you want Want to engage and you know, people that use the QRP, it means to say, hey, I want to pay play by the rules. I want to look at the tax code and look at what the tax code gives me. And within the rules, the tax code, maximize what I can do. If somebody’s the kind of person who just wants to break the law. You know, there are a lot of other things that they can do. Using QRP means to say, Hey, I’m the kind of person that wants to play within the rules. And I don’t want to have risk with the IRS. I want to do what is legal, and within that world do the most that I can.

Vee 24:32
So within the QRP, what kind of tax liability are we talking about here? What do we have to pay Uncle Sam’s here?

Bernard Reisz 24:40
Okay, so awesome question. So QRP is actually going to have, you know, want to think about any kind of tax vehicles out there. It’s the one with the absolute least high tax liability for the most part, QRPs right? They function very much like IRAs in the sense that you get tax deductions. If you use a you know, tax deductible QRP. And if you use a Roth QRP, you don’t get the tax deductions. But all earnings are forever tax free. So for the most part using QRP, you have no tax liability, very much very similar to IRAs, but it has some substantial tax benefits over an IRA, particularly within the real estate investing arena. So the first tax benefit is you can get much greater. This whatever you can do in the IRA world, inside of the QRPs, you can just magnify that.

Bernard Reisz 25:36
So with an IRA, Roth IRA, traditional IRA, the most you can put in on an annual basis of $6,000.

Bernard Reisz 25:43
Whereas with a QRP, you can put in 56k. So, think of it as IRA tax deductions or Roth IRA on steroids. So it’s it’s just much much more powerful. The magnitude is much greater than an IRA. The The second thing is there are certain cases where even tax sheltered retirement accounts. And really any not for profit entity can be subject to tax. There are some really great exceptions to that tax for QRPs. So have you ever heard of UBIT? Have you ever heard of UBIT UDFI, UBTI?

Vee 26:24
Yes. UBIT is unrelated business related income.

Bernard Reisz 26:28
So yeah, UBIT is unrelated business income tax.

Vee 26:32
Okay.

Bernard Reisz 26:33
And where you’re most likely like one would that tax potentially apply? So the words most relevant to real estate investors is when they have something called UDFI unrelated debt financed income and when you have UDFI, which you may be wondering, you know, we’ll talk from home what that is, I know it sounds a bit like UFO there’s the potential for tax liability and is really great. Carve out that exempts QRPs from UDFI created by real estate.

Bernard Reisz 27:05
So what is UDFI? UDFI stands for unrelated debt financed income, and it’s what you have when a tax free entity borrows money to invest. And it’s important to note this is not unique to IRAs and 401 K’s or any tax free entity, you know any charitable organization that doesn’t pay taxes a non for profit, if it borrows money goes to a bank borrows money and then invest that moneym then there’s the potential for tax there. And when now UDFI applies to any tax sheltered entity, but QRPs are exempt from UDFI related to real estate. So a QRP 401k whatever we’re going to call it, if it borrows money for real estate investment, there is no UDFI but if an IRA invest money, you know in real estate using borrowed funds, there is a potential for UDFI there. So that’s a really, really great benefit of the QRP over 401k. But at the same time, it’s very important to put it into, you know, in context. You know, if I were to ask you, now that you’ve heard about this UDFI thing, would you stop using self directed IRAs to invest in real estate?

Vee 28:21
Hmm, depends.

Bernard Reisz 28:23
And what would it depend on? You know, what, what were your thoughts be on that? What would it What would it hinge on?

Vee 28:27
I’m not sure it’s just a lawyer answer.

Bernard Reisz 28:32
Okay, yes, you can never go wrong with it depends.

Bernard Reisz 28:36
And here’s the thing. Let’s put this into into context. You know, how does UDFI work? And there are a couple of layers of this. But the first and most important thing to point out is as follows. Understanding how UDFI is calculated. So if I were to tell you, you can, you know, you’ve got $100,000 in an IRA So first question to you is you’re going to invest in real estate. Do you want to use a QRP? Or self directed IRA? What will your response be?

Vee 29:09
Without knowing the tax implication? I would say self directed IRA

Bernard Reisz 29:13
Vee. what’s going on? We just spoke about all the benefits of the QRP?

Vee 29:16
I know, but I’m saying if I’m just a normal listener, right, we Yeah, just learning about this for the first time. And before this episode, I would say self directed IRA.

Bernard Reisz 29:28
Yeah, okay. 100%. Right. Right. I get that completely. So the answer would definitely be QRP is for especially because of the QRP does not have this UDFI. And most, most real estate deals have leverage. In fact, that’s why you want to invest in real estate is because you can go to the bank, get the bank get give you 60 to 80% of the money. There’s a potential for UDFI, which the QRP is going to be accepted from, in contrast with a self directed IRA, which may have to pay some tax there.

Bernard Reisz 29:59
Now that’s great for the folks that qualify for a QRP. But the folks that do not qualify for the 401k, you know, I’ve seen lots of folks that have been talked out of using IRAs for real estate because of UDFI. So it’s important to understand why that is generally a mistake. If you can put $100,000 you know, in your IRA, and put that into into a real estate deal, you can do an all cash deal with $100,000 and not pay any tax. No UDFI no potential UDFI, or you’re given the choice, hey, you can take your hundred thousand dollars, get $300,000 from the bank, do a $400,000 deal. But you’ll have to pay tax on 75% of the income which would you prefer?

Vee 30:47
You pay tax

Bernard Reisz 30:49
Yeah, because I mean, of course, if you’d like you can do the hundred thousand dollar deal and have no tax but again, you can do a $400,000 deal and pay some tax. That’s definitely the Way to go. So the key thing to understand is that even the event that you UDFI applies, it does not apply to your total investment. It’s only applies to the portion of the return that’s generated by borrowed money. So it’s not as if you borrow money, all of a sudden your IRA becomes taxable. It does not. It’s only the portion of the deal that was financed with borrowed money can potentially be taxable. So you don’t lose by taking the loan. You come out way ahead, because on the contrary, you get the benefit of leverage. And your principal, your IRAs investment will always be tax free. It’s the bank’s money that would be subject to tax. So that’s the first thing that think that people gotta understand. When they think about you, UDFI and recognize that UDFI should not intimidate them or not stand in the way because you’re always coming out ahead, almost always coming out ahead when taking that was taking that loan. Now. The other thing to understand is, for the most part in real estate, Vee, based in your experience in the how much taxes to real estate investors paid?

Vee 32:12
very minimal.

Bernard Reisz 32:13
That’s right. So real estate investments generally actually have no taxable income. So if you have no taxable income, there’s no UDFI. So just like your regular real estate investor, you get your depreciation deduction, your mortgage interest deduction, you get all those great tax deductions that real estate has. So after all your leverage, you have no income, you have no taxable income, you have cash flow, but you have no taxable income. Well, same thing inside of an IRA. Even if the IRA has the potential for UDFI, it’s generally a phantom thing. If you don’t see it, it doesn’t exist because you’re not have taxable income. You have all those tax deductions to offset it, even within Ira, you’re generally not going to see UDFI.

Vee 33:04
So Bernard what you’re saying is that just clarify something. Earlier you mentioned, let’s say, we have $100,000, we’re taking a loan from the bank, and we only have to pay UDFI taxes on 75% of the income, is that because we are leveraging 100,000 to get another 300,000 and more by a $400,000 property, and that’s the proportion that you have to pay taxes on, based on the income.

Bernard Reisz 33:29
That’s That’s exactly it. It’s oversimplified. But that’s the concept. The idea is that you’re paying taxes only on the portion that was financed with debt. You don’t have to pay taxes, your IRA is tax free, and it stays tax free, right? The only way an IRA really is going to pay taxes if you break the IRA, right, but over here, you’re doing it a passive real estate investment, which is, you know, which is a great investment for an IRA. Okay, the fact that you took some of that outside money so that outside money is literally not IRA money and so there were returns generated by an outside money will be taxable.

Vee 34:07
Okay, so let’s say in terms of a syndication let’s say you have this GRP and you want to partner in syndication you buy membership share in an LLC and the syndicator now, after here she bought the building goes to your friends, Yonah Weiss from Madison SPECS and you do cost seg right? Then write off everything you cost seg, you do bonus depreciation. So now you have a huge phantom loss. You don’t pay taxes on on that,

Bernard Reisz 34:39
that that’s exactly it. Cost Segregation is something you definitely got to talk to Yoanh about all the ins and outs in practice. You know, the, you know, even without cost segregation, you’re generally not going to have income. In the first couple of years of a real estate investment with without cost segregation. The real benefit of cost segregation is to create Losses now, are you going to have a benefit from the loss? Whether or not you benefit from real estate losses, you’ll really depend on being a real estate professional for the most part, even without cost segregation, you generally will not have any taxable income. The benefit of the cost segregation is to create a loss in year one,

Vee 35:20
right? And by having a loss, you don’t have an income. And so, you know,

Bernard Reisz 35:25
I’ll illustrate a bit. Usually the first couple years of an investment even without cost segregation, you’re not going to have any taxable income. So like once you take your whatever your profit is, right, the rental income comes in. But once you deduct your standard depreciation deductions, you deduct your mortgage interest you direct all your operational costs there in the first couple of years of a deal. You just won’t have income once you subtract your expenses, you will not have taxable income. Right? And the key thing in real estate is, is that you’re while you’re not having taxable income can still have cash flow because depreciation which you get no matter whether or not you will cost seg study depreciation is a non cash expense, right? It’s the kind of this it’s a phantom expense and away on the tax bill on your tax return you right? We had depreciation expense, but it doesn’t cost you any money. So that’s that’s so you get cash flow, but no taxable income.

Bernard Reisz 36:23
But suppose you want to take, you want to put your depreciation deduction on steroids and create a loss. That’s where cost segregation is super powerful. Now the benefit of a loss is not that you don’t have income, the benefit of a loss is that you can take that loss and offset some other investment that you made, that does have taxable income. Or you may be able to take that loss and offset your W2 income or your business income, not every investor. This is subject of itself, but only certain people are positioned today. Take advantage of real estate losses. And I gotta clarify, there’s something called passive activity loss limitations, which means to say is that unless you’re a real estate professional, you can only use real estate losses to offset real estate income. So if you the only way for somebody that’s not more or less full time real estate to benefit from real estate loss is if they have other real estate or other passive real estate investments that have taxable income. Otherwise, the loss is suspended and you know, get no current benefit from that, from that real estate loss. Does that make sense?

Vee 37:37
Yes, totally. I’m trying to see if there are other ways that someone who was trying to invest in a syndication has to pay attention to in terms of using the QRP in a syndication

Bernard Reisz 37:51
so it’s Think of it as very much like using an IRA except you do not have to have a custodian involved. There is no requirement whatsoever to have a custodian. So an IRA, it’s in the tax code needs a custodian. So there’s got to be some sort of financial institution involved. So even when we set up the checkbook, you know, even we set up the structures that give clients IRA money in a bank account, we have to partner with custodians. In contrast, 401k, there is no requirement for custodian to be involved at all. So it’s actually in a way much more streamlined than using any type of IRA because you’re definitely going to get the money in a bank account. There’s no need to get any custodian counter signature. You don’t have UDFI. So it in any other way, it’s very much like using an IRA, just just simpler and no potential for you UDFI.

Bernard Reisz 38:48
So QRP is is a really kind of the obvious choice for anybody that qualifies for it. You know, because the UDFI thing will you We’ll encounter it and let’s bring this full circle will you will encounter UDFI on a real estate syndication is on the exit at that disposition is where there is the greatest potential for encountering UDFI Because at that point, you know and a successful syndication, right, you’re going to exit out to five to seven years. And the idea is that you’re going to sell for much higher price than you actually paid. So at that point, you’re going to be looking at a at a gain at a taxable gain. And again, would potentially to the IRA investor, it’s going to be taxable to the extent that borrowed money isn’t the deal. Whereas to the QRP investor, there won’t be no tax whatsoever.

Vee 39:48
So everything is then just tax deferred until you cash out

Bernard Reisz 39:51
with an IRA investor then the first couple of years, you’re not going to see any UDFI if you stay in the deal long enough. There definitely is the potential UDFI but certainly at the disposition of the asset, when the asset when the deal is actually exited, and this, you know, on the partnership wraps up, right at that point you’re planning to show on the K one you plan to show that you sold it for a gain. That’s where you’re going to be looking at UDFI for an IRA investor, and a QRP investor will not have any that UDFI

Vee 40:22
right so after everything you’ll have to explain right now it seems like it’s very easy to get into a QRP just based on the all the reason that you’d explain and all the things that you need to do to qualify it seems like not much for for you to qualify. So why would someone still do self directed IRA over QRP. If you can qualify for the QRP You certainly, you know, in almost all scenarios, that’s the way to go. There is one other one other factor,

Bernard Reisz 40:55
you know, perhaps but this is not the answer the this is not going to answer your question because this doesn’t explain Enough why people are not using QRP. But that is Roth IRA money cannot be rolled over to a 401k or QRP. So if people have money in a Roth IRA, it’s got to be the investment has to be made through a Roth IRA. But in any other scenario, if somebody does qualify or can qualify, and they certainly should, now, it’s, it is easy to qualify, you know, obviously, somebody’s got a business already going, they qualify. If somebody wants to qualify, it does mean that they have, they’re probably going to have to change or they’re gonna have to do something for that they have to start some sort of business.

Bernard Reisz 41:39
Now today, it’s easier than ever to have a business right now. I’m going to know if I get to ask you how many of your friends are doing some sort of side hustle or a full time hustle, you know, gig economy, freelancing, Amazon, Etsy, you know, some sort of something in the sharing economy. To be at ridesharing consulting, there’s so much opportunity to have your own business. But it’s something that people should consider doing for so many tax and financial reasons. But if they don’t have it already to qualify for QRP 401k, they’re definitely gonna have to do something. And some people, you know, to each their own, and everybody, some people can’t, you know, don’t want to change what they’re doing. Some people do want to change what they’re doing. Yes, by all means, if somebody can qualify and wants to take action, and qualify for a checkbook 401k power to them.

Vee 42:35
So in the situation of someone who is running an Airbnb business, is that something that you would consider as qualify?

Bernard Reisz 42:43
That is something that I would say as follows. Airbnb businesses, is definitely something that might qualify. You want to have consistency with what you’re doing your tax return. So when people call us And have Airbnb businesses going on what we try to tell them is be consistent, and rather than say, oh, you’re Airbnb qualifies. Now, where are you putting it on your tax return, you’re putting on a Schedule E or schedule C. And there’s, without getting into what should or shouldn’t be done, we can do that on a different podcast if you’d like. You know, all the tax rules around the Airbnb and one of my belong and Schedule E one of my belong a Schedule C, we generally want to see something on Schedule C, in order to set up a QRP.

Vee 43:33
Okay, and then one other business type that I want to ask you about is any pot-related businesses like if you grow marijuana or you own warehouse to rent out, so that someone could grow? Does that qualify?

Bernard Reisz 43:52
So if you’re growing, that sounds like a schedule seat to me, by all means, if you’re renting out warehouses, that’s really not a pot business. You know, incidentally, There’s a, you know, you’ve got a cannabis business renting from you. But you’re a real estate you’re collecting real estate rent, and which would be a Schedule E, which I think is not a good fit for a for QRP. So if you’re the grower, you know, you’re buying and selling pot. I know. Absolutely. And I know you’re, you know, you’re in Colorado, Colorado is where it all began. So while spreading to other states, that certainly the pot capital, so by all means you’ve got a pot related business. It is a business. And it’s really cool. Because think of this way at the federal level, right pot is still illegal. My it’s only the states that have allowed it. So it’s really cool to realize that, hey, this is a business. And we’re going to we’re using federal rules, right to QRP 401k. As a federal concept, but this has precedent. If you think about real drugs, you know, the tax code, talks about drug related businesses, and then even Al Capone, I think when they got they locked him up, you know, when he’s Doing they were drug running and maybe during Prohibition selling alcohol, they took him on tax evasion. But even a drug dealer in general is, is entitled to tax deductions. It’s a business, you know, the fact that it runs afoul of certain federal laws doesn’t mean it’s not a business.

Vee 45:17
This is so great. This is awesome. I’ve not ever heard that before.

Bernard Reisz 45:21
Yeah, I’m serious tactical talks about this. And yes, if you are running an illegal business, it’s still a business. And you got and you have to pay taxes. Right? The fact that you have a pot business, which is illegal doesn’t mean you don’t have to pay taxes, you have to pay taxes, the IRS can come to you for tax evasion. If you don’t pay taxes on your, you know, on your drug running, and your drug dealing. So, pot business is a business.

Vee 45:44
Oh, man, this is so great Bernard. One last question before I let you go. What is your most favorite success or mindset quote?

Bernard Reisz 45:53
Can it be my own quote?

Vee 45:54
Sure,

Bernard Reisz 45:54
I got to distill this into like one pithy sentence, but what I say is recognize that you are in control of your financial destiny. Whether or not you realize it or whether or not there are people around you that are, you know, that are trying to take control of your financial destiny. Ultimately, you’re going to be a beer, the risks and consequences and rewards. So you should take charge of it.

Vee 46:23
Awesome. Thank you so much for your time Bernard. This has been great. I learned a lot and I certainly did not know that. You know, a drug business just related business. Can you kind of write off the tax and get a deduction? That was awesome.

Bernard Reisz 46:40
Okay, awesome to have been on the show. Vee. Thanks so much for having me on. And I’m looking forward to hearing the recording and hearing future episodes. Awesome.

Vee 46:50
That’s the end of the show. Don’t forget to subscribe, leave a five star rating and review on iTunes for the real estate lab podcast. Until next time, have a prolific week.

The post EP 13: Bernard Reisz – What Everyone Should Know About QRPs & UDFI Tax appeared first on Real Estate Lab .

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https://realestatelab.live/ep-13-bernard-reisz-what-everyone-should-know-about-qrps-udfi-tax/feed/ 0 Bernard Reisz CPA is the founder of 401KCheckBook.com which gives investors direct control of their tax-sheltered funds for real estate equity and debt opportunities using checkbook controlled IRAs, QRPs, Solo 401K(s) and Checkbook Life Insurance. Bernard Reisz CPA is the founder of 401KCheckBook.com which gives investors direct control of their tax-sheltered funds for real estate equity and debt opportunities using checkbook controlled IRAs, QRPs, Solo 401K(s) and Checkbook Life Insurance.



He’s also the founder of AgentFinancial.com which provides tax strategy, entity, and financial services to real estate professionals, including real estate agents, real estate investors and mortgage brokers.



SHOW NOTES:



[00:07:01] Bernard explains the different types of QRPs out there.



[00:11:17] Bernard explains how to correct a mistake you make in a checkbook 401K.



[00:12:40] Bernard explains about prohibited transactions



[00:13:21] What are the differences between IRA and 401K?



[00:15:02] Bernard explains the rules required to have a solo 401k.



[00:21:51] You have to include someone in a 401K plan only when they work a minimum of 1000 hours per year for your business.



[00:25:36] Traditional IRA, you can put in on an annual basis of $6,000. With QRPs, you can put in $56,000.sz



[00:26:33] Bernard explains UBIT and UDFI.



[00:30:49] Bernard explains how UDFI tax works.



[00:43:33] Cannabis businesses qualify for QRPs.



FOLLOW BERNARD REISZ: Websites: https://www.401kcheckbook.com LinkedIn: https://www.linkedin.com/in/bernard-reisz-cpa/ Consult and Free Entity Formation Call: https://bit.ly/2Rw9N1v Email: Bernard@ReSureFinancial.com



Join our free Facebook Group at www.EastWestVentures.com/AIMS



Listen, subscribe, rate and review: Apple: https://apple.co/2BdPdeJ iHeartRadio: https://ihr.fm/2MPxyAu Sticher: https://bit.ly/2pUgd0v Listen Notes: https://bit.ly/2JtpZxi TuneIn: https://bit.ly/2NhRCe2







Transcript



Bernard Reisz 0:03
Recognize that you are in control of your financial destiny, whether or not you realize it or whether or not there are people around you that are, you know that are trying to take control of your financial destiny. Ultimately, you’re going to be a beer, the risks and consequences and rewards. So you should take charge of it.



Vee 0:31
Welcome to the show, you are listening to the real estate lab podcast. In this lab. we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.



Vee 0:50 It’s a great day to be alive and to invest in real estate. My name is Vee Khu and you’re now listening to my show the The Real Estate Lab Podcast. Hey it’s the 3rd week of the New Year. Are you on track with your goal? What is your goal for 2020? Mine is to buy a mobile home park this year. If I can support you and your goal in any way, hey, please do not hesitate to reach out to me. You can get to me at vee@realestatelab.live or you can simply schedule a call at www.callwithvee.com Alright, I’ll guess what today came highly recommended by Yonah Weiss. He is the founder of 401kcheckbook.com, which give investor like yourself direct control over your retirement funds.]]>
Vee Khuu 46:55
EP 12: Yonah Weiss – Cost Segregation Expert Interview https://realestatelab.live/ep-12-yonah-weiss-cost-segregation-expert-interview/ https://realestatelab.live/ep-12-yonah-weiss-cost-segregation-expert-interview/#respond Mon, 13 Jan 2020 14:26:14 +0000 https://realestatelab.live/?p=500 Show Notes [00:02:40] Yonah works for Madison SPECS, one of the biggest cost segregation firms in the country. [00:03:06] Yonah had recently surpassed 1000 posts on BiggerPockets.com [00:03:34] You can schedule a free consultation with Yonah at http://bit.ly/Yonah15Min – You should do this if you have ever wonder whether cost segregation is right for you!...

The post EP 12: Yonah Weiss – Cost Segregation Expert Interview appeared first on Real Estate Lab .

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Show Notes

[00:02:40] Yonah works for Madison SPECS, one of the biggest cost segregation firms in the country.

[00:03:06] Yonah had recently surpassed 1000 posts on BiggerPockets.com

[00:03:34] You can schedule a free consultation with Yonah at http://bit.ly/Yonah15Min – You should do this if you have ever wonder whether cost segregation is right for you!

[00:07:30] Yonah believes that you have to learn from those who have done it before you.

[00:09:47] If you are not doing cost segregation, you are doing straight-line depreciation.

[00:09:56] The IRS allows you to write off the entire value of a building. For commercial, it’s over 39 years period and for residential it’s over 27.5 years.

[00:10:18] The main categories of cost seg:

  1. Actual Structural Components of the building
  2. Personal properties depreciate over a 5 year period (include fixtures, lighting fixtures, special purpose plumbing, etc.)
  3. Land improvements (depreciate over 15 years): Landscaping to pavements, to asphalt a parking lot etc.

[00:15:34] Yonah used real number examples to demonstrate bonus depreciation and cost segregation for mobile home parks.

[00:19:53] Yonah discusses whether you could use the benefit of cost seg to offset your W2 income.

[00:20:50] Yonah discusses briefly about real estate professionals and using it to offset the entire W2 income.

[00:24:48] I asked Yonah about Cost segregation and Airbnb for a friend. If you have an Airbnb business, you will want to listen to this section.

[00:35:05] Yonah shares the questions you need to ask a firm before hiring them to do your cost segregation study.

Real Estate Lab Podcast Episode 12:
Cost Segregation Expert Interview

Transcription

Yonah Weiss 0:02
These successful and success is really, you know, relative kind of term. But I would say, and you probably heard this before, because I’ve said it before this and all the podcasts that a person who is truly a happy person, successful or rich person is someone who’s happy with what they have. So, being rich is not about monetary wealth. It’s about you know, being truly satisfied, being truly happy with with what you have and you know, not kind of looking to see, you know how I can always be making more but being totally content with where you’re at.

Unknown Speaker 0:39
Welcome to the show, you are listening to the real estate lab podcast. In this lab. we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.

Vee 0:58
Hey, is a great day to To be alive and to invest in real estate, my name is Vee Khuu. And you’re now listening to my show the real estate lab podcast. Let me ask you this. Are you interested in keeping more money for yourself? Do you know about the tax loopholes that the mainstream media keep on telling us that is only available for the rich?

Vee 1:18
You know, the loopholes that someone in a high office used to not pay any taxes at all. Our guest is here today to show you how you can benefit Also, if you are an overworked doctor, you can participate in this. If you are a spouse of a dentist who happened to runs your Airbnb rental on the side, you can participate in this. It worked even for the rest of us worker bees that are trapped in the rat race.

Vee 1:45
You will wonder why your CPA never discussed about this tax deduction with you after listening to our show today. This guest and I, we discuss about a tools called cost segregation and how you can use it To save millions of dollars from our least favorite Uncle, uncle sam. So who is our guest today? He is a blockchain enthusiast. He is a Super people connector is guys know pretty much everyone you need to know in the real estate industry.

Vee 2:17
He is super super busy yet he volunteer for a nonprofit and helped raise over $100,000 for needy widows, orphans and underprivileged families. He’s also a licensed Realtor with the Israeli Ministry of Justice. Now, that’s just one small part of this guest impressive resume. So who is this person?

Vee 2:40
As a business director at a national cost segregation leader Madison SPECS, he helped numerous of investors save on their taxes every year. Over the last 14 years, Madison SPECs have done over 15,000 studies covering all 50 states and what Result? over $3 billion in tax saving. That’s super impressive.

Vee 3:06
Ladies and gentlemen, our guest today is Mr. Yonah Weiss. Yonah is on a mission to get to 1000 posts on bigger pockets. So if you’re a member on bigger pockets, and you see any posts that he can add value to make sure make sure to tag him.

Vee 3:24
Also be on the lookout for his new podcast called Weiss advice. Make sure you check out Yonah profile on LinkedIn and bigger pockets as well.

Vee 3:34
If you’re interested for a free consultation with Yonah check the show notes for the link. Real quick if you have not leave a review at five star rating or subscribe to the real estate lab podcast, do me a huge favor, head on over to iTunes after the show to do it. It would help me out tremendously.

Vee 3:54
Last but not least, make sure you join our free Facebook community as well. I want to give a huge shout out to our admin Rajesh Tekchandani and Vinney Chopra, one of our expert guests. They have recently closed on a 200 unit apartment in Orlando, Florida. I am sure you can learn a tons from them. Just head on over to www.EastWestVentures.co/AIMS to join. Alright, let’s dive into my conversation with Yonah Weiss from Madison specs.

Vee 4:34
Welcome to another episode of the roost a lab podcast. It is my honor to have Yonah Weiss here. Yonah, Shalom, how are you doing?

Yonah Weiss 4:44
Shalom, I am doing well Vee. Thank you so much for having me on the show. It’s a pleasure to be with you.

Vee 4:49
Awesome. I I saw your schedule this morning on LinkedIn is a crazy schedule. So I really appreciate you jumping on with me here. So let’s just dive right in. I understand You had a background in education for more than two decades doing that, what were you doing in that field?

Yonah Weiss 5:08
Really learning and teaching, I’m like, I’m a lifetime learner. So I love to learn and love to teach. And I have six kids. So as part of my, you know, even from when I was when I was young, a teenager, I was, you know, a camp counselor and doing some, you know, high school tutoring and so it’s kind of been in my blood just to kind of, you know, something, you can help others and, you know, teach them and share with share your knowledge.

Vee 5:32
So then At what point did you say you want to get involved in real estate?

Yonah Weiss 5:36
Oh, you know, I guess it was about five years ago, when, you know, I just needed some, some things happen in my life or really changing, you know, some environments, and I was just looking for opportunities, and I wasn’t really looking for real estate, to be honest, but I thought about it. What is a field that I would like to get into I didn’t want to go into any more formal schooling. I’ve been in formal schooling postgraduate you know, for a long time, so I didn’t want to go back to school to learn something new.

Yonah Weiss 6:08
At the same time, I thought what would be a field that I could you know, pick up by just mentoring, apprenticing with other people and kind of learning on the go, and what could potentially have the most lucrative outcome. And real estate just kind of naturally made sense. And I had a lot of people that I knew were in the field already. So I just reached out to a few people and a couple opportunities came my way and just kind of jumped in.

Vee 6:34
Awesome. So what did you do at the beginning?

Yonah Weiss 6:37
So the beginning I started out with a friend of mine who his uncle owned a small boutique commercial real estate financing firm, so we were doing a mortgage brokering. I was just learning from everything about commercial real estate at that point and brokering loans and hard money loans and you don’t have sort of sourcing financing underwriting. You name it.

Vee 7:00
So in a in a few short years, you said four or five years ago in a few short years, how did you go from someone who is new in the field to now Your name is synonymous with cost segregation?

Yonah Weiss 7:13
I think it has to do like I said before connecting with and really apprenticing the real experts, because you’re not going to learn things on your own, you’re not going to become great on your own. Just, you know, being a self made like like, like that even exists.

Yonah Weiss 7:30
There’s no such thing as self made, you really have to learn from those who have done it before you and that’s kind of where I got involved with Madison specs, the company I currently work for, they’re literally the experts in the field, you have people who’ve been in industry for for decades, and doing everything in the commercial real estate field. So just you know, learning side by side from them.

Vee 7:53
So the topic that we will be discussing today is obviously cost segregation, which is an area that you are an expert In. Let’s just take a basic step here. I understand cost segregation is more or less, you take a building and you break out each component of that building and you depreciate it over time, according to the IRS code. Can you just kind of walk us through? Who does what and how does that work? At what point do we go to Madison spec, yourself? Or what point do we go to a CPA? Just just the whole thing, how the whole thing put together?

Yonah Weiss 8:30
It’s a really interesting idea that cost segregation allows you to accelerate depreciation like you mentioned that. But CPAs don’t necessarily do this because it’s something engineers needs to do. It’s something a firm that needs to that specialize in this needs to actually take part in preparing that according to the IRS rules, which is why accountants really don’t specialize this albeit there are many, there are many firms, accounting firms that will do this in house. So they’ll have engineers in house that do this. But those are usually the large accounting firms the big four, you know, large carriers really accountable to do this. What we do is, like you mentioned, break down the property into those small, you know, those assets, instead of taking the tax write off every single year, a small amount over, you know, 39 years over 27 years, you can actually take a larger amount in the first five years by front loading a certain portion of that.

Vee 9:31
Can you talk more about the front loading component and how each asset has a certain lifespan right so you how do you categorize what goes to what and how does bonus appreciation and depreciation plays into all this?

Yonah Weiss 9:47
So yeah, so the, the main categories, you know, if you’re not doing cost segregation, you’re taking what’s called straight line depreciation.

Yonah Weiss 9:56
Can you buy a building the IRS allows you to write off the entire value of That building over for commercial a 39 year period or for residential multifamily over 27 and a half year period. The front loading and the reallocating of assets comes into play when the engineer the cost segregation engineer comes in. And really, there’s two, three main categories.

Yonah Weiss 10:18
One main category is the actual structural components of the building. And that’s what most people just take everything. And if they’re doing straight line depreciation, they just throw everything into that bucket and take a small deduction each year, but that’s really not accurate even according to the tax code. You’re supposed to be separating it out and really doing cost segregation according to the actual right way of depreciating your property.

Yonah Weiss 10:44
This other two categories are what’s called personal property which depreciate over a five year period and that can include anything from furniture to appliances. You know fixtures, lighting fixtures, you have special purpose plumbing, if you have cabinetry countertops, things like that in a building, even carpeting or floor tiling will actually fall under that five year category, which means you can depreciate the entire value of all of those things in the first five years. Now, the second category is land improvements which depreciate on a 15 year schedule. Okay, so now we have three categories we have, you know, the main structural components of the building and think of that, like the structure and that’s the main component that’s usually going to consist of the majority of the value of the property. Then you have the other two components which are the, the personal property are the tangible movable property which isn’t necessarily always movable. But IRS considers it to be so and that appreciates on a five year schedule. Third category is the 15 year property, the land improvements and that can include anything from landscaping to pavements curving asphalt to a parking lot, have a driveway, you have a sidewalk on your property, right even, you know a path all the That all the landscaping depreciates on a 15 year schedule.

Yonah Weiss 12:04
Now, you mentioned bonus depreciation, how does that work? It’s actually not something separate from cost segregation. It’s the same thing. It’s just allows you the IRS came up with a new rule that allows you to take instead of separating out those three categories, the five year, 15 year and the 27 and a half year, you can actually know take the entire five and 15 year property meaning any the depreciation less than 20 years and you’re allowed to take that entire amount in your number one, which that’s what 100% bonus depreciation so that’s probably the biggest thing that’s happened to the real estate tax world in probably the last 2030 years.

Vee 12:46
Okay, so I just want to clarify something when you mentioned earlier the commercial building the depreciation is over 39 years?

Yonah Weiss 12:55
Yes.

Vee 12:55
Okay. So that count as apartments or commercial buildings for retails and` strip malls and whatnot.

Yonah Weiss 13:02
So apartments fall into the residential category. So even if they are, you know, a 300 unit multifamily apartment complex that IRS still considers them residential, even though it’s you know, theoretically a commercial property, but for tax purposes its residential. Commercial would include anything else. So whether it be office, retail, industrial, you know, self storage, and anything in between.

Vee 13:25
Okay. A follow up to that is regarding the land improvement. I understand that cost segregation doesn’t really work in mobile home parks. But in your example that you said early, you have a 15 years period for land improvement does that work in that scenario also?

Yonah Weiss 13:41
Absolutely. In fact, mobile home parks can actually be one of the best I guess the word I’m looking for his. Someone who could take the most advantage I can think of a word right now.

Yonah Weiss 13:55
I’ve been going since way early this morning,

Vee 13:58
the most advantageous?

Yonah Weiss 14:01
So I’m a little bit giddy right now. Yeah, mobile parks can actually get probably the most tax deductions from cost segregation than any other type of asset out there. And and that’s because in many cases, mobile home parks are entire, especially when they’re entirely tenant own homes. So the tenants actually the homes, you as the landowner just own the land, right.

Yonah Weiss 14:28
But you own the land improvements, which includes the pavements, right, the pads under each home, and all the landscaping the roads in between those. So basically, what you own is the land, which land itself doesn’t depreciate. So there’s a certain amount to every property that you have to separate for land land allocation, which does not depreciate and then you have land improvements. There are some structural components there in the home parks like sewage, and you know, main structural piping and electric stuff like that, but the majority of that is going to be land improvements and you’re looking at literally, sometimes mobile home parks where they’re all completely tenant on homes can be 60 70% of the entire value is that 15 year land improvement.

Yonah Weiss 15:14
Now, when you’re talking about bonus depreciation, that means you can take that entire tax deduction in the first year. Okay, so let me use a real numbers, right? What does that mean? Let’s say you buy a property for a million dollars, a mobile home park, and let’s say right, let’s say after land, oh, you bought it for $1,200,00 and you separate $200,000 for land.

Yonah Weiss 15:34
Okay, well, they have a million dollar property. Okay. 70%, let’s say potentially can be that land improvements. That means you can have a $700,000 tax deduction in the first year for buying a million dollar property. Right, and you have to actually spend $700,000 worth of oil, nothing. Okay. No, think about it. If you buy a million dollar property, and your Financing it once you’re putting down 200 $250,000 Okay, now you get a $700,000 tax deduction. So you can spend $200,000 and this is women one and get a 700,000. And it’s crazy, but that’s exactly how it happens. And I have people with long parts reaching out to me left and right, because this is something that is just blowing people’s minds. And and it’s really true. Now, not every moment will have that, you know, 70% that is a extreme example, because a lot of times there’s some, you know, parkwood homes as well and so that will contribute to the more of the structural components etc. But it’s usually at least 50% because what we’re talking mobile home parks, so that’s huge golf courses. Another one actually that that fits into that category, but multifamily properties usually is more like you’re at a 20% 20 to 30% allocation, which is still great, which means you can buy a million dollar property, get it to $300,000 tax write off, which again, is incredible! It almost doesn’t make sense. But, but, but it’s true.

Vee 17:06
Well, yeah, it’s true. And you know, depreciation is one of those things does the IRS force you to to take regardless, you know, you when you sell a building, you have to pay for recapture regardless. So I don’t see why not just going in and you know, take the depreciation and accelerate it.

Yonah Weiss 17:23
Exactly, yeah, taking much advantage as you can now take that cash flow, especially if you need those tax deductions. Take it now and use it.

Vee 17:33
So in, let’s say, in the scenario of a syndication and I’m the GP, I don’t need the depreciation. How is it possible that I can pass it over to some of the limited partners that need that tax write off? Let’s say the limited partner is a doctor or a dentist that you know has a lot of income, how does that work and also talk about the bonus depreciation who qualify for that? Are there certain asset or certain investor profile that the need to qualify?

Yonah Weiss 18:08
No the bonus depreciation you don’t need any qualification in that and I’ll get to the first question second. But the bonus depreciation is really a choice. You can choose to take that hundred percent bonus depreciation and you can take to choose to front load that entire amount in the first year. You can also just choose to do the regular cost segregation which accelerates it and still gives you a larger tax deduction over the first five years, but it doesn’t get you that whole big huge chunk in the first year.

Yonah Weiss 18:35
Now, back to your first question, which is about the limited partners versus the general partners who’s getting the tax deductions unfortunately, high net worth individuals who are you know very high networth high you know, W2 jobs at doctors lawyers, they may be getting passive, wanting passive income from the investments they’re doing as a limited partner. However, they may not be able to take advantage of the tax deductions beyond They’re actual income from the properties.

Yonah Weiss 19:03
What I mean is, if you have an income from the property, whatever income is coming from the property, the depreciation can now be used to offset that income. Okay, what we’re doing is you have, let’s say $100,000 income, hundred thousand dollars of tax deductions, it’s wiped out you have zero tax liability, you pay zero income tax on the property.

Vee 19:24
On the property?

Yonah Weiss 19:25
On the property correct. However, if the doctor has a $400,000 $500,000 income from his job, he’s not going to be able to use the tax depreciation to offset that income. It’s only going to be sheltering the income from the property.

Vee 19:41
Okay, so how does someone like that? Because I’ve heard a lot of people who said I can pass this deduction through to the limited partners, so correct me or how does it work for them?

Yonah Weiss 19:53
So how it works is like this. There’s really two things number one is that yes, the deductions get passed on Those partners but they may not be able to use them, okay? It also means they’ll be able to use it to offset entire amount of their income, okay, which is great, which means whatever income they’re getting is going to be tax free, at least in this first five years. That’s usually the case those passive incomes, however, it may just it may stop there, okay? And they’re not going to be able to shelter their tax or their taxable income from other from their w two job. However, there are really two other things that I said there’s two things but there’s three. The first thing was that right. The second one is really is to the so the first one is that whatever income the limited partners get from the property, they can use the tax deductions from the depreciation to offset that meaning they don’t have to pay taxes on that income.

Yonah Weiss 20:50
However, the other thing is that if they have other passive investments, okay, let’s say they have other passive income, whether it be from other properties they own Or whether it be from other -` maybe soon as another business interest passive income, then depreciation can also be used to offset that income as well meaning it doesn’t have any limit to property because the depreciation kind of cross pollinate to other properties as well or other passive income. Okay, so that’s one one advantage that other investors could have. The other thing is and really, this is the ticker and this doesn’t actually apply to the limited partners or the passive investors but really applies to anyone and everyone is that if you can get the real estate professional status, okay, which is a box that you check your tax returns, which shows that you are materially involved in real estate investing, have ownership and are materially involved invest in actually managing or operating or you know, be involved in renovations of any kind of broken properties. You can actually use depreciation to offset all of your income not just from the front or from any other source.

Yonah Weiss 22:02
But it gets better. It doesn’t necessarily have to be you, it can be your spouse, okay? And this is really where the tickets are the kicker, whatever you want to call it, this is where the Big Bang is you’re getting, let’s say you have your you’re a doctor and your spouse is a real estate agent, right or is involved in property management, or involved in in running some properties. You now qualify as a joint, jointly finding taxes as a tax as a real estate professional. Now you can use contribution you can use those depreciation deductions to offset all your income from any source and your spouse’s.

Vee 22:41
Okay, and this is fairly easy to get qualify right? I think is around 16 to 18 hours of real estate activity a week to get your qualify?

Yonah Weiss 22:51
Yeah, it’s it’s 750 hours a year. It’s not particularly easy, but I mean in the fact that it is possible Okay, which means that it’s not it needs to be tracked as ours even track. But yeah, anyone can do it, anyone can do it, you don’t need to any qualification, you just need to actually have the hours more than 50% of your time has to be involved in real estate. So if you have a W two job, it’s probably not possible or feasible to also spend equally or more hours in real estate and materially involved. However, if you have a spouse, that’s really the way to go.

Vee 23:26
Okay, so So just to recap, in order to take advantage of this, you need to be a real estate professional, or doesn’t really matter, it cannot offset your active income.

Yonah Weiss 23:37
Correct. And it is, it’s, it’s the best way to take advantage of this. It’s not the only way but it’s definitely the best way.

Vee 23:44
Okay, and so let’s just take a step back and say so cost segregation doesn’t work for, let’s say, a single family homes where someone bought it for as an Airbnb investment.

Yonah Weiss 23:56
Yes, it can be for Airbnb investment, it can be for any Any type of property. My general rule of thumb is that if a property is purchased for over a million dollars, there’s usually it’s almost a no brainer that there’s going to be tax benefit there is going to be worthwhile. When the property is smaller than that maybe under a half a million dollars it usually doesn’t even make sense. It just there’s not enough meat on the bone again, we’re talking about unless the mobile home park because again there we can have, you know, there’s so much meat on the bone. But if it’s not, you know, you’re talking about a 20% maybe reallocation there’s just not a lot there when we’re talking about the actual tax deductions. So So yeah, any property can do can do it doesn’t have to be multifamily doesn’t have to be commercial could be even a single family house. If it’s if the purchase price is high enough Can you can make it worthwhile.

Vee 24:48
Right as I’m asking this because I’m thinking of a friends who just recently bought a single family homes in Southern California for Airbnb, so In that situation I understand you can break up the component different components inside a house and write it off depends on the schedule that the IRS has out there. What about the stuff that she bought for her business? Let’s say beds and everything else that goes along with that business?

Yonah Weiss 25:15
all that goes in there because if you think about it, all of that stuff is part of the personal property. All part of that and fits into that five year category. Right? It’s part of you know, is if you think of as a business, but it’s really you know, it’s an investment property and all of that, you know, movable property goes along with it.

Vee 25:32
So all that chattels go along with that right then just five years, you can write everything off the year, first year?

Yonah Weiss 25:39
Correct.

Vee 25:40
So she already let’s say, past last years, and now we’re going into the second year of owning this property, can she go back in retrospect and do it?

Yonah Weiss 25:51
Yeah, retroactively. You can go back you can get the tax deductions retroactive which is incredible, because there’s almost there’s almost no reason not to To get like, like what we do will provide like a feasibility analysis, which will show you what you know the tax benefits would be if you’re just doing straight line a lot of people they don’t know about cost segregation, and they’re just doing straight line depreciation and they’re taking that little amount every year.

Yonah Weiss 26:14
There are many people who don’t even know what depreciation and their their accountants really doing a huge disservice. And not even giving them the tax write offs that they so rightfully deserve. But I’m not talking about that I’m talking about just people taking break the straight line depreciation. If you did that, and you’ve owned a property for a year or 2, 3, 5 years, you can actually go back retroactively and get those missed accelerated tax deductions in the first year. And it’s like bonus depreciation because you’re getting what you missed over those past five years. And you’re going to get all that in your one because that stuff depreciates on a five year schedule. So in case your friend who’s just had it for one year, actually, if it’s been within the past year, and they haven’t yet claimed any type of cost segregation

Vee 27:01
Right,

Yonah Weiss 27:01
Then they can actually claim bonus depreciation as well, even retroactively as long as they didn’t opt out of it by by depreciating property separately.

Vee 27:10
So if they did the straight line depreciation year one now going into year two, they can do a cost seg study and and claim those depreciation.

Yonah Weiss 27:20
Correct!

Vee 27:21
That’s awesome.

Yonah Weiss 27:22
Yeah. So

Vee 27:25
what would some, what would something like that usually costs? And when does it make sense to do it? When does it make sense not to do it.

Yonah Weiss 27:34
Like I said, it’s definitely worthwhile any property over half a million dollars, especially over a million dollars, it’s worthwhile to reach out to a firm like ours to get a quote or an estimate. And in that will show you that analysis of what the difference would be if you’re doing straight line depreciation versus if you’re doing cost segregation. So that’s, that’s no cost whatsoever. We do that as a service for free. Anyone can reach out anytime. Get that and it’s really you You can helps you to make an educated decision to see if it’s worthwhile or not. Because there’s no real black and white, is it worthwhile? Is it not? It really depends on a person’s personal tax situation. And if they need those extra deductions, there is a lot of advantage to doing it. And there are some disadvantages. There are some reasons why person may not need, they may not need those tax deduction, it may just be going to waste and it may so it’s definitely worthwhile to reach out for that. What about the timing?

Yonah Weiss 28:25
Like I said, you can do retroactively you don’t have to do it in the first year ownership you can and a lot of people do because they want to take advantage of those tax deductions right away or pass those to the investors they want to you know, offset other income they may have other gains they may have and they can use the cost segregation in the first year. So definitely worthwhile to try to get a hold of it in the first year. But again, you do not need to and you can actually get it back retroactively.

Vee 28:51
Okay. Another question just came up.

Yonah Weiss 28:53
Oh the cost also, right, you mentioned the cost, right? I will include in that what the cost would be which is is not based at all on the tax benefits not based on contingent to what you’re getting gonna save for it. Rather, it’s a one time flat fee based on the scope of work and has a lot to do with, you know, the number of units or the square footage and what type of property is. But generally speaking, in most of the cases, I’ve seen a huge massive properties, somewhere between four and $7,000 in that range.

Vee 29:25
That’s a lot cheaper than what I’ve heard before. I’ve heard somewhere between 13 and 15 grand and what So what you’re saying is, it’s definitely worth a shot to to just try it out and, you know, call your firm or call some other firm, whoever offer the feasibility studies for free basically, exactly.

Yonah Weiss 29:47
Yeah, I mean, get the free analysis, you know, what I mean? Like, check it out, see if it’s worthwhile see if in your situation it would make sense or not. And that’s, that’s, that’s doesn’t cost anything. It’s really quite educational actually.

Vee 30:00
So earlier I mentioned another question that I just have is, let’s say you’re buying a building, but the owner had already have that building for a long time and already the cost seg did the the bonus depreciation, I’m sure it was different, you know, this new bonus, the appreciation that President Trump just passed, just, you know, still new. So in that situation, let’s say if you are assuming the loan, nothing changed, you’re buying this property, but you’re buying the LLC. You’re not buying the property itself. So no title transfers, you’re just buying the LLC. In that situation. Does it work still for cost seg?

Yonah Weiss 30:42
Because what happens is the IRS considers depreciation starts over when there’s transfer of ownership, as long as it’s a, an arm’s length, non arm’s length, sorry, an arm’s length transaction, meaning if you’re passing it just from one LLC to another, but and you’re just the same person And then there’s no real change of ownership in that case and depreciation does not start over.

Yonah Weiss 31:06
If you’re passing it over to a close blood relative as well. The IRS considers that a non arm’s length transaction and therefore this is also not considered a change of ownership really because it’s really kept in the family However, if you’re you know, just buying a property from someone else even if it’s your that LLC transfer, you are actually buying apartment the IRS considered it and the new purchase price is what is actually being depreciated by you. So even if the previous owner bought the property for a million dollars five years ago, and you’re bought and they’re depreciating it on a five, you know, on that schedule for a million dollars, that’s their defeasible basis. That’s how much tax rate if you buy the property for $10 million. Now your tax write off is $10 million dollars.

Vee 31:53
Okay, so, same situation, let’s say that the old the seller Still have that building right? Bought it for a million still has $500,000 on the loan, I’m coming in, I’m giving a million dollars to the seller , I’m assuming that half a million. So at that point is my base, one and a half million or a million,

Yonah Weiss 32:15
your basis is whatever the actual transaction price was. So it doesn’t really matter if you’re assuming a loan or not. It matters what the you know, the settlement statement says what’s the closing price that’s in the IRS that establishes the new basis and the new ownership.

Vee 32:33
Got it? Okay. And the other thing I want to ask you is the regard to the methodology of cost segregation. Because I when I read on the IRS website, just briefly, there’s rule of thumb and then there is actually that the court have no methods to cost seg so when your company, Madison Specs come out and do something like that. Is there a procedure that your company developed? is is it’s different from company to company or it’s pretty much standard all across?

Yonah Weiss 33:03
It’s normally I wouldn’t say standard all across but if you if like you said if you look on the IRS website, if you go and scroll through the cost segregation audit techniques guide, there are really several different methods of doing cost segregation. Right. And the one you mentioned the rule of thumb method, okay, right. I think that the someone who can just kind of guesstimate based on some experience but but very little details can kind of come up with a number of what the depreciation should be without any actual facts without any actual findings. If you read the clearly what it says there it says that, that is not actually don’t know this by heart, but but it says there and you can actually look it up there. It says there that you can, it’s not really recognized and won’t hold up an audit by the IRS. So they actually state it. They said you can do this, but it doesn’t really hold up strongly in an audit. However, there is something called a quality cost segregation study, which is also listed there in what is there’s different approaches of doing cost segregation. And that’s the approach that we, we use Madison specs, and probably the approach that I would assume the majority of you know, large cost segregation firms like ours, are using it as an engineering based approach. And they follow up all the details. And it’s actually if you read that you’ll see there are 13 principles. The IRS delineates that go into a quality cost segregation study, which include You know, there’s a numbering system that they developed, there’s a know a proper nomenclature you have to use, you have to find you have to have pictures, you have to have, of course, a documentation of actually being at the property. There’s the list goes on. So, you know, when you when you’re looking at a quality cost segregation study, which it says explicitly there in the code, that’s what will stand up to an audit. So you want to make sure that you’re following the rules.

Vee 34:58
So how do I differentiate between a bad cost seg study and a good one?

Yonah Weiss 35:04
I mean, you want to ask is this A quality approaches? is an engineering approach? Is that or you know is what’s the experience? What has you know, something you want to ask the firm? it? What’s your experience in cost segregation? You know, is this something you’ve been doing for a year? Or two or 10? Or how long? How many studies have you done? How many times have you had the clients been audited? If they have never been audited? Have Have you had your have your studies stood up to those audits. And these are questions that I get all the time for clients. So this is something that you need to just be aware of, and make sure that you’re doing it in the right way. Listen, if you have you know, high risk tolerance, there are even some like these, like you said, these rule of thumb type things that people are doing. I actually know some accountants that they’ve never done a real cost segregation study and they just kind of guesstimate, and they keep the numbers pretty low just to be conservative, but they’ll guesstimate say okay, let’s say 4% to land improvements. You know, like and you know just put that in in numbers, they don’t have anything to prove it. They don’t have anything to back it up. They don’t necessarily have you know, square footage and all these they’ll just put in the depreciation 4%. They’ll come with that number and I asked them once, like, when i when i friends is an accountant who does this, this is like, what do you do? If you ever get audited? He’s like, well, like, what? There’s not 4% of the properties land improvements, like yeah, of course, they’re like, it’s just logic, meaning he’s using a logical approach and like, like, show me like, there’s landscaping here. You’re saying that’s not even 4%? So that’s kind of his logic, and he feels comfortable enough with that logical approach, but I wouldn’t necessarily recommend it.

Vee 36:46
And honestly, on a side note, I want to ask you so in a cost seg study, how do you know how much percentage to put aside to allocate to land that you cannot depreciate?

Yonah Weiss 36:58
That’s a really good question. Actually. And there is real, no definitive way of deciding that. And the truth of the matter is, because that’s so we we usually don’t make that decision, we’ll leave that to our clients or their accountants to kind of figure out what that is. Now, there are some ways the IRS doesn’t because the IRS doesn’t say explicitly how much you have to allocate to land it just has to be some sort of reasonable approach. So some people use, they’ll use an appraisal, now a third party appraisal will come in and do that sometimes they’ll use the county assessor what the property taxes would assess the land allocation to be, but sometimes the county assessor and especially places like California, and other places where the land allocation is going to be very, very high, the land value is going to be really high and a lot of people aren’t comfortable with that, and will try to take another approach to find a lower land allocation. I mean, you’re talking about I know people that you know, California that have 50 to 60% is being allocated to land. So you’re talking about whatever is left over When you purchase price, that’s what you can depreciate after allocating to land it’s ridiculous but so the want to try to cut that down as much as possible.

Vee 38:09
So then so then back to the mobile home park situation and that whole place is just just land so you running, you cannot run off 100% off of your purchase price.

Yonah Weiss 38:19
Well, like I said before, it’s not really land, it’s also land improvements. And and, and there may be a reason to allocate more to land, but in many cases, you know, mobile home parks are in places where the land value is actually really low. So to say I’m buying a mobile home park for a million dollars, you know, and maybe it’s five acres or whatever, but five acres of land and you know, who knows where Tennessee is not gonna be worth a million dollars is gonna be worth like $10,000 right? So to allocate more than 10% more than 1% in that case to land is not even logical, but you still gonna have to put with something reasonable. So that but it will not be the entire amount. Like I said, the majority in that case is going to be the land improvements will be where the real value is.

Vee 39:11
Thank you for clarifying that I you know, and that’s that’s the part where I kept on being confused about because to me mobile home park is just like all land, right, but in what you’re saying and you’re still breaking out the part by component, you still going in with land improvement. The land itself is the land itself, you still have to allocate something and then everything else you can depreciate

Yonah Weiss 39:37
correct.

Vee 39:38
That’s actually is a lightbulb moment for me. Alright, so let’s just fast forward to another question that I have. And this is regarding 1031 exchange. So you have property A you do your cost seg study, you do your bonus depreciation, you write off everything and then let’s say 10 years later Now it’s time to sell you do a 1031 exchange, you roll that into property B, right and you do the same thing. And then eventually you go to a property C, D, E and F. Eventually you have to you either die or you pay taxes. So at that point, at that point, how does the depreciation recapture work?

Yonah Weiss 40:22
That’s an interesting question. First of all, just to clarify for people who are listening in depreciation recapture, tax is a tax you have to pay upon sale of a property, okay, you take depreciation it’s great, all you have the property, but when you sell, you have to actually pay a tax on that. To get around that if you do a 1031 exchange, not only as you know, if you don’t know 1031 exhcange allows you to defer the capital gains taxes, maybe the gain that you’re getting on the sale of that property, you buy a property for $10,000 all for a million dollars. You haven’t paid 25% or 15% capital gains tax if you 1031 exchange that You can get around that you can defer that. Okay. You’re also deferring the depreciation recapture tax. So we’re pushing it out or pushing it further down, and you’re rolling it down the road, as they say, and like you said, until you die like this, you know, you swap to the drop, right? Yeah, keep going, keep going as far as you can, at that point, if if a person you know, at that point, they either die or they pay taxes, like you said, but there are a couple ways around it, there’s actually you can, you know, put it in a trust a lot of people do, they’ll put it in the properties in a trust and have that be inherited by the children, which would actually, they would not be at that point with the with the depreciation, neither would the person who owned it. So there is really a way to get around that even even at the end of the road.

Vee 41:47
But let’s just say you, you want to just cash out and use the money at that point, right. I’m trying to see. I understand the depreciation schedule walk with the 1031 it walked from property to property. So in the end of just say you’ve done this three, four times, you do go back to the beginning and you pay taxes on on that on the first property and then the second property in

Yonah Weiss 42:11
No, I mean, you’re once the property has been fully depreciated, which is really something also interesting once again, fully appreciated. Then there’s no depreciation recapture because there’s no longer any depreciation left. There’s nothing left in the basis.

Vee 42:29
No, but so, if we if we depreciate it, and that the bonus depreciation and we did the cost seg, we take everything out year one so really we’re taking everything. So there’s nothing left to the depreciate year two, right?

Yonah Weiss 42:46
No, again, we’re not taking everything what we’re doing is we’re taking those assets that are accelerated, so the five year property 15 your property and again, let’s just take our example multifamily, let’s say is 20% Okay, 10 20% of your taking in year number one, your number two, and you know, two through 26, you actually have the rest of 80% of the value of the building that you are Yes, yes depreciating. So just to give you some numbers and an example of what that would look like, let’s say your problem is a million dollars. Again, just keep it around. If you did straight line depreciation, you’d be getting about $30,000 a year as depreciation, right? Now, if you take bonus depreciate and get 20% of that $200,000 up front, in the first year. Now in years number two through 26, you now have instead of the 200,000, you took already, you know 800,000 to depreciate over the rest of the 26 years. So instead of that 30,000 you would have had straightline every year, You took $200,000 and first year and then for two through 26. You’re going to be left with about a 25 $24,000 depreciation so you’re still going to be getting depreciation deductions every year. years. It’s just not going to be as much as it would have been originally.

Vee 44:03
Got it. Got it. Okay. And then if you did this game long enough, and you don’t have anything left to depreciate, you don’t have to pay for recapture.

Yonah Weiss 44:12
Yeah, pretty much. Okay.

Vee 44:14
And I and I understand the recapture taxes, cap at 25%

Yonah Weiss 44:19
is a little more complicated than that, but but in most cases for property, yes.

Vee 44:25
So if let’s just say you are a high net worth individual and you’re paying a lot of taxes, where your tax rate could be in the high 40s. And you can write off a lot of your income by get either getting a real estate professional status or having your spouse getting that status.

Yonah Weiss 44:45
Correct.

Vee 44:46
And then when you have to pay this back, you only paying in at 25%. You can arbitrage that.

Yonah Weiss 44:50
Yeah, you could take that route. Yeah, that’s, you know, again, there are many strategies make different strokes for different folks, right, you’re going to have to look at your long term strategy. But you also, you know, maybe looking at not paying income tax for X amount of years, and it’s really, you know, going to keep you in the long run with that cash flow coming in.

Vee 45:13
That’s, that’s awesome. And is there anything else that I need to ask you that I forgot to ask them? I’m sure. There are many things that because I’ve listened binge listen to a lot of your webinar. And

Yonah Weiss 45:28
I can tell you got all the questions.

Vee 45:33
It’s just like, you know, I’m missing something in some of those webinars. So that’s why I want to ask, and, yeah, so I’m sure I’m miss a lot. So is there a topic that I need to ask and I forgot?

Yonah Weiss 45:44
I’m sure there is but I really can’t think of anything right now.

Vee 45:48
Okay, one last question before I let you go then. I know that you you have a lot of quotes and Jewish sayings that you like, what is the most what’s Your favorite success or mindset quote, or Jewish saying

Yonah Weiss 46:04
success, or mindset quote or Jewish saying, I guess I would say that be successful. And success is really you know, relative kind of term but I would say, and you’ve probably heard this before because I’ve said it before, listen to all the podcasts that a person who is truly a happy person successful for a rich person is someone who’s happy with what they have. So being rich is not about monetary wealth it’s about you know, being truly satisfied being truly happy with with what you have and you know, not kind of looking to see you know how I can always be making more but being totally content with with where you’re at.

Vee 46:49
Awesome. Thank you so much, Yonah. I really appreciate you jumping on to this podcast episode with me today.

Yonah Weiss 46:55
Vee has been truly my pleasure and you got me in a funny moment right now. First day back from two weeks vacation and literally been going nonstop for about like 10-11 hours at this point. So I apologize that a little little giddy and, and and stuff but glad we have this opportunity.

Vee 47:15
Awesome. Thank you Jonah,

Unknown Speaker 47:16
Love this episode of The Real Estate lab podcast, share the show with your friends, subscribe and give the show a five star rating on iTunes. Until next time, have an awesome work week.

Don’t forget to check back on www.RealEstateLab.live each week for a new episode of The Real Estate Lab Podcast.

The post EP 12: Yonah Weiss – Cost Segregation Expert Interview appeared first on Real Estate Lab .

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https://realestatelab.live/ep-12-yonah-weiss-cost-segregation-expert-interview/feed/ 0 Show Notes [00:02:40] Yonah works for Madison SPECS, one of the biggest cost segregation firms in the country. [00:03:06] Yonah had recently surpassed 1000 posts on BiggerPockets.com [00:03:34] You can schedule a free consultation with Yonah at http://... Show Notes



[00:02:40] Yonah works for Madison SPECS, one of the biggest cost segregation firms in the country.



[00:03:06] Yonah had recently surpassed 1000 posts on BiggerPockets.com



[00:03:34] You can schedule a free consultation with Yonah at http://bit.ly/Yonah15Min – You should do this if you have ever wonder whether cost segregation is right for you!



[00:07:30] Yonah believes that you have to learn from those who have done it before you.



[00:09:47] If you are not doing cost segregation, you are doing straight-line depreciation.



[00:09:56] The IRS allows you to write off the entire value of a building. For commercial, it’s over 39 years period and for residential it’s over 27.5 years.



[00:10:18] The main categories of cost seg:



* Actual Structural Components of the building* Personal properties depreciate over a 5 year period (include fixtures, lighting fixtures, special purpose plumbing, etc.)* Land improvements (depreciate over 15 years): Landscaping to pavements, to asphalt a parking lot etc.



[00:15:34] Yonah used real number examples to demonstrate bonus depreciation and cost segregation for mobile home parks.



[00:19:53] Yonah discusses whether you could use the benefit of cost seg to offset your W2 income.



[00:20:50] Yonah discusses briefly about real estate professionals and using it to offset the entire W2 income.



[00:24:48] I asked Yonah about Cost segregation and Airbnb for a friend. If you have an Airbnb business, you will want to listen to this section.



[00:35:05] Yonah shares the questions you need to ask a firm before hiring them to do your cost segregation study.







Transcription



Yonah Weiss 0:02
These successful and success is really, you know, relative kind of term. But I would say, and you probably heard this before, because I’ve said it before this and all the podcasts that a person who is truly a happy person, successful or rich person is someone who’s happy with what they have. So, being rich is not about monetary wealth. It’s about you know, being truly satisfied, being truly happy with with what you have and you know, not kind of looking to see, you know how I can always be making more but being totally content with where you’re at.



Unknown Speaker 0:39
Welcome to the show, you are listening to the real estate lab podcast. In this lab. we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.



Vee 0:58
Hey, is a great day to To be alive and to invest in real estate, my name is Vee Khuu. And you’re now listening to my show the real estate lab podcast. Let me ask you this. Are you interested in keeping more money for yourself? Do you know about the tax loopholes that the mainstream media keep on telling us that is only available for the rich?



Vee 1:18
You know, the loopholes that someone in a high office used to not pay any taxes at all. Our guest is here today to show you how you can benefit Also, if you are an overworked doctor, you can participate in this. If you are a spouse of a dentist who happened to runs your ...]]>
Vee Khuu 47:43
11: Jonathan Wei – Best Practices to Raise Capital https://realestatelab.live/11-jonathan-wei-best-practices-to-raise-capital/ https://realestatelab.live/11-jonathan-wei-best-practices-to-raise-capital/#respond Mon, 16 Dec 2019 05:02:00 +0000 https://realestatelab.live/?p=496 Show Notes [00:01:43] You can visit Jonathan’s website at www.GreystoneCapGroup.com [00:02:13] Set up a free call with me at www.CallwithVee.com [00:04:43] Jonathan bought 3 condos to start. Then he bought investment properties in Philadelphia. [00:05:32] Rich Dad Poor Dad changed Jonathan’s life: https://amzn.to/2LWDcQF [00:06:39] Jonathan mentioned Peter Harris’s YouTube channel: https://www.youtube.com/user/CommercialPropertyAd/about [00:07:01] Jonathan found Michael...

The post 11: Jonathan Wei – Best Practices to Raise Capital appeared first on Real Estate Lab .

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Show Notes

[00:01:43] You can visit Jonathan’s website at www.GreystoneCapGroup.com

[00:02:13] Set up a free call with me at www.CallwithVee.com

[00:04:43] Jonathan bought 3 condos to start. Then he bought investment properties in Philadelphia.

[00:05:32] Rich Dad Poor Dad changed Jonathan’s life: https://amzn.to/2LWDcQF

[00:06:39] Jonathan mentioned Peter Harris’s YouTube channel: https://www.youtube.com/user/CommercialPropertyAd/about

[00:07:01] Jonathan found Michael Blank’s analyzer online and purchased it.

You can download Michael’s free ebook “The 10-Minute Offer” here https://bit.ly/34kfqEr

[00:07:26] Jonathan mentioned Michael Blank’s book “The Ultimate Guide To Investing In Real Estate and Multifamily“. You can check it out here: https://bit.ly/2LYc6IW

[00:09:35] You should be getting soft commitments from your investors all along instead of waiting until you have a deal. 

[00:10:46] Educate your investor, so they know what syndication is.

Three Tips that Jonathan Wei learned from Adam Adams’ Raising Money Summit

1. Have a good brand and branding strategy

2. Attend meetups and or host meetups

3. Use a CRM

[00:17:09] Jonathan shares his knowledge about financial due diligence.

[00:25:09] Jonathan shares his plan to implement what he learned at the Raising Money Summit

[00:27:24] Jonathan mentioned a meetup for Asian called Asian American Professionals Connect Dallas.

Don’t forget to subscribe, leave a 5* rating and a review.

Full Transcript

Jonathan Wei 0:03
So number one, in any syndication business that you want to do, you need to learn how to raise capital. That’s the utmost important thing. And yeah, do it soon as possible.

Unknown Speaker 0:17
Welcome to the show, you are listening to the real estate lab podcast. In this lab, we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee

Vee 0:37
It’s a great day to be alive and to invest in real estate. My name is Vee Khuu and you’re listening to my show the real estate lab podcast. Our guest today is someone whom I just met recently at a conference in Colorado. Our guest is an expert in tax as he has a master in taxation and is currently the Director of income tax for a company in Texas. He worked on wall street for 15 years as the director of taxations of the Americas. When he’s not working. He enjoyed traveling and spending time with his wife and two daughters. I can tell you this guy hustle hard. He started investing in real estate since 2003 and have recently switch over to multifamily. So most of the days after his W2 jobs, he spends time with his family and then hit the ground running with his real estate business. He’s the founder of Greystone Capital Group and host a meetup called Greystone Capital Group apartment investment club in Dallas. You should definitely go to one of his events if you’re in the area.

Vee 1:43
And you can check out his company’s at WWW dot Greystone cap group. com. Ladies and gentlemen, our guest today is Jonathan Wei. In today’s episode, Jonathan and I discussed about his latest apartment purchase and also share some information about the market that he’s buying in. Now before we start, if you haven’t done so please do me a favor and head on over to iTunes, subscribe rate and review the show to help boost the ranking of our show.

Vee 2:13
Or if you just want to chat with me hey schedule a call at www.CallwithVee.com V with two E’s dot com Again, that’s www.CallwithVee.com. If you want to connect with Jonathan, check out the show notes for his LinkedIn profiles link or you can email him at info at Greystone cap group. com. Alright, let’s turn it over to my conversation with Jonathan Wei.

Vee 2:43
Hey, welcome to another episode of the Real Estate Lab podcast. Jonathan is so good to have you here with us, man.

Jonathan Wei 2:49
Great, great to be here Vee.

Vee 2:51
So we were just talking. You came out to Denver first time about 10 years ago at a conference?

Jonathan Wei 2:57
Yes, that’s correct.

Vee 2:58
What was the conference?

Jonathan Wei 2:59
It was it was Real Estate conference this two gurus will teach you how to buy things and buy houses. Use creative financing master lease option or one of those you know owner financing and those kind of creative tips how you buy homes.

Vee 3:15
So it was an overall general view of real estate investing just different options that you can do?

Jonathan Wei 3:22
Yeah more for residential or commercial is more like oh you buy a house, go talk to the owner. To the owners interested in selling your house you can do maybe a deed that you do it the deed you to fill out the the sign, sign over the title and the kitchen. It was also like mine to try auto financing or want to try this and that to help the owner. The owner is distressed or that divorce or something you did to help them you’re a problem solver basically that’s what it is.

Vee 3:47
Right? Was it the about the time you start to get into more interested in investing in real estate?

Jonathan Wei 3:54
Yeah, I was always had an interest because when I was younger, I had a passion for real estate when I was My my 20s I bought my first condo in Princeton, New Jersey, which is where I, I lived for six years. And I decided to I was hooked. I bought another condo. Then I bought another condo, three condos. And then I joined the Garden City Real Estate Investment club was a local New Jersey club here. And I found out for one of my co workers, one of the colleagues there said you could go to Philadelphia get a cheap roll home, right was like $50,000 roll home and a property taxes like maybe $200 a year right? And this thing Why don’t you go there and you know, fix and flip and buy the shelf for $10,000 and then rent it out or you can do you could just sell it you know?

Jonathan Wei 4:42
So I went down with my brothers and my wife and we we did around the family we say hey, you know maybe we will invest in South Philly or temple area temple is known for a little more high crime and the wall you know, a little more kind of war zone that was on area.

Vee 4:59
Okay.

Jonathan Wei 5:00
So that was more riskier because it’s high crime and love shooting. The safer side was near the Bella Vista of just South Philly. And we were targeting South Philly for for lesser crime. So we did buy like a shelve. We try to fix it up and we sold it. I bought one stabilized property were rented out like $50 and I rented out made made a pretty good cash flow. So with that in Philadelphia for a while, and while I was working as a career I’m a CPA and a tax professional.

Jonathan Wei 5:32
I read Rich Dad Poor Dad book, which you know, changed my life. Like most most people read his book and I want a passive income. But I didn’t know how because me being individual didn’t know I could do syndication on multifamily.

Vee 5:48
Right.

Jonathan Wei 5:49
Back in the old days, there was no internet there was not much Facebook was basically like Barnes and Noble. We got the bookstore and you read the books. So in the old days, you can Not good information readily available. So that’s why I didn’t know about those items. Excellent until like recently.

Vee 6:06
Well, how old you talking about now? How old days how many years ago?

Jonathan Wei 6:11
Wow that time was 2000 and 2001. And it wasn’t really available that I know on the internet that’s like this was syndication. So all we do is look at books and read the books, then you know, it was only like maybe like a year ago or two years ago I read I saw some YouTube videos or Peter Harris which is as you three two videos on the multi family and why multi family choice to to reach financial freedom.

Jonathan Wei 6:42
And I really like this I got hooked on his videos I watch every single video I learned the basics of what’s you know, what’s Cap rate and what is how you value cap rate. How would you go find deals, what you look for new certain metrics, etc, etc. So then I said I want to evaluate the deal.

Jonathan Wei 7:01
So I got that and I read his book, The Ultimate Guide to investing in real estate and multifamily, I think it was called. I bought that and it was a really interesting book. I really liked his experience. I felt like this credibility to Michael Blanks writing. So I decided to go on to the mentoring program to get a coach. So it could take me to the next level, which is really leading syndication, you know, help me raising and raising capital and teach me the secret to how to become successful syndicator and that’s, that’s what I did.

Jonathan Wei 7:01
So I found Michael blanks SDA analyze online. Okay, and it was very affordable price. That’s okay, I’ll pay for this price. And I’ll have I’ll test one couple of deals to see if you know this makes sense. And if I can actually just you underwrite a deal. And maybe an Excel wizard, tax guru. I use Excel so single day so for me it was it was like, it was easy for me.

Vee 7:57
Okay, so it’s interesting. You started with this idea back in early 2000s and you bought a row home in Philadelphia, you bought those condos and then you bought a row homes, then you didn’t do anything for the next 10-15 years?

Jonathan Wei 8:17
No, I bought and hold like a lot of them. So like still today I own a condo in New Jersey. This is a legacy so hold forever. Okay, so I want to cash flow, some fix and flip and Philadelphia circle short term. Some I hope, I hope a long term. So but when I moved to to Dallas two and a half years ago from New Jersey, I sold to my condos I kept one.

Vee 8:41
So two and a half years ago you move to Dallas, and that was around the same time you joined Michael Blanks?

Jonathan Wei 8:48
Michael Blanks, I joined` last September last year, September I joined Michael Blanks.

Vee 8:52
and then how long after that? Did you do your first syndication?

Jonathan Wei 8:58
So first deal I Become a passive investor okay to to shadow his moves and be invited to his his meetings and due diligence. And I was buying in that as a student. So I did invest that money with that. And then the second deal was when my my coach said, Oh, the student needs help. Do you want to help the student raise capital? And maybe an ego student who wants to get into deals and want to do well said, Sure, I’ll raise my hand, I’ll help help the student. And I was a first time venturing into really raising capital and you only don’t know that feeling to actually do it. Right. And it was very difficult.

Jonathan Wei 9:35
The first time raise it was very, very difficult. I asked all my friends, my family and all my people I knew and I’ll do to raise some money, but most of them didn’t want didn’t want to invest. Because what I realized was, it takes time, it takes certain steps. They should they should been doing all along to get soft commitments because you come at the last minute you said I have a deal. You wanted to put $50,000 into the deal they get scared right because there’s a large amount of money. They don’t know the team. They don’t know if this can be successful. They asked many questions but even though the problem is that a lot of ordinary folks don’t know what syndication means, and it’s not out on TV like semantic reads and like bonds is very common.

Jonathan Wei 10:24
So you say you want to investin a REIT, they understand what a REIT is. You will invest in a mutual fund s&p five you know 500 index they understand what that is. But when you show them like a syndication they have never heard of it, they get nervous, right. They’re very scared because they think that either they lose all the money or it’s something that could be a scam, right? Because they don’t know what it is, can be Bernie Madoff.

Jonathan Wei 10:46
So the very careful and they tend not to invest first. They want to see how it goes first. And on a second deal, they might invest. That’s kind of what I’ve seen. But uh, well, so I also learned from going to Adam Adams raises money summit and hearing my friend Rama speaking and out of a lot of people speak on the stage, I learned a sort of steps you can do to kind of groom them, educate them and get them through the process where they can feel comfortable not to be too kind of soft commitment.

Jonathan Wei 11:20
And only then that you can able to gauge how much you can raise how much to deal size can get. And how quick Can you raise the capital? Because if you just go get a deal, and you have no clue how to get the capital, you can be stranded in that deal.

Vee 11:34
So from your first raise, and what you have learned from the raising money summit 2019 what are the top three tips or tricks that you have learned that you will now implement differently?

Jonathan Wei 11:52
Yeah, so number one, in any syndication business that you want to do, you need to learn how to raise capital. That’s the utmost important thing. And you gotta do it as soon as possible. And the steps how you do it is and actually this is kind of outline and some courses that some people have put together recently.

Jonathan Wei 12:12
And basically what it is is, first up is branding. Get you a company, get your branding for social media, that you will know who you are, so they know who you are and what you do. So tell you what you do, man have branding, have logos and business cards, and put on social media. Have a website to a good website.

Jonathan Wei 12:31
And number two, you should go to meet meetups. Meet people have business cards, and you can create your own local meetup like I did myself, I have a local one in Dallas and be more once a month. And I also have a zoom meeting, huh? Yeah.

Vee 12:44
What’s your meetup called?

Jonathan Wei 12:45
Greystone Capital Group named after my firm’s company, okay. And I also have a so I do two folds, because what I realized was when you have a local meetup is limited to people in Dallas and Dallas is very large, so it’s only limited to that That area so the turnout won’t be that big as you expect it to be as number one. And someone always busy that night right? And number two so what I did was I did two fronts now I do one local meetup I do once a month a webinar zoom meeting industry experts so I can learn on myself if I don’t know the topic and I can hand my hand and do it and record it and upload my YouTube channel. So there’s another branding mechanism I do so so I recommend those tips to build your brand to get your your you get your cloud out and also get your knowledge to you connect with more people. Your network is your networth. So you don’t want people like I met you It’s great. We met you know whenever connection and we have a better relationship now. So this is this is very valuable in real estate business. Very, very valuable.

Vee 13:58
Definitely meeting someone online and even connecting with that person online is one thing. Yes. But getting that face to face is 100 times better.

Jonathan Wei 14:09
Yes. Yeah. So that’s why it’s it’s important that you have you do these things and have local meetups and at one time have you know your address from Dallas you Hey, come by meet I will meet up you know, it’s great.

Vee 14:24
Okay, so what’s the third tip that you learned from Adams summit and you will implement differently.

Jonathan Wei 14:31
So I have I use CRM, which is you know, a CRM is it is a sales is a marketing tool, where you can track customers when you send them by email. So what I do is once a month I try to reach out to my own investors and potential investors. I do a MailChimp campaign where you send out a newsletter.

Jonathan Wei 14:51
Say, Hey, this webinar up to this dude I’m looking at I’ve been at Adam Adams’ summit meet me there. You want to meet me. Our local meetup coming up soon, here’s a new next guest speaker on my on my on my zoom meeting or webinar. So I gotta let him know what’s happening in my community. Number one, I’m active, I’m serious. And I’m growing. And also, when you do that, you you get a lot of followers because they see you on the camera. They know who you are, they know that you are genuine and you’re serious about success. So they’ll come this one say hello to you.

Jonathan Wei 15:30
And then you can, you know, follow them and it could be they could be part you’re wanting to pass on investors. So that that’s not a good that’s another thing I’ll let you know. And it’s always important to strategically put on people who who are more also more experienced because if you need to raise $10 million for a large deal, I get I know some people who bring in who could help me raise $10 million right so like for example, I’m friends with Adam Adams I’m friends with you know Michael Blank or friend with some other people that I know Here, you know, some of people in the Think Multifamily world as well. So I could probably have partners help me raise some money as well.

Vee 16:07
Okay, so let’s talk due diligence for a little bit on your going back to your first deal. Okay, I’m sure you so you had Michael Blank to help you out. And your first deal that you did everything on yourself on the GP side, you’re the lead investor now. How did you use your skill or your knowledge from the CPA world to do your due diligence on multifamily? Because a lot of it is financial due diligence and physical diligence. I’m sure your expertise lies on the numbers. So you got your you have a lot of things to share when it comes to due diligence, especially on financial due diligence.

Jonathan Wei 16:51
yes, so very important. Under CPA rules, there’s something called conservatism the principle when you stay CPA exam. And I apply that in throughout my underwriting. Because there’s two things you do, you’re conservative and you need multiple exit strategies.

Jonathan Wei 17:09
So in case something happens so in return in respect to due diligence, you always need to check your your competitors, your benchmark with the rent, rent is an area you should drive by there you should actually visit the competing apartments to see how renovating they are, how much are they going for. If it’s far away, I have my broker go take pictures for me Give me his insight because he’s he’s he’s a local broker. And then I look at pictures online apartments.com and you can see the pictures and see what’s going on for live in real time.

Jonathan Wei 17:48
So those are true numbers. Then you look at account comparables in like, like I get report like a Costar report or Yardi matrix which is which is like a analytical tool. A report that gives you sales comps the rent comps and the whole neighborhood so I can analyze and say what are the areas running for who was my competitors and what rent rate status and was the sales comp. So have a good sense of what what the numbers should be how much cost I should be, you know kind of offering to your right right.

Jonathan Wei 18:20
And then on the expensive side, you always want to call it a property tax assessor’s office to make sure that their numbers is in line with your thinking and also ask them next year is if any increases and normally How much is the increases? Because generally what happens is that if you’re new, you’re newbie to multifamily underwriting. What you’re going to be able to find out is that the property taxes are gonna increase so after you buy your value increased If you value increase your property tax performance is gonna increase. So what you need to do is you have to call the that that property tax assessor office and say what is your formula? I need to Know your formula and apply what sales price you have. And that’s your property tax and then when you when you underwrite for the future you’re going to add some elements of increases to see you covered.

Jonathan Wei 19:12
So normally on rent increases one to 2% which is very conservative in our leases I think that 3% so we know that we’re conservative in that front. I know it can be a little more but I don’t want to I want to keep like 3% and then test that and I’ll say is make sure that you check every single item and expense. So lawn mowing, you know, pest control, you know utilities who’s paying the utilities then you getting got planning opportunities can you use rubs which means you ratio, utility bill back to the client, the tenants, what can you do to optimize and lower expenses.

Jonathan Wei 19:49
What can you do to add other income like laundry income vending machine, you think of ways how to optimize the spaces. And if you if you’re living in a city, where space is a commodity You can rent out like those storage spaces. So your storage space in the apartment, you can say you can rent up maybe for a few thousands dollars a month for storage, you know, so they can put the goods in there. So that’s another item.

Jonathan Wei 20:13
And if the unit is very large, you can maybe put a like a half wall or wall and you can make a two bedroom so your check you city code and regulations is just simply putting like a new drywall or something you may meet increasing income a lot. So that that’s not a potential yet think of if your room is long enough to accommodate that. So getting outside the box and getting very like strategically and how to maximize your income while maintaining and minimizing your expenses and that’s where getting a good property manager was many years experience is very valuable. I mean they are your right hand person, you’re going to asset manage them. But he also had a trust similar instincts and insight as well to the give you to gauge you so So for example, usually my property managers with me when I get a deal on the contract, and we gauge what is, you know, what’s the amount was expenses, so we’ll good idea what it is. So that will help you a lot.

Vee 21:15
And something I just want to add also is you I believe in Texas that’s a nondisclosure state and the tax assessor over there. Usually, they are very helpful in telling you to Formula just for the audience listening, if you are buying in state, like Texas that’s have the non disclosure rules. The tax assessor will tell you exactly what to use to calculate the new taxes going into that new building you’re trying to buy, just like Jonathan was, was relating to? Yes. Okay, so, now that you have done a few under your belt, what are you most curious about next?

Jonathan Wei 21:55
I’m curious about asset management, because now I’m going to stage where I’m managing the asset. It’s interesting because I have to make sure that we can, you know, turn the units and properly have properly make sure that the expenses are online expecting so in the beginning is a little rough because in the beginning they can be turbulence the tenants can be testing you to see how your management is. They could not pay rent as test see you if gonna evict them. In my case, you know, some people left so that’s normal and then when you transition, somebody will leave which is normal. So you expect a little bumps in the beginning, then you get to start you know as time goes by you’re stabilizing it you’re, you’re putting positive word positive vibes thing that we’re here to make the community better. We’re going to put new sign for good environment. We’re gonna put out a barbecue and pergola. We’re going to repaint it a gray, make them a little more modern, instead of the old, old colors, and we’re gonna organize food truck day. We’re going to have special events at the community. And we’re going to fix the drivers broken and put in place some vending machines. So I think that overall attendance will be more happier under new ownership. And someone who really quick here the quality of life with tenants, and not just you know, worry about the p&l.

Vee 23:21
So right now you are the main investor who’s taking charge of the assets management. Do you have someone else on your team to help you with some of the other functions in running this syndication business?

Jonathan Wei 23:34
I do. I do. I have. I have people. I’m training and I’m teaching and every part of my team Greystone team, these are my good friends who I trust, trust the confidence. And they are also my passive investors. And they go to my meetup every single time. They’re always there for me, and I’m always always, you know, with me So, like Adam Adams. I think you met the two other people. They were with me so and they are there to, you know, do well in this business. So I’m here to help them as well too. Because if they succeed, I succeed.

Jonathan Wei 24:10
That’s, that’s what I believe in.

Vee 24:11
And that’s great because they invest in your deals, and now you’re training them, you’re telling them what to do. So, in a sense, they are acting as the general partner, and also because they’re helping you taking care of their assets, their investment.

Jonathan Wei 24:26
Yes, yeah. So, you know, that’s great, because I need a team and he could scale and if he will help me asset management and raise capital. So those are techniques. That’s why that’s why I brought them two I paid the tickets for Jason and Bobby, I got a free ticket, because I knew someone who didn’t come. So I brought him there on purpose to the purpose to learn how to raise capital, get pre commitments, up to like, you know, 5-10 million dollars. So that my team, are we ready to get the next deal and not the one to worry too much about raising capital.

Vee 24:58
So So what have you already put in motion to help you implement your whenever you learn from that summit, you know besides your zoom calls,

Jonathan Wei 25:09
so I implemented what Rama kind of emphasize Was this an acquaintance bucket and does investor bucket acquaintance you need to get to know for you need to talk to them. You don’t want to go straight to those trigger the horse and give them the deal deck. And also, in my MailChimp campaign I’ve incorporated a Google Doc form that Rama suggested and what that does is that to my investors who’s been there for a while, they can now click on a button to to subscribe to any future offerings and do a self commitment.

Jonathan Wei 25:44
So in that form, whether it’s kind of give us a question here are you accredited investor or your non accredited investor? How much money you want to invest? How you can invest it solo 401k, or individual cash or entity or trust. This will give me an idea of gauging of who’s interested in my deals in my members and who would want how much they can commit. So that’s an important to medicham after doing that, and our meetup will Bobby and Jason tomorrow my meetup to kind of talk to them, see what they’re doing. And I know Bobby’s going to present to me into in front of the Asian professional group.

Vee 26:21
What group is it?

Jonathan Wei 26:22
it’s a local group here in Dallas that created by this Hong Kong socialite, she’s a she’s a wealthy lady who has a lot of time and wanting to create social events. And like go go go ice skating, go movies, go karaoke KTV for the Asian community and meet friends, meet genuine friends. From a you move from different state you will meet friends and hang out. She creates a platform for you. And she even let you co host it so she don’t want to drive far from her hometown in Frisco. So she said you want to be a co host tell me and you can do your own event and, and just set it up.

Vee 27:07
What’s the name of the group?

Jonathan Wei 27:08
It’s called Asian professional Connect. Let me see what exactly what it is on the meetup. I know Bobby is a member of that. So let’s see. Asian Yeah, I’m not I can’t really find it but it’s a it’s an Asian professional connection. I think it’s cool.

Vee 27:24
Is it Asian American professionals Connect Dallas Yeah, yeah, Sonia.

Jonathan Wei 27:27
Yeah, that’s the one. Okay. Yeah. So you’re welcome to join and if you are in Dallas, he goes go to those events. They have like happy hours they have this go to Cal town and check out the rodeo or something. You know, one of those things like that when I went to one that’s where I met Bobby. We ate fried chicken and Korean fried chicken. And we chatted each other and I told him about multifamily. That’s how he came interested.

Vee 27:51
That’s interesting. You didn’t see in this business. You never know who you will run into. So you will always have to tell everyone about what you’re doing.

Jonathan Wei 27:59
Yes, exactly. That’s why we’re doing that. Yeah, that’s why I went there because my strategy was to connect with Asian people and tell them what I’m doing and Tom and an interesting story, right? Because what I say is, Hey, I’m a CPA.

Jonathan Wei 28:14
That’s my day job and within three years I plan to leave that job and do my do my my own business, and then actually do not say, what’s your business? Then I get my business close. I’m a multifamily syndicator I buy buildings with family and friends and people like yourself, we pull my together maybe an experienced guy and it will experience team will lead a deal with take care of you for you. You don’t know where we’re at oil it or anything like that. And you could be just a limited partner and you get mailbox money every quarter. That’s how excited and you know, he was he was interested in so it sounds really good. I want to come, I said come to my meetup. So again, my meetup and he came over. And at first he was very leery said you want to invest? No, I’m not sure maybe raising capital for you.

Jonathan Wei 28:56
And then And then he said, then they’re not Okay, no, no worries Bobby no rush. I’m not in no sales pitch to go into my website, GreystoneCapGroup.com . Go look at some of my portfolios and my videos. And then I’ll see you next time. My meetup is okay, sure. Then I scheduled next meetup is there right there on a doc? And he goes, You know what, Jonathan? I really I really like this thing. I wanted this $20,000 then I go Bobby, okay, that’s fine. I said, No, no problem. I’m here whatever you like I said, no problem. I said, I’m gonna get a deal soon for you. So you know, I’ll show you the deal deck, and we haven’t raised money. There. Okay, sounds good. Then, then the next meetup. He will Hey, Jonathan, man, I, I I’m really into I’m really excited about your deal. I like what you do. I want to put $50,000 in man.

Jonathan Wei 29:49
So I was very surprised.

Vee 29:52
He sold himself!

Jonathan Wei 29:53
Yeah he sold himself and then when I had a deal, this guy’s a very smart guy too. He was can I drive to the property? I said. You’re welcome to drive. It’s in Oklahoma city is two hours and a half and two hours and a half. I went there with Jason so you’re welcome in a weekend go up there. But don’t don’t don’t bother tenants, as you notice. tell you a tenant, you know. And he did that he, he tried to ask look inside, but as all filled he was surprised and then he was very happy that it was all filled. He drove two mile radius around the area to make sure that there’s a Walmart same club is economic growth. Right. And there is and he said, he texted me. He goes, Jonathan, I came back. Is it a wonderful opportunity to fit exactly the C class he talked about? Because how do you will you find his deal? I said a little secret. It’s called networking. So so and that’s, and that’s how he became, he became my trusted confidant because every time because everytime he goes to my meetup he’s always there. He’s a very honest guy and is a very like, he’s very serious guy and very nice person to his I can see he’s trying to help me too. I can feel it. So you know,

Vee 31:03
and that’s why this is a relationship business you help each other to, you know propel into a bigger game you have you basically went with him, he sold himself right going from 25,000 to 50. Now he’s your he’s in your tribe, he’s helping you out with your business with your deals. Yeah, he is more more or less your brand ambassador.

Jonathan Wei 31:29
Yes, yes. And he’s trying to convince his friend to Richard. So it takes time. So we’ll Richard secondary might come in. It just takes time to to kind of get indoctrinate people and kind of educate them about what multifamily syndication is. And for me, you know, it’s fine. It’s not It’s not wrong, to use it just to go he’ll come come to come to my meetups, and he’ll join my group. So

Vee 31:53
can you tell us a little bit more about your meetup when you meet where do you meet?

Jonathan Wei 31:58
So my meetup Yeah, sure. So my meetup is it’s happy hour is called social mixer. Greystone Capital Group, it’s near my home. So I’ve been doing it at this place called bar Louie in Ireland, but I decided to, to mix it up and go to a different location whereas the more more better vibes no more no growth. So I’ve been planted a new place called Moxie, Moxie born and grow, which is a new bar. And I know that that’s a nice nice venue because one of my buddies threw it there. Yeah, like a lot of people and it was it was a big success. So in my Meetup group, already had like, 18-19 people sign up to go and go to my meetup tomorrow. And I think it’d be a success because it’s a great place, great food, great drinks, and all all it’s about is to chill out, relax, get to know me, my company.

Jonathan Wei 32:51
We can chat about multifamily and what goals you like to achieve as a passive investor and if you want to do active We can talk about maybe you helping me, me raising capital, what do we need that you’re looking for? So that I can help you as well. So, so it’s a great, it’s a great place to relax, chill out, talk about my investments and see you want to invest as a limited partner.

Jonathan Wei 33:16
And if you want something else, you know, I know we could talk more about that and see there’s a need for that and how will fit into into plan but basically, it’s a happy hour you come out you get drinks, you meet my friends, my inner circle in the in the multifamily space, they are my investors, they are my friends. And, and we talk about multi family we talk about you know, the their personal life stories, whatever you want to talk about. The whole point is to connect also to, to network and connect and get to know each other. And then we will talk more about the family if they want to.

Vee 33:53
So Jonathan, when the audience listening to our show, right now yeah, let say In your business, can you think of a role that is a missing piece that you are trying to fill right now? And maybe the listener can fill that role?

Jonathan Wei 34:10
Yes, that does a role. Like for example, finding good off market deals is a key what I need so there’s any listener who can find good you know, genuine off market deals that is that is good and good areas that I I like my areas of Oklahoma City, Memphis, Atlanta, Georgia, some secondary areas of Texas and Jacksonville, Florida. So if anyone who has that kind of skill set or can find very good deals, that that’s that’s that’s what I need.

Vee 34:46
Okay, so you need someone to help fill the broker relation role.

Jonathan Wei 34:51
Yeah, because I have some broker contacts. And they’re looking for me I do have some leads, but if a nice somehow performing more of that be great. And I’m always looking for capital raise as well, too, doesn’t know area I’m always looking for.

Vee 35:05
And just to clear that up, you’re not looking for just someone to raise capital. You’re looking for them to join your team also. Yes, yes. It’s not Pay for play kind of deal.

Jonathan Wei 35:16
Yeah, yeah. You’ll get compensated for capital raising obviously, it’s also like asset management and capital raising as well and some other functions.

Vee 35:24
Right. What I’m trying to convey is that if you’re listening, you unless you have a license, you cannot raise capital for Jonathan and get paid for it. You have to be in his team doing something and you are helping with the capital raising part.

Jonathan Wei 35:40
Yes!

Vee 35:40
Unless you have a license, you’re not allowed to get compensated by him or by anyone at all. Right, right.

Jonathan Wei 35:46
Exactly. That’s right.

Vee 35:48
So Jonathan, what’s the one thing that you wish you had known what when you started in this whole venture about syndication?

Jonathan Wei 35:58
I wish I wish I knew earlier I felt I’m a little late in the game. I wish I was younger, which had more time to do and, and, and, and not be so later in life is the way I feel, even though I’m a lot wiser than I was married, you know 20 years ago, but also I wish I had more time when I was younger.

Vee 36:21
Is that why you working so hard now? I mean, we’re talking and it’s almost eight o’clock your time at night. And you had a day job right and you’re doing the meetup. You doing the zoom calls? Yeah, you’re doing a lot of things and exactly what’s your drive? What’s your what’s your WHY?

Jonathan Wei 36:39
My Why is my family my daughter, she’s a young daughter, seven years old. My family I wants spend time with my family more, I want to travel more I love traveling. I want to also give back through donations and help you go to soup kitchens and give meal to a needy family. So I want to give back to the community. I don’t want to get to the to the society, but also want to have my own personal free time. I also want the time my daughter who’s growing really fast. I want to be with my family and do the things that you know, I want to do on my own terms, I want to control time, because right now time controls me. And financial freedom will give me the privilege to, to control and manage my own time. And to be able to travel, be able to spend time my daughter goes on events that girl scouts go to school, visit her summer school and lunchtime and also you know, do good things right donate to you know, breast cancer or AIDS research. Maybe help people out in volunteering, and stuff like that. So I think this will be very important for me. That’s why I’m working very hard work. I Oh, look. I will try all the day. Like tonight I’m under a deal that I got a lead of today. So

Vee 38:02
what does financial success looks like for you?

Jonathan Wei 38:06
that just says, to me means that I’m no longer needing to work my day job as a tax director. I no longer need to worry about that. And so that can focus on doing more and multifamily, but also focus on my family. So if I can do exactly my day job and achieve that freedom, that’s a big that’s a big win. And then just focus, maybe nine to like, three, two, so my multifamily and have the hours to spend on my family and do things and they do from my laptop remotely. That’s a big win for me. And then I also want to progress my spiritual enlightenment as well too. So that type as well, that’s very important for me to

Vee 38:56
awesome, Jonathan, before I let you go, just one last questions. Yeah. Do you have an Asian name?

Jonathan Wei 39:02
I do was well, I’m like you I’m born Saigon. And my original name, my Asian name in Chinese. Oh, you know you’re

Vee 39:13
up to you. I’m looking for just another name that people know you by. So if you have two names, go for it.

Jonathan Wei 39:20
Okay, so my name is Ha Tran. So Tran is very common common Vietnamese lastname.

Vee 39:24
How did that go to from Tran to Wei?

Jonathan Wei 39:28
My father was drafted in the Vietnam war in Saigon. They gave him a name place so your name last name is Tran. My dad didn’t like that because he wasn’t he was Chinese. And when we moved to the States, I was given citizenship and they said that you can choose a name that you that you want to choose. And I was getting ridiculed because I was a Ha ha, ha. And my brother’s name was was hung and tree. So ha tree Right, so here’s a hug on a tree. So who made fun of us growing up in New Jersey, so we have to change the name we took we took a heartbeat, but the decision was how you choose an American name. So ironically, we love watching movies and a time in the 80s it was a show called heart to heart so Jonathan a merry heart so so you know what i like Jonathan. Jonathan and we shouldn’t either way because that’s my dad’s last name real real name. And then my brother chose Michael James Wei because of Michael James Fox and then my brother Tri is changing at the D So Eddie, Eddie is similar

Jonathan Wei 40:42
to Eddie Wei

Vee 40:43
that’s cool man I’m I missed the boat on on that opportunity as I probably have to do that. Sometime down a road. Yes. Changed my last name.

Jonathan Wei 40:52
Yeah. Interesting. Vee Khuu is interesting. Name. It’s not Tran but anyway

Vee 41:00
Awesome brother. Thank you so much for jumping on to the call with me this late man I really appreciate your time with us. No problem. Thank you, brother. Take care.

– 41:09
That’s the end of the show. Don’t forget to subscribe, leave a five-star rating and review on iTunes for the real estate lab podcast. Until next time, have a prolific week.

The post 11: Jonathan Wei – Best Practices to Raise Capital appeared first on Real Estate Lab .

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https://realestatelab.live/11-jonathan-wei-best-practices-to-raise-capital/feed/ 0 Show Notes [00:01:43] You can visit Jonathan’s website at www.GreystoneCapGroup.com [00:02:13] Set up a free call with me at www.CallwithVee.com [00:04:43] Jonathan bought 3 condos to start. Then he bought investment properties in Philadelphia. Show Notes



[00:01:43] You can visit Jonathan’s website at www.GreystoneCapGroup.com



[00:02:13] Set up a free call with me at www.CallwithVee.com



[00:04:43] Jonathan bought 3 condos to start. Then he bought investment properties in Philadelphia.



[00:05:32] Rich Dad Poor Dad changed Jonathan’s life: https://amzn.to/2LWDcQF



[00:06:39] Jonathan mentioned Peter Harris’s YouTube channel: https://www.youtube.com/user/CommercialPropertyAd/about



[00:07:01] Jonathan found Michael Blank’s analyzer online and purchased it.



You can download Michael’s free ebook “The 10-Minute Offer” here https://bit.ly/34kfqEr



[00:07:26] Jonathan mentioned Michael Blank’s book “The Ultimate Guide To Investing In Real Estate and Multifamily“. You can check it out here: https://bit.ly/2LYc6IW



[00:09:35] You should be getting soft commitments from your investors all along instead of waiting until you have a deal. 



[00:10:46] Educate your investor, so they know what syndication is.



Three Tips that Jonathan Wei learned from Adam Adams’ Raising Money Summit



1. Have a good brand and branding strategy



2. Attend meetups and or host meetups



3. Use a CRM



[00:17:09] Jonathan shares his knowledge about financial due diligence.



[00:25:09] Jonathan shares his plan to implement what he learned at the Raising Money Summit



[00:27:24] Jonathan mentioned a meetup for Asian called Asian American Professionals Connect Dallas.



Don’t forget to subscribe, leave a 5* rating and a review.



Full Transcript



Jonathan Wei 0:03
So number one, in any syndication business that you want to do, you need to learn how to raise capital. That’s the utmost important thing. And yeah, do it soon as possible.



Unknown Speaker 0:17
Welcome to the show, you are listening to the real estate lab podcast. In this lab, we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee



Vee 0:37
It’s a great day to be alive and to invest in real estate. My name is Vee Khuu and you’re listening to my show the real estate lab podcast. Our guest today is someone whom I just met recently at a conference in Colorado. Our guest is an expert in tax as he has a master in taxation and is currently the Director of income tax for a company in Texas. He worked on wall street for 15 years as the director of taxations of the Americas. When he’s not working. He enjoyed traveling and spending time with his wife and two daughters. I can tell you this guy hustle hard.]]>
Vee Khuu 41:15
10: Vinney Chopra – Oversubscribed Funding in Two Hours https://realestatelab.live/10-vinney-chopra-oversubscribed-funding-in-two-hours/ https://realestatelab.live/10-vinney-chopra-oversubscribed-funding-in-two-hours/#respond Mon, 09 Dec 2019 21:36:31 +0000 https://realestatelab.live/?p=486 Show Notes Vinney’s Contact Info:https://www.facebook.com/VinneyChopra/ https://www.instagram.com/vinneychopra/?hl=en https://www.youtube.com/channel/UC_SGeOpnIHvXWqZE9dMUdlw/featured Email: Vinney@VinneyChopra.com [00:02:08] Vinney has two different podcasts. Syndication Made Easy with Vinney (Smile) Chopra: https://podcasts.apple.com/us/podcast/syndication-made-easy-with-vinney-smile-chopra/id1473126675 Mr. Smiles Motivation Talk Show: https://podcasts.apple.com/us/podcast/mr-smiles-motivation-talk-show-vinney-chopra/id1474284264 [00:03:49] Vinney’s website is www.VinneyChopra.com [00:04:42] Apartment Syndication Made Easy: A Step by Step Guide: https://amzn.to/2qD3EY6 [00:23:43] Vinney now buys B-, B products. Millennials like to live in communities with nice...

The post 10: Vinney Chopra – Oversubscribed Funding in Two Hours appeared first on Real Estate Lab .

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Show Notes

Vinney’s Contact Info:
https://www.facebook.com/VinneyChopra/

https://www.instagram.com/vinneychopra/?hl=en

https://www.youtube.com/channel/UC_SGeOpnIHvXWqZE9dMUdlw/featured

Email: Vinney@VinneyChopra.com

[00:02:08] Vinney has two different podcasts.

Syndication Made Easy with Vinney (Smile) Chopra: https://podcasts.apple.com/us/podcast/syndication-made-easy-with-vinney-smile-chopra/id1473126675

Mr. Smiles Motivation Talk Show: https://podcasts.apple.com/us/podcast/mr-smiles-motivation-talk-show-vinney-chopra/id1474284264

[00:03:49] Vinney’s website is www.VinneyChopra.com

[00:04:42] Apartment Syndication Made Easy: A Step by Step Guide: https://amzn.to/2qD3EY6

[00:23:43] Vinney now buys B-, B products. Millennials like to live in communities with nice amenities, exercise rooms, resort-style swimming pools, Jacuzzi, hot tubs, BBQ areas, on-site dry cleaning pick up, dog parks, valet trash, cover parking, dog wash, etc.

[00:26:36] Vinney’s mastermind is $4,997 and online course is $2,497

You can schedule a strategy call with Vinney’s team at https://bit.ly/348zjhS

[00:28:46] You can create an all-around win situation with a syndication. Residents get to live in premier communities. Lenders/ Partners who are most likely baby boomers get to retire and use their retirement funds to invest and get a higher yield.

[00:33:03] Tell everyone you meet that you are looking for equity investor partners.

[00:42:04] Text the word LEARN to 474747 to get more information about Vinney’s program. You should also send an email with your background and your goal to Jon@VinneyChopra.com to his business advisor could help you.

[00:42:54] When emailing Vinney or Jon, please mentioned our show the Real Estate Lab Podcast with Vee Khuu. Vinney will give you $500 or $1000 off depend on the program you are interested to join.

[REVIEW] Want to get Vinney’s book? Subscribe, leave a 5-star rating and review. Then email Vee@RealEstateLab.live. I will pick 3 random winners and reach out individually.

Transcript

Vinney Chopra
Hi guys, this is Vinney Chopra right here Vinney Smile Chopra from Moneil Investment Group and multifamily syndication Academy and investing and management. And I just have this special privilege to meet with Vee. Please make sure you subscribe you’re like and listen to his great podcast, the real estate lab podcast, please go ahead and be sure to subscribe to it and leave five star reviews because he’s got great content in it. Thank you again, this is Vinney Chopra.

Unknown Speaker
Welcome to the show. You are listening to the real estate lab podcast. In this lab. we decode the stories, secrets and skills of the most brilliant minds in real estate investing then turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.

Vee
It’s a great day to be alive and to invest in real estate. My name is Vee Khuu and you’re listening to my show, The real estate lab podcast. It’s finally here. I have officially hit two digit with the show. Now awhile ago, I’ve heard some crazy stats that said, more than 70% of new podcasts don’t make it past episode seven. And I am glad to say that I’ve made it to the first milestone on this long podcasting journey.

Vee
Thank you so much for being with me on this amazing journey. Hey if you’re new to the show, welcome to the lab. If you’re brand new, and this is your first ever episode, you should go back to my very, very first episode that I’ve released, where I share the reason that I want to create a show and also a little bit about myself and my background. Also, I wanted to let you know we are back with our regular program. Last week I released a pilot episode of my Vietnamese podcast. If you did listen to it, I would love to get some feedback from you. Drop me a message at Vee at Real Estate lab dot live.

Vee
That’s V with two E’s. Don’t forget to subscribe rate and review the show on iTunes. This is a very special episode. So to mark this accomplishment, it only make sense to have someone just as special to come on and share his knowledge with us. Our guest today is first and foremost a husband, great father to Monica and Neil. He is an international best selling author and fellow podcast host of two different shows.

Vee
He’s a mechanical engineer, although I’m not sure how much of that he’s doing these days. He’s also a CEO of three different companies. Our guest today needs no introduction, but I still want to share some information about him. He is Vinney Chopra. Many of us known him as Mr. Smile. That’s right! Vinney Smile Chopra is here with us today. Vinney is a multifamily syndication expert. He has done over 28 successful syndications. He has acquired and manages a real estate portfolio of over $300 million with well over 3800 doors. Vinny currently manages four very successful companies, including MoNeil Investment Group, Moneil Management Group, multifamily Academy and youth academy. His motto is that we are entrusted to do to good in life for the people that we come in contact with each and every day. Now before jumping into our episode today, I would like to take a moment to share with you how you can get a hold of Vinny.

Vee
It’s very easy just go to his website at www. Vinney Chopra dot com as Vinny with an E. Or you can just text the word Learn l e a r n to the number 474747. All right, let’s get right to my conversation with Vinney Smiles Chopra.

Vee
Thank you for tuning in to another episode of The Real Estate lab podcast it’s my honor to have a feature guest here today who is an immigrant and his story is just so unbelievable. We have Ji Vinney Smile Chopra today.

Vinney Chopra
Hi there. Hi, Vee. Nice to Nice to be with you. I’m humbled and I’m excited to be here.

Vinney Chopra
You bet.

Vee
Awesome. So first question, I just want to ask you, I’ve read your book, right. And I’m sure a lot of people have heard your story of coming to the US with only $7 in your pocket and now you have an empire worth over $250 million. What did you buy with the $7 When I came to the US, hopefully it was not a Coca Cola.

Vinney Chopra
Actually my book. I say that you know, I was broke at five $7 because that was the only thing we could bring. It’s amazing. You know how life takes you in humble beginnings and here, right Vee? You know, I came to New York actually, if I remember correctly, LaGuardia Airport from India, I was tired. And then I was going to take another plane to go to Washington DC. And they said, Oh, no American airline is on strike. Literally. I said, What does that mean? With my accent and everything. Nobody could understand me. And I said, No, no, I gotta go there. I mean, some people are waiting to pick me up, blah, blah. I don’t I cannot reach them or something. They flew me in a helicopter. Can you believe it from LaGuardia, or all the way to you know Newark, New Jersey. Actually. Then I took Delta Airline from there.

Vee
Oh, wow. So $7 right. So was it all that you have from from India?

Vinney Chopra
No, no, not really actually what happened was my parents really didn’t want me to come here. Just just to tell the truth right there. So they definitely want to pay me any money. But my grandpa was the force behind me. And he paid for my ticket, my ticket to come here. And then of course, the Government of India and then government of, you know, here you United States. Once you are a student visa, student visa, you could only were allowed to bring $7 That’s all. So I couldn’t bring $20 30 $50 I could afford it. But just seven was done in my name.

Vee
So the US government branded you, Mr. $7. So, you know, it’s surprised to hear that because in, in your book and in another interview, you had mentioned that education play a big role in your childhood, right? You live in a quarter with six siblings? Yes. And you’re you’re you, you said that your dad had run a mini mastermind at night for y’all to study?

Vinney Chopra
Yes.

Vee
So how come he was not supporting your decision to come to the US?

Vinney Chopra
OK very good

Vinney Chopra
point very, very good point Vee. Since I was the second child from the top, you know, and then of course, my sister, my oldest sister was adopted by my grandparents. So I was the oldest and left in in the family later on in life. And then my sisters were there. So in Indian culture, parents pay for their education there. I know mine too. And then I got a scholarship, which is great. By the way, five years of Merit Scholarship. I got money from the government to go to school to do my engineering school and also books stipend, so I got paid. But the other thing was that our parents, you know how they are, they want to make sure that they don’t lose me.

Vinney Chopra
And that, you know, when I come here, I won’t go back to India, which really happened like that. Right? It was a very good boy for them because I earned money. And I was sending all the money I earned. Just keep a little bit to myself to eat and live and every dime, I would, you know, send it back. I remember in a new podcast I just recorded. I talk about my humble beginnings with my wife. When I started 39 years back, we’ve been married, and we had zero money. We had negative money, actually, you know, and now we live in a palatial $3 million home and all that and thanks to real estate, because we our portfolio has grown a lot. You’re right.

Vee
Yeah, that’s that’s tremendous. And, you know, I understand that When you came to the US here you study and you were going from a mechanical engineering background working for was it Reliance?

Vinney Chopra
Yeah, it was Reliance Industry.

Vee
I also worked for Reliance.

Vinney Chopra
Yeah, I was in master fabrication heat exchangers I always wanting to become an engineer but when I came to USA I turned into a sales guy salesperson.

Vee
Hundred 80 degrees which so from from, from the time you study in the US and you went on door to door selling Bible selling educational material, basically to earn money. How did it like what what point did it come to your mind? You say, hey, I want to invest in real estate?

Vinney Chopra
Good point. Very good point. I would say that once we got married 1980 we got married April 3, and then my company was expanding out west. Luckily, so they said our president said Vinney, would you like to move to California? I said California where you know I was living in Bowling Green my wife and I, we had cockroaches in our apartment I remember that she’ll say get me out of here you know. And then my president said you know, California she jumped on that idea and I did too. So we moved out here.

Vinney Chopra
We took five days travel in the car, and then they moved our stuff here and everything. But then people out here my circle of friends, they were in real estate, look at that, how the luck will have it. If I were there in Ohio, maybe I won’t be exposed to what I’m exposed to whilst living in California. So they were talking about or they were in single family home they were in shopping center. They were and I would listen to them, you know, and I started buying also lease for purchase to lease for option kind of deals in

Vinney Chopra
all over the place but a lot of single family homes.

Vee
That was it all around the Bay Area. Yeah,

Vinney Chopra
Bay Area, not too many in the Central Valley. We owned our first home was $99,000. Home, humble home, and then we sold it for 148 or 146. Then we bought $210,000. Home, because we upgraded it. Then we sold that one for 346. Then we bought another one for for $458, whatever. And we still own it, it’s worth 1.4 million or something, then we bought this one, just about four months back four or five months back. So we only have now the old home the lived in for 28 years. Just from here, just outside this black hawk Country Club. I mean, this is a good thing. It’s a power of suggestion, power of telling yourself that you know, maybe one day I want to live in the country club, and that’s something everybody should really think big. I talk about that all the time.

Vinney Chopra
It has happened in my life and it will happen in many people’s life. If we live with positivity with abundance with law of attraction, because many times you don’t know who’s going to come in your life. And I didn’t know about syndication I didn’t know about apartment investing anything. I’m d 2004 2004. That’s when the 15 years back.

Vee
Yeah. So for 2004 I heard that you bought a course from Dave Lindahl on eBay.

Vinney Chopra
Yes.

Vee
See, folks, you know, you don’t really need to pay a lot of money up to learn this business and Vinney did it with $300.

Vinney Chopra
I sure did. But later on, I do want to confess, I did take my team in 2007. I think I started taking them to Boston, where Dave Lindahl was and I appreciated what he was and he was charging $20,000 at that time. And we did pay, we didn’t have money but I did take my team and myself and my partners, we spent$150K, hundred 60,000 in education and look at the results that are making millions of dollars now you know which is exciting, but the good part is it’s good to pay not 40 50,000 there is a lot of gurus out there, you know, but get catch somebody with 5000 or 4000 or 3000 you can learn a lot.

Vee
So the the whole idea is you pay a little bit of money you learn a little bit yes then you make a little bit of money you achieve a little bit of result, then you upgrade and you go to the next level and then you just keep on going up and keep on going up.

Vinney Chopra
So true Vee. You know, I’m and I want all your audience to understand that where I am today, but 308 million portfolio, whatever, but I started with 14 units, 14 units $480,000 $180,000 was the my first purchase. So remember, don’t worry about it getting duplex, get a four Plex get an eight Plex. I teach that in my Academy also every day, because don’t really say that I can find a way to get this point, just find every which way save the money if you’re young people, you know, in my youth academies totally free. But then the good part is, once you find and you have the attitude that a lot of people have money all around you, which is the truth, by the way, 24 trillion with a T trillion dollar money’s in the retirement funds in USA Today, right now. And out of that only three to 4% is invested in real estate. Oh my gosh. So there is a huge opportunity for us to really make a big difference in the lives of people. And that’s how you grow just like Zig Ziggler Say zero said right you know, and Jim Rohn said also if you help other people get what they want, you will get what you want that that’s so important.

Vee
right and it’s this so true and also what you said earlier too was that bought the course from eBay You didn’t have to really go to Dave Lindahl in Boston to and pay him all that money. Yeah. But besides paying for knowledge you also paying for proximity. Yes proximity is power and you to associate with someone like you, your team or even with with Dave back in the day I’m sure it was beneficial to you.

Vinney Chopra
It was very beneficial Vee. If I could tell it took us 11 months 11 months, babies born in nine months. But it took us 11 months to get our 11 units of 14 units sorry, but then also we closed on 109 units on Friday. On Monday. We closed on this 11 Went 14 units. Why am I saying that? And then hundred nine units and all for $2.4 million. That was on Friday, but we had been working with a seller with the broker for 11 months. Can you believe it? But it’s some good coach, because if we did not have a coach, I wouldn’t be here today.

Vinney Chopra
I wouldn’t be because a lot of trials, tribulations, negativism, you know, I mean, we are not excited all the time when you’re not closing deal, or you get rejections at every stage of the way. So, you know, it’s well, well worth to have a partner accountability partner and a coach or mentor.

Vee
Right. And I was one also asked you additional question on your first purchase, right? Yes. On the 14 unit, when was it?

Vee
Oh, that was way back. I think 2007 or eight, something like that. You know,

Vee
okay, so right before the crash?

Vinney Chopra
quite a bit like 11 years. Right there, right. Exactly, you know, and actually I remember why I couldn’t close some my other property was because I think it was we were buying a property in Dallas. Oh my gosh, I wish I had bought that property.

Vinney Chopra
It was fully renovated property. 120 units and REO a bank owned it but then bank while they owned it they also upgraded it Can you believe it? Oh my God, oh wow. And I got to like the loan broker and the broker was a within the bank. And he sent me hundred four pages off the renovation schedule. What they did, he said I oversaw Vinney this property smelling like a rose. And then we even talk the same bank to give us the loan. We said who is going to give us a loan, everything is going falling apart. You know the give us a little And pay for the closing cost and everything. But the last thing I remember was the crash of 2008.

Vinney Chopra
I had one and a half million raised on Friday. And Monday morning, when I call my investors, they said, Vinney, I’m not going to pull it out. Sorry. He says, I committed to you on Friday hundred thousand or 200. Last one week or so. It went down to 750. Half of my money was lost. But I didn’t give up but I could not close on that property. I wish I had. So that was something. But you’re right. You know, the thing is, you got to really say, investors money is all around us. We need to educate the investors. That’s the word.

Vinney Chopra
Don’t ask for money. Don’t ask for money from investors. It’s hard earned money. You have to be really careful because it’s hard to get even $10 from somebody right? or $20 or Hundred 5000 you put $50,000 of their hard earned money, or hundred thousand in my case now 500,000 By the way, I had my one of the parties, they have been with me for 10 years. They put $700,000 into my last deal, the $52 million. I just did it end of June of this year 2019 they put in $700,000 and another family put in $500,000

Vee
Wow, where were these investors that have been investing with you since day one?

Vinney Chopra
No the $500K one, first time, first time, but they just liked the sincerity. I think they live in Sacramento right here. They drove two hours and had lunch with me and my wife and their children came and everything somebody had referred it to them and they said Vinney, we feel so secure, what your track record is and everything. So we want to write you a check for half a million. Wow, what I mean, within two hours, that’s my best I have ever done. You know?

Vee
That’s, that’s awesome. I’ve heard anyone that were to raise that much money in that short amount of time. Yeah. That’s really awesome. So just to go back to that point earlier, you bought your first deal in 2007. And the market now kind of, do you think is similar to what you were seeing in 2007 leading to 2008? Or we’re at a different place now.?

Vinney Chopra
Okay, good point. I would say the parameters are all different Vee. We should not be worry too much at all, to be very truthful. Look at back what happened in that time. 2007 and eight in that downfall, the downturn in the economy. They were derivatives there were houses they were people having four four rental homes, stated income literally stated income I mean, nobody if you breathe, you got the loan, you know. Yes, oximeter, they call it right? Just fog a mirror right? Yeah, you got the loan, but not anymore. The the restrictions have been put now, the loans are not their mortgage companies are gone by the wayside as you know.

Vinney Chopra
I mean, you know, so it’s a whole different things. People are not in that jeopardy of losing homes as they were back then. The other thing was the junk mortgages were being sold off too and then when the shrinkage came by the economy, as you recall, when people go bankrupt or they lose their home, they went into apartments, see somebody has to live, have a short, you know, shelter over their head. So that’s what happened back then in 2007. Eight, the apartment survived.

Vinney Chopra
Apartments survived, the default rate was only 1% as compared to 50% default Rate are 59% in certain communities, you know, default rate was very high. I know one place right here in near Tracy. I don’t remember the name of the place. It was like, almost 87% you know, bankruptcies over there or something happened. I don’t know what happened. It’s back up now. But the thing is, once the jobs go, layoffs happen, then the office space shrunk, because they don’t need that many people to stay in the offices, industrial the economy drops, the GDP drops. And then of course, the products are less now consumed, buying power goes down. Hospitality gets down travel, and hotels. That’s what happened. If you look back at that time. Those are the industries that really got hurt strip shopping centers got hurt, things like that industrial and all, like I said, but apartments did not similarly in this downturn, but nobody knows when is the crystal ball what’s going to happen or anything but people are saying it’s going to be a blip, they calling it a blip now, maybe six months, seven months short lived and then back up again.

Vinney Chopra
You know, so if we buy the apartment complex buildings in the nice areas where the jobs are coming, right, so that’s what we are buying now. I used to buy C C- B- B product. Now we are buying B plus you know, A, A- now i don’t buy A at all, but we are buying like, you know, I’m saying like, B plus, you know, nice ones, and very nice where the millennials like to live. Nowadays.

Vinney Chopra
They live like to live in the amenities that they have all these beautiful, you know, exercise rooms and resort style swimming pools and Jacuzzis and hot tubs and barbecue places. All that stuff and then even dry cleaning coming there to the apartment complex to pick up their laundry and everything. Then dog parks, valet valet trash. They don’t want to take the white bag and throw it in all across the community. They want people to come and pick it up right from there outside. So those covered parking, dog wash dog parks, all those things right you know. So those are the things we are buying now. So we are finding that millennials will be needing to rent more they are trying to not by the houses anymore that much. But they are liking portability. That’s the word portability.

Vee
Wow, just right there. You have given us so many value add strategies.

Vee
I don’t know if you have a course about it but it’s all you know, each separate topic right there. You just mentioned you can have a course Yeah. And teach

Vinney Chopra
You know Vee, i have 748 lectures I’ve given so far and that’s on top of my interviews about 97 interviews I think now and then I have my own podcast now to two of them. That’s the one the motivation the Mr. smileys motivation talk show. And then also sequel to my book in apartment syndication made easy. I have the sequel to that podcast where I try to give the nuggets that my students get from me in the mastermind, my co host ask me questions, and I reply in simpler ways to teach the masses you know.

Vee
So let’s talk about your mastermind who who are these people that comes to you and how has it you know you How has your teaching has helped them out so far?

Vinney Chopra
I would love to thank you so much for bringing that up. Actually, most of my students, you’re not going to believe it. They are not that newbies. They are the ones who are brokers, their brokers, their property managers, they are surgeons, their doctors, their attorneys, their CPAs. And it’s amazing just the barrage of different people. And those flippers, wholesalers are those are the ones who have seek me out because I have crushed it in buying and managing apartments through syndication. You know, I’ve done 27 deals so far. 27 syndications by 28 will be the one we just got last week, and Fred 29 20th and all that so we’ll keep on moving.

Vinney Chopra
But the good part is that I share all my knowledge for only $5,000 people are charging $50,000 mine is only $4997. And we give rebates also if somebody can afford we can give rebates, but then my online Academy is only $2497 everything one can crush Everything by learning and watching my courses and looking through all the document library and looking at my PowerPoints in Excel, and the underwriting tool, everything they get for very, very, very low price, because I want to move 1 million people, 1 million investors. That’s my thinking is right now, you know.

Vee
So your goal is to help 1,000,00 investors?

Vinney Chopra
Yeah! And I really believe I can do that if I keep my price low, you know, the quality is there. And all my examples are live examples of everything I do daily, no examples of fabricated numbers or anything, but I show my real deals, all the deals I’ve done.

Vee
Alright, so let’s go back to the quote you brought up earlier, right? You said or Jim Rohn, you quoted that if you help enough, help enough people get what they want, you will get what you want. So your goal is to help a million investors. So what is it that you want Vinney?

Vinney Chopra
Oh, I don’t want anything in return. I don’t, because the key thing is my passion is that it’s such a great business model where we can utilize our skills to understand how to syndicate, lot of people feel that syndication is a gorilla.

Vinney Chopra
I just say that that’s why I wrote this book to make it easy in five, you know, plates spinning of the five plates, which makes it kind of easier to digest. The other part is my goal is also to help the millennials who are making more buying power, saving more money, and then downturn. I mean No, no down grading of the baby boomers see, so they are downgrading, but they are really enjoying retirement.

Vinney Chopra
But if we can put their money into real estate investments, as LP limited partners, then we be win win win win situation see, because we are giving the residents millennials Live in the communities, premier communities, and the money’s coming from the baby boomers who are retiring from the retirement funds into self directed and cash and things so they could get about, you know, 10 12 15% returns per year, you know, like that, right. And then the third thing I would say, are our giving jobs to the community managers, and the leasing agents and the, you know, our vendors and all the different maintenance people like that, because we manage all our assets. So we have two management companies, to acquisition companies and one education company. So I have five companies total.

Vee
You’re running five companies, and you’re giving talks all around the country. That is crazy. How are you managing your time?

Vinney Chopra
Gosh, it’s so easy. It’s easy. I mean, the big thing is systems, systems and systems. We have been living near San Francisco now for 39 years. We’ve been married 39 years. And remotely, we’ve been managing 100 employees, team members 100 and we do it through remote digitally by zoom meetings, where everybody is equipped with a beautifully nice computers and the webcams and all that and we use the software to manage the assets. And our accounting department is all connected through the each property we own. Then we have the HR director, the payroll persons, the accounts payable director, our VP of finance, our asset managers, regional managers, all that

Vee
it sounds it sounds like it’s a good system because you have been able to achieve so much you know, in the last 14, 15 years.

Vinney Chopra
Oh, thank you. Thank you, you know, Vee actually to be truthful I, my new company Moneil Investment Group and Moneil management group, which is a kid’s name Monica & Neil. And that is only five years old. By the way, only five years. I built it. November 19, was my first acquisition in that in that company. And then I did almost 13 acquisitions so far, in four and a half years, I would say. And then we’re going to scale up again, we’re looking at some assets, one or two more before the end of the year. And then next year, we’re looking for picking up $200 million worth 200 to 250 million. That’s our target, you know,

Vee
so you want to almost double

Vinney Chopra
Yeah, yeah. And you can and you can, you know, because I can raise millions of dollars, just to let you know, like this new one I just got over the weekend, right last week, right. We sent out soft commitments to my investors. I needed only $5.5 million I have $7.5 million already committed in soft commitment. If

Vee
So you over subscribed right away

Vinney Chopra
over subscribed yeah within 14 hours, 14 hours

Vee
oh wow

Vee
As someone is who is new in the syndication game? Can you give me some tips on how to get the I just came back from raising money someone from Adam Adam. Yes, yeah and there was a lot of speakers there many of them are your friends

Vinney Chopra
Yes, yes,

Vee
but can you share one additional tips that you know maybe I, some listener can benefit from?

Vinney Chopra
Totally Vee, I would say always have that mindset and also have the, you know, gumption or I’d say like you know, the mindset and also believe the value of abundance because investors are all around you. They are totally all around you. I would like your audience to say everybody they meet with hey guess what? I’m in commercial real estate.

Vinney Chopra
And I’m are always looking for equity investor partners. Oh my gosh, you got to use those three words together. You never say I’m looking for investors for my deeds. Never say that. You never say I’m looking for equity investors wrong. You gotta say I’m looking for equity investor partners.

Vinney Chopra
Let me tell you why. Because they are the partners in the LLC, that’s going to buy the property. They are limited partners. You are the general partner. They are the limited partners but their partners, investors, they are investors, they are not debt investors. So by saying equity investors, you’re telling them right away, oh my gosh, I want to have a piece of equity. And that’s how who they are. So you’re giving them not only the cash flow, but you are also also giving the equity returns when we sell the property, so why not do approach them rightly have an elevator pitch and meet everybody and you just have a nicest business card, have the nicest website. And then you just give everybody three cards. Never give anybody listening to me today. Never give one card to anybody. Always give three or four cards. That is the best investment you can give. digitally. Have your picture on your email signature and also on your card, make it colorful, make a smiley face and things like that. Use the card both the sides put a mission statement on the back side. That’s what we have been doing it for last 12 years. You know.

Vee
That’s wonderful. I’ve never heard anyone say you give out four or five business cards before because now nowadays, a lot of people You know, give out business card, you take it from one hand and they can they go, because the trash can right away.

Vinney Chopra
So to have the Vcard also, but also many times when we go to conventions and things like that have a card which kind of stands out, have a card, which is square, rather than regular kind, have a different kind of card, invested money because the thing is, once you invest some good money in the card, that’s what reflects who you are. And the website, have a social presence and start recording and also start writing blogs. And the thing is, the more nowadays, every investor you want to get money from or you want to educate them, I say educate them. They’re going to Google you first. They’re going to go on LinkedIn, they want to find out all about you. So have some good association of organizations in multifamily that you are a member of and then also be learning the Material learning the art of joining hands, you know to bring the money through syndication and tell the investors that we are fully compliant with sec ruling and that we do private placement memorandum everywhere to meet with you three times we follow all the rules, but I’m always looking for equity investor partners.

Vee
Equity investor partners,

Vinney Chopra
Can we get together on the phone or on zoom? Or for a cup of coffee?

Vee
That’s it’s subtle because it’s like you’re having you’re crafting your elevator pitch using NLP Yes, neuro neuro linguistic programming, and you’re giving them hints and they don’t even know is there

Vinney Chopra
so true.

Vinney Chopra
So true or true? And you know, the good part is you could also share the word you know, we invest in C C plus, maybe I don’t know if you know what I mean. Like, you know, 1980s or 1970s apartment complex. Like season the apartment complex is as you know, are great in demand because the housing, you know, ownership is going down. I mean, you’re telling them this little small thing, and we value add. And I would love to explain you are everything see what you did now? You’re meeting them curious.

Vinney Chopra
They’re saying, right oh my gosh, I better meet with this guy because he’s gonna tell me more. And that’s the key to my success Vee. I have been not finding money. money’s coming to me. Because I’m going to educate my investors. That’s all I do. I just educate them. And I spent $10,000 to develop my brochure on 30 page brochure, syndication attorney charged me $2,500 just to go through the brochure, because it took her so many hours, five hours I think, and she took out all the words and all everything, all that so we educate the investors and By the end of 30 pages, they’re ready to invest. And we give it to for free. It costs me 10,000. But I give it in PowerPoint for free with my $2400 program and $5,000 program.

Vinney Chopra
Whatever we do, you know, yeah, we do that right away. So that way, it’s a great thing, because people want to really build the trust. That’s what it is. You want to build the trust with the people and give them some knowledge and tell them why you’re looking for in Utah? Why you’re looking in Phoenix? Why there is a new report today that you want to work in Orlando, Florida or something. So the more you educate the investors, they will draw closer and closer and closer and closer to you.

Vee
Right. So those cities that you just mentioned earlier, I know in your book, you said you bought heavily in Texas, Houston, San Antonio area, but all cities that you just mentioned are not in Texas.

Vinney Chopra
Know what to be truthful. It’s amazing. I mean, I’ve been for 12 years in Midland, Texas, Odessa, Texas near San Antonio, Texas. We bought quite a few San Marcos North Side sent out on the west side, sorry, not sites again. And nearby, you know, Austin then I went and opened my brand new company. Five years back south of Houston, not only in Houston, but south of Houston bought 10 syndications every two months, I was syndicated every two months. I had so many much money coming. I’ve sold six of them already. Can you believe it? And make one so full circle

Vee
full cycle?

Vinney Chopra
Yeah, full cycle. Yep, yep. In four years full cycle, four and a half years full cycle. I’m selling to right now. I bought for 6.580. I think I’ll get about 11.5 million for that one. And another one I bought for only 6 million. I’ll get 10.5 million for that one. Approximately and that’s only in four years in four years. I’m selling them.

Vee
Oh wow. And I know results are not typical but can you shed the light a little bit on the kind of return

Vee
You know, that’s not bad at all. Not too shabby,

Vinney Chopra
love to I would love to. I mean I have had some really good luck in going to some assets off market buying them. I gave 39.9% return. I even just bought in Atlanta two years back Vee, just two years back 29.7% return per year. Every year. Two years in a row I just bought for 10.1 million sold for 15.4 million. I bought another 12.2 million. I get calls every week from other buyers. They want to pay me $18 million. That’s in Atlanta, which I just bought two years back, by the way, just two years back, but then, Houston I bought one for 3.550 5 years. back. I sold it in January, by the way, I sold it in January. And I gave my investors almost 29% IRR on that one. 29% that’s over four and a half years. That’s not bad.

Vinney Chopra
even in these times, you know, in the last two years, last four years, not only that I’ve done well, when I bought them in 2008 and nine and 10 & 11. But I’m still doing very well, you know,

Vee
right and a lot of people, maybe you’re listening to this podcast right now maybe hearing Vinney result and the kind of return that he’s given, and you want to jump in right away. But maybe you don’t know how to find this indicator or how to ask question and vest a syndicator. So Vinney, can you share some information about how one could, you know, kind of investigate or ask questions? About time of deal and syndicators or not they know, you know, working with the right party.

Vinney Chopra
Yes, surely surely, you know, please do read the book. And if you really will learn quite a bit about it, but then please text the word learn, LEARN to 474747 and that will come to john, my business advisor right away and my team. And then the other thing is even emailed john with your background, that will even help us a lot. If you can tell us what your goals are. Things like that to Jon at Vinney chopra.com, that’s my website VinneyChopra.com. That’s the website. You can see my podcast, my interviews, my blogs, everything, but I’m also you know, humbled that you invited me on your show.

Vinney Chopra
The key thing is we would love to give your audience rebates if you’d like, you know, please tell them that you listen to us on Vee’s podcast, that way we can give them $500 off or $1,000 off something. Sometimes we do that, you know, no big deal. Because I’m making money in buying and selling. I’m making my millions, you know, every year buying and selling education is I just want to give it back to the community. It’s not my money maker at all. But you know, I just want to spread the knowledge. That’s what my main goal is.

Vee
So definitely so if you are interested in learning more about Vinney’s program and as you hear, he just said, you know, if you are interested in joining, just mentioned the show’s name, the real estate lab podcast and text the word learn to 474747. Yeah. And Jon will reach out to you and discuss on how to help you further when you investing games. And also, I would like to give you a signed copy of vinnies book. Yes, the title is my journey from $7 to 250 million Portfolio. Apartment syndication Made Easy by Vinney Smile Chopra. So keep on listening to the end of the show and I’ll tell you how.

Vinney Chopra
Oh Yeah.

Vinney Chopra
Thank you Vee. It’s such a pleasure to be with you and have it tremendous. No, I enjoyed it thoroughly. If you would like to bring me back, even talk about different things. I speak about lot of different topics and it’d be my pleasure. No, yeah,

Vee
yeah, definitely. I just have one more question before I let you

Unknown Speaker
go. Sure.

Vee
No problem. What are you doing for Diwali?

Vinney Chopra
Oh, Diwali. Oh my gosh. You know, we were just in San Francisco my wife’s family’s here. My our both the kids live right here, right children, Neil and Monica and cousins. So we invited them to our place actually everybody’s welcome. I know that there’ll be decorations and I think four o’clock we start the celebrations of Diwali. end of this month. It’s 27th I think it’s coming up. And then we’re going to have fire works in the back and now and then have some Indian food and some other American food and everything. Yeah.

Vee
That’s awesome. You It sounds like you’re you’re not going to miss India one bit and you’re going to Vinney Chopra’s party.

Vinney Chopra
Oh, thank you. Thank you so much Vee. God bless you. Keep up the good work. And, you know, just, you know, the key thing is, make a decision and then stick with the decision that you want to get into multifamily. If I may leave with the last thought. It’s the best world out there. I mean, the corrections may be coming here and there, but don’t worry because you know, the things will be even if correction comes, the people with the money will be buying those properties. So keep the money ready, built with investors money, build with your family money, and just have a legal way to do all these things. And learning syndication is not hard.

Vee
Definitely, you have to just make a decision, have a goal, and just go for it.

Vinney Chopra
So true. So true. Very true. No, it’s been such a pleasure. We and it’s such a pleasure again, please let me know if I can be of any help to you anytime, and I’ll talk to Jon and we’ll get that personalized copy. Or even if you tell me I don’t you won’t know the listeners name right. Otherwise, I know personalize it. Yeah, I’ll personalize it in a nice way. And we’ll get that to you. Sure.

Vee
Awesome. Thank you very much. Thank you so much for your time. God bless. Bye bye. Bye. Bye bye.

Unknown Speaker
That’s the end of the show. Don’t forget to subscribe, leave a five-star rating and review on iTunes for the Real Estate lab podcast until next time, have a prolific week.

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9B: Sương Nguyễn – Thu Nhập Thụ Động Từ Private Lending https://realestatelab.live/9b-suong-nguyen-thu-nhap-thu-dong-tu-private-lending/ https://realestatelab.live/9b-suong-nguyen-thu-nhap-thu-dong-tu-private-lending/#respond Mon, 02 Dec 2019 18:16:20 +0000 https://realestatelab.live/?p=483 Show Notes [00:02:01] Cty Loan Factory: https://www.loanfactory.com/suong/home Địa chỉ của Sương: 10515 Bellaire Boulevard Houston, TX 77072 Số điện thoại là: 346-309-6107 Email: Suong@loanfactory.com hoặc SuongNguyen85@Gmail.com Thư gớp ý có thể gửi về Vee@RealEstateLab.live [00:04:03] Private Lender là một người có dư tiền trong ngân hàng. Cho người khác vay để mua nhà để ở...

The post 9B: Sương Nguyễn – Thu Nhập Thụ Động Từ Private Lending appeared first on Real Estate Lab .

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Show Notes

[00:02:01] Cty Loan Factory: https://www.loanfactory.com/suong/home
Địa chỉ của Sương: 10515 Bellaire Boulevard Houston, TX 77072
Số điện thoại là: 346-309-6107
Email: Suong@loanfactory.com hoặc SuongNguyen85@Gmail.com

Thư gớp ý có thể gửi về Vee@RealEstateLab.live
[00:04:03] Private Lender là một người có dư tiền trong ngân hàng. Cho người khác vay để mua nhà để ở hoặc flip.
[00:06:10] Lender trực tiếp cho người mua nhà mượn tiền. Công ty của bạn Sương chỉ là môi giới.
[00:08:03] Khi bạn nhận 1099, thì ngân hàng sẽ dùng net income (Gross – expenses) để xét duyệ.
Còn khi bạn nhận W2, thì ngân hàng sẽ dùng con số gross income để xét duyệt.
[00:10:36] Lien là một văn bản cho phép chủ nợ nắm giữ vật thế chấp (căn nhà) đến khi người mượn nợ thanh toán hết nợ.
[00:11:02] Deed of trust là một văn bản thỏa thuận pháp luật mà trong đó, người vay nợ cho phép một người hoặc công ty khác giữ tài sản của người vay nợ cho đến khi món nợ được trả hết.
Foreclose là tịch thu tài sản để thế nợ.
[00:12:00] Underwriting cho vay dựa theo hai yếu tố chính là khả năng trả nợ (ability to pay) và ước muốn trả nợ (desire to pay).
[00:16:26] Sương nhận commision từ việc hướng dẫn bên mượn nợ và bên vay nợ xuyên suốt quá trình cho vay.
[00:19:25] Debt to income ratio là tỉ lệ nợ so với mức thu nhập.
[00:20:33] Refinance: Tái cấp vốn, tái tạo nợ
[00:23:00] Interest Only là khi ta chỉ trả tiền lời mà không trả tiền gốc. Ví dụ ta mượn $100,000 và lãi là 12%. Thì ta sẽ phải trả $1000/tháng cho lender.
Full amortized là cách mà ngân hàng thường làm. Đó là chia tiền gốc và lãi ra trong một thời gian dài.
[00:24:23] Ở phương diện là lender, thì mình luôn phải nghĩ cho mình trước. Nếu như người mượn trả interest only, thì tiền lời mình nhận được sẽ mãi ở mức cao nhất có thể vì tiền gốc sẽ không bao giờ tụt xuống.
Sương ở giữa nên luôn muốn tốt cho đôi bên.
[00:30:50] Trung bình nếu down payment là 30% thì lãi xuất trung bình là 8%.
Nếu down payment là 40% thì trung bình lãi xuất là 7.5%
[00:31:48] Mức đầu tư tối thiểu để dễ làm private lender nhất là tàm $140,000.
[00:33:34] Phải có dư tiền mới làm private lender.
[00:33:48] Và private lender không cần dùng đến số tiền này trong vòng 5 năm.
Số tiền cho vay phải là tiền đang trong một tài khoản ngân hàng.

Transcript

Vee : Chào mừng quý vị thính giả đang đến với chương trình Real Estate Lab Podcast. Đây là một phòng thí nghiệm và tôi sẽ đồng hành cùng bạn. Qua các câu chuyện của khách mời trong chương trình để trao dồi kinh nghiệm và kỹ năng để cho chúng ta có thể tăng thu nhập cho gia đình mình từ việc đầu tư vào bất động sản. Con đường dẫn đến thành công luôn luôn là đang được xây dựng và tôi mong rằng Real Estate Lab Podcast của mình sẽ luôn sát cánh bên bạn trên con đường đó. Tôi là Vĩ và đây là chương trình Podcast của tôi.

Vee : It’s a good day to be alive and to invest in real estate. My name is Vee Khuu and you are listening to my show the Real Estate Lab Podcast. This week I have released 2 episodes concurrently. This one you are listening to, was recorded entirely in Vietnamese. If you are looking for the regular program, please tune in to the other episode with my good friend Roddrick Phillips. Quý vị thính giả thân mến, dạng đầu tư dễ tiếp cận nhất trong bất động sản

Vee : Đó chính là thu nhập thụ động. Vậy thì thu nhập thụ động là gì? Đây là một khái niệm mà trong vài năm gần đây có lẽ bạn và tôi đều nghe nói rất là nhiều. Đây là một hình thức thu nhập mà chúng ta không phải làm việc nhiều để có. Nhưng khác với cái câu “Ngồi mát ăn bát vàng”. Vì sao ạ? Quý vị vẫn phải học hỏi tìm tòi để mua được Cổ phiếu của một công ty nào đó mà họ trả lải cổ tích cao cho mình. Hoặc bạn phải nghiên cứu ra một cái gì đó để cho người ta trả tiền cho tài sản trí tuệ của bạn. Thế nhưng trong chương trình của chúng ta hôm nay tôi muốn cho bạn thêm một sự lựa chọn. Khách mời của chúng ta hôm nay là ai? Cô ấy là người rất trẻ trung và thông minh và đặc biệt là rất giỏi về khoảng xét duyệt hồ sơ cho vay tiền mua nhà. Điều này cũng dễ hiểu thôi vì cô ấy có một thời gian làm việc khá là dài tại ngân hàng Thương Mại Cổ Phần Xuất Nhập Khẩu Việt Nam Eximbank và cô ấy là một thạc sĩ Tài chính ngân hàng của một trường bên Thụy Sỹ. Quý vị thính giả thân mến khách mời của chúng ta hôm nay là bạn Nguyễn Thị Ngọc Sương. Hiện tại, Sương là một Mortgage Broker, người môi giới

Vee : thế chấp cho công ty Loan Factory tại Houston. Trong chương trình của chúng ta hôm nay, Tôi về Sương sẽ trao đổi về một cách mà chúng ta có thể đầu tư vào bất động sản nhưng không cần quản lý người thuê nhà, hay quản lý nhà và, tất cả các rủi ro khác kèm theo với việc mua nhà cho thuê. Vừa nghe thì đã thấy rất là hay rồi đúng không quý vị? Trước khi chúng ta bắt đầu vào cuộc hội thoại thì tôi mong quý vị thính giả sẽ bỏ qua cho các sai sót, Tôi có chương trình ngày hôm nay. Đây là chương trình đầu tiên mà tôi làm hoàn toàn bằng tiếng Việt. Và mong là quý vị sẽ góp ý cho chương trình của chúng ta sẽ được thêm hay. Quý thính giả đã có thể gửi thư góp ý về Vee@RealEstateLab.live cho tôi. Sau cuộc hội thoại này nếu như bạn muốn liên lạc với Sương thi Bạn có thể gửi email cho Sương tại SuongNguyen85@Gmail.com và số điện thoại của Sương là 346 309 6107 Và đây là cuộc hội thoại của tôi và Sương.

Vee : Hôm nay là chúng ta sẽ nói về một cái đề tài rất là khác hơn mọi lần mà chúng ta viết bài và khi mà mình đầu tư vào bất động sản thì thông thường là chúng ta sẽ mua có nghĩ đến mua một căn nhà tao mua một cái building nào đó, nhưng mà công ty của chị xưng là có một chương trình khác là hoàn giúp chúng tôi có một cái nguồn thu nhập thụ động từ các nguồn vốn của chúng ta đang có thì Sương có thể chia sẻ với thính giả một chút, ít thông tin về cái chương trình này.

Sương Nguyễn: Xin chào quý vị thính giả của chương trình. Thường mình hay nghe nói nhiều về gọi là Passive Income thì đa số những cái passive income đúng ra theo định nghĩa khi mình khai thuế thì là những cái nguồn về Interest khi mình gửi saving accounts tiết kiệm ở trong nhà bank.

Sương Nguyễn: Hoặc là mình mua nhà rồi mình cho thuê. Thí dụ như mình mua nhà mình cho thuê đó mình gọi là Passive Income, nhưng mà thực ra nó cũng không hẳn là passive. Tức là mình vẫn phải quản lý về cái người tenant cho thuê rồi, mình phải maintenance căn nhà của mình, mình cũng phải đi tới đi lui để thu tiền hay gì này nọ thì nó cũng gọi là passive nhưng không phải hoàn toàn là passive. Còn một cái nguồn khác mà nó gọi là hoàn toàn passive income là mình có thể bỏ tiền vô trong saving accounts rồi nhà bank sẽ trả tiền lời cho mình đều đặn hàng tháng. Thì nó cái đó mới hoàn toàn là passive Income. Tuy nhiên khi mình gửi tiền saving thì tiền lời hơi bị thấp giống như nó cỡ khoảng từ chừng 1% cho đến 2% thôi một năm. Còn nếu mình mua nhà cho thuê thì có thể cái cái cái tiền lời ở trên tiền vốn mình bỏ ra có thể nhiều hơn có khoảng chừng 8 lần 10% gì đó trên cái tiền vốn đầu tư của mình một năm. Nhưng mà nó có một cái đó nó thị trường Houston cũng hay làm. Bởi một phần là vì cái cái cái giá nhà ở Houston nó thấp cho nên người ta dễ làm hơn. Nó gọi là coi Slender có nghĩa là có tiền cho người ta vay. Nó gọi là private lender, bản thân mình có dư $100K $200K gì đó cái người ta mượn để người ta mua nhà để ở đây cũng có thể là người ta cũng có thể mượn xong rồi, người ta sửa lại người ta bán đó thì mình cho người ta mượn theo những hình thức như vậy.

Vee : Vậy thì những cái những cái anh chị nào mà có tiền và muốn tham gia các chương trình này thi họ phải có điều kiện gì để làm mới có thể tham gia vào Private Lending, làm lender cho công ty của Sương?

Sương Nguyễn: Thường thì không phải là họ làm lender cho công ty của Sương. Mà là họ là lender cho những người mua nhà trực tiếp luôn. Tất là Sương chỉ là người ở giữa mình biết những cái người khách nào cần mượn tiền như vậy. Rồi mình giới thiệu qua cho cái người cho cần cho mượn tiền đó. Thì cái người đó, cho nên Sương không có mượn tiền của người Lender. Sương cũng không lấy tiền trước của người Lender trước khi đi giao dịch đó nó kết thúc.

Vee : OK.

Tức là thí dụ Sương làm là có những người khác họ ưu tiên hàng đầu vẫn là họ qualified mượn tiền qua nhà bank.

Sương Nguyễn: Tại vì mượn tiền qua nhà bank thì họ sẽ có được cái interest rate thấp và có cái thời gian vay nó ổn định 30 năm hoặc là 15 năm. Tiền lời họ cũng cố định cho 15 năm với 30 năm. Thì cái đó là nó tốt hơn đối với người mua nhà. Tuy nhiên khi mình mượn tiền qua nhà bank thì nó có một cái khó khăn là họ cần phải check income và credit thì nó có nhiều cái có nhiều cái thế giới hạn để mà người mượn tiền mua nhà không có thỏa mãn hai cái điều kiện đó. Mà đa số thường Sương hay gặp nhất là không có thỏa cái điều kiện về income. Một phần là do cái đặc thù của cái cộng đồng người Việt của mình. Thì cái người mà họ làm Self-employed rất nhiều, chẳng hạn giống như họ làm nails họ làm họ làm construction, họ làm bán hàng online.

Sương Nguyễn: Kinh doanh về hàng online. Thì khi mà họ cùng khai thuế đó thì khai thí dụ như họ nhận 1099, nhưng mà họ trừ lại nhiều cái chi phí quá thành ra là cái Net Income thì lại không đủ. Thì họ không có biết tại vì những người mà họ làm mà nails hay là gì thì họ nghĩ là bank họ Se4 căn cứ vào cái income trước con số gross trên cái 1099, con số tỗng thu nhập trên cái 1099. Tại vì họ nghĩ là giống khi mình làm nghề nhận lương W2 thì nhà bank họ sẽ tính con số gross theo W2. Nhưng mà 1099 thì nhà bank họ không tình con số gross trên 1099. Mà họ nhìn theo cái khai thuế trên cái cái khai thế của mình, mình trừ lại những cái chi phí xong rồi còn lại cái net income là bao nhiêu thì đa số những người ở ngoài không có biết cho đến khi mà họ bắt đầu đi mua nhà thì mình mở ra mình coi cái khai thuế thì mới phát hiện ra quá nhiều chi phí trong đó.

Sương Nguyễn: Thì họ không có đủ income. Nhưng mà, nhưng mà thường đa số những người mua nhà đó thì họ không có tư vấn với nhà bank trước mà họ đa số là họ thấy thích đến khi họ cần mua nhà thì họ mới đi mua thì đến lúc đó, thì cái khai thuế họ đã không có không có đủ qualify rồi mà họ lại cần. Có rất là nhiều lý do họ cần mua nhà gấp. Họ cần phải move out – hoặc là họ tìm được một căn nhà họ giá tốt chẳng hạn như vậy. Thì họ cần mua liền. Thì khi họ cần mua liền như vậy đó thì mình, họ không có qualify qua nhà bank thì mình có thể giới thiệu qua private lender. Thì private lender mình flexible về các điều kiện income và credit nhưng quay lại thì private lender họ đòi hỏi điều kiện là mình phải có downpayment cao.

Vee : Downpayment tầm bao nhiêu phần trăm?

Sương Nguyễn: Thì bên Sương là đa số là minimum là cần phải 30% – 30%

Sương Nguyễn: Của giá Nhà mình mua.

Vee : Vậy những cái đối tượng mà dùng cái private loan này bên bên của Sương thì thường là mình thấy là những cái đối tượng này là consider là high risk tại vì họ không trên 1099 là họ không có đủ income, nhưng mà ở một cái mặt khác thì cái điểm credit của họ có cao hay không? Hay là công ty của Sương sẽ dùng những các chuẩn mực nào để mà underwrite cái loan này?

Sương Nguyễn: Thật sự mà nói thì khi mà làm private lender thì họ không check income không check credit luôn tại vì bản thân họ đã có nắm cái phần downpayment rất là nhiều ở trong căn nhà đó rồi. Thì khi mà mình đã cho vay private lender mình vẫn nắm cái quyền first lien trên sân nhà đó, first mortgage lien.

Sương Nguyễn: Giống như nhà bank cũng có deed of trust, rồi cũng có promisory note everything mà các nhà bank họ làm. Thành ra nếu như có chuyện gì xảy ra thì họ vẫn foreclose được. Tại sao private lender họ đòi downpayment nhiều rồi thì họ không check income nữa? Là bởi vì nhà bank ví dụ như họ cho down payment ít thành ra họ sẽ check cái income kỹ. Tại vì cái risk khi mà foreclose nhà thì họ sẽ thu lại không có đủ cái tiền để mà họ đã cho vay. Ví dụ như một căn nhà mà họ down 5% họ không trả được nợ thì mình đi foreclose cái nhà của họ thì có thể cái giá bán ra nó không có đủ để cover phần nợ mình đã cho vay 95%. Tại vì most of the time đa số Khi mà mình foreclose thì giá nhà sẽ thấp giá nhà bán được sẽ thấp.

Sương Nguyễn: Private lender họ đã cho ra 30% rồi thì nếu như có chuyện gì xảy ra họ foreclose luôn cái nhà thì họ 70% họ bỏ ra thì đa số là họ sẽ có thể thu lại đủ được. Là một cái, cái thứ hai nữa là khi mà người ta cho vay thì underwriting dựa theo hai yếu tố chính. Nó gọi khả năng trả nợ và cái ước muốn trả nợ. Mình phải vừa có khả năng trả nợ mà mình phải có ước muốn trả nợ nữa. Mình underwriting bên nhà bank thì họ underwrite cái income và credit để họ underwrite cái ước, khả năng trả nợ nhiều hơn nhưng mà đối với private lender họ đánh giá về cái ước muốn trả nợ nhiều hơn. Có nghĩa là khi mà bạn đã bỏ vô 30% cái số tiền vô trong căn nhà đó thì bạn sẽ cố gắng giữ Căn nhà đó chứ bạn không có bỏ.

Sương Nguyễn: Tại vì cái 30% giá trị trong nhà là một số tiền lớn. Ví dụ giống như bình thường ở dưới Houston giá nhà trung bình, tất nhiên nhà thì sẽ có giá thấp giá cao, có những khu luxury nhưng mức trung bình khách hay mua nhà nhất là tầm trong khoảng từ $200,000 đến $250,000. 30% là cỡ khoảng từ $60,000 cho đến $75,000 đó là một số tiền rất lớn của người mua nhà đã bỏ ra. Thì đa số họ sẽ cố gắng giữ căn nhà đó chứ họ không để rơi vào tình trạng foreclose.

Vee : Đúng là họ sẽ muốn tất nhiên là ai mua nhà, ai bỏ một số tiền lớn như vậy xuống làm làm tiền đặt cọc tiền down payment thì họ sẽ muốn là cố giữ được cái căn nhà đó. Nhưng mà nếu trong trường hợp mà kinh tế xuống và họ bắt buộc phải bỏ căn nhà nó đi thì lender có thể lấy lại trong nhà là mình có thể làm foreclose.

Vee : Làm một bước đó là có thể bảo vệ quyền lợi của người cho mượn tiền. Nhưng mà trong cái trường hợp này thì công ty của Sương đứng ở giữa như là một cái người môi giới vậy đúng không? Mình không có underwrite, mình không có làm gì cả mình chỉ là môi giới giúp mà bên A là người cần mượn tiền và bên B là người có tiền cho thuê cho mượn. Thì mình ở giữa mình lấy một cái commission, tiền hoa hồng. Nhưng mà nếu mà mình nghĩ sâu xa một tí thì có phải là có một cái xung đột lợi ích ở đây? Tại vì đối với Sương thì mình cần phải mình có thể close cái loan này mình không có một cái gì risk gì cả để đấy mà làm tại vì mình không có cần underwrite cái loan này luôn là tất cả đều là người lender này, họ có chịu cho mượn hay không. Tất cả đều là do cái người.

Vee : Cho mượn tiền làm chủ thì Sương có thể giải thích cho thính giả nghe và hiểu cái lý do vì sao mà họ phải trả hoa hồng đó? Vậy cách nào để mình đứng ở giữa màn hình không có cái một cái xung đột lợi ích conflict of interest giữa các bên?

Sương Nguyễn: Giống như Sương có nói trước là cái program này chủ yếu là mình nắm theo cái người lender họ nắm trong tay quyền để bán cái nhà đó. Thành ra cái risk về của người borrower là coi như mình bỏ qua. Tức là ví dụ giống như người ta có khả năng trả tiền hay không, mình không phân tích kỹ. Người ta có cái cái credit tốt hay không mình cũng không có phân tích kỹ cái chuyện đó. Thì cái cách của nó là như vậy thì mình cũng đã xác định được ngay từ đầu và phân tích cái rủi ro của việc làm này.

Vee : Đúng là mình phân tích cái rủi ro đó. Nhưng mà thích đứng không phía một cái người mà cho mượn thì họ phải suy nghĩ những cái gì? Tại vì thông thường mình là nếu mà có một cái người professional đứng giữa làm làm chứng thì họ sẽ giúp mình underwrite. Họ sẽ theo sát quá trình mà mình làm giấy tờ để cho mượn loan.

Sương Nguyễn: Cái quá trình làm giấy tờ thì bên Sương là tư vấn để mình là một cái bộ giấy tờ cho nó đúng đắn. Những cái vấn đề về giống như title. Không phải Sương giới thiệu chị A với anh B gặp nhau rồi hai người cho vay, xong. Không phải như vậy. Sương không phải là không phải là – Sương phải là người ở giữa và Sương phải tư vấn cho họ biết là ví dụ như cái món vay này họ mượn cái số tiền như vậy thì mỗi một tháng hỏi trả bao nhiêu tiền rồi, họ phải tức là mọi thứ.

Sương Nguyễn: Khi mà mình close thì cái người mượn tiền đó, họ sẽ ký sự những cái check để trả hàng tháng đưa qua cho lender luôn. Tại vì ví dụ giống như mình mượn qua nhà bank thì nhà bank lúc nào cũng có những chương trình online cho mình để mình lên mình direct mình trả tiền cho nhà bank qua auto withdraw. Rồi hoặc là họ có những cái processing chuyên nghiệp để họ thu nợ hàng tháng. Nhưng mà đối với người private lender thì họ không có như vậy. Họ không có cái cái cái cái program cho auto payment. Thì thường người mượn tiền sẽ ký sẵn những cái checks cho họ. Trên cái check mình sẽ đề cái ngày là ngày 1 tháng 10, ngày 1 tháng 11, hoặc 1 tháng 12. Thì cứ mỗi tháng người private lender họ sẽ tự động rút tiền từ trong account ra. Họ deposit cái check đó withraw tiền.

Sương Nguyễn: Còn những giấy tờ về những giấy tờ về title thì Sương cũng là người ở giữa để Sương hướng dẫn cách làm. Họ cũng phải làm title commitment có tên của Lender trên đó. Họ phải mua title insurance rồi

Sương Nguyễn: họ cũng phải order cái survey đảm bảo cái nhà đó không có bị lấn ranh rồi Sương cũng phải là người ở giữa Sương phải hướng dẫn cái người Buyer phải đi mua bảo hiểm nhà để họ có cái tên Lender là cái first lien trên cái bảo hiểm Nhà đó để lỡ có chuyện gì xảy ra thì cái căn nhà đó vẫn được đảm bảo rồi những cái giấy tờ về legal doc như deed of trust hay những cái promisory notes, thì Sương cũng phải order một cái công ty luật chuyên làm những cái package cho lender. Đó rồi Sương cũng phải là người middleman ở giữa cũng phải hướng dẫn lender là bây giờ tiền này mình cần phải chuyển vào title phải làm sao. Rồi

Sương Nguyễn: những cái package Sương prepare sẵn, Sương cũng phải gửi qua cho lender họ review. Rồi Sương cũng phải giải thích cho họ hiểu những cái terms and conditions ở trong cái package đó. Rồi cái ngày closing thì mình cũng phải hướng dẫn người cái người buyer là tiền thì họ phải làm sao những cái như vậy hiện tại Sương cũng phải làm. Nó không phải underwriting mà nó giống như là processing, loan process hơn.

Còn underwriting thì nó là cái này là nó là mình không check debt to income ratio, mình không check credit mình chỉ check cái phần tiền down payment của họ. Họ có khả năng họ down tiền như vậy thì mình đã nắm được cái 30% down payment của họ như vậy rồi thì chỉ vậy thôi.

Vee : Mình phải nắm, mình phải kiểm tra kỹ là họ có cái số tiền này họ có thể bỏ vào down payment nhưng mà mình không có check ability to pay.

Sương Nguyễn: Nói là mình không check, nhưng mà cũng không tự nhiên khơi khơi người nào đó lại mượn tiền mình mà mình không biết người đó là ai thì sao mình dám cho mượn. Thật ra đó mình không check về khai thuế nhưng mà mình cũng biết được cái người ở người ta nghề gì. Mình cũng người ta cũng phải có cái thông tin về việc làm của người đó. Rồi với lại thường thì Sương cũng tại vì cái program này nó chỉ là tạm thời ngắn hạn thôi.

Vee : Ngắn là trong bao lâu Sương?

Sương Nguyễn: Cái term của mình cho mượn chỉ có 5 năm. Tức là trong vòng 5 năm người mượn tiền refinance hoặc là phải có cái tiền để trả hết thì mới làm việc, thì họ mới tham gia mới mượn cái chương trình này.

Sương Nguyễn: Sương cũng thường là tư vấn cho khách rất là kỹ về khả năng họ có khả năng refinance hay không. Ví dụ giống như có những người họ.

gặp trở ngại về credit mà nó không phải là gì mà chẳng qua họ bị những cái món collection medical bills chẳng hạn mà họ làm cho cái điểm nó thấp quá. Không có đi qua bank được hay nói là private lender không check nhưng mà tại vì Sương đã là người coi những cái giấy tờ đó trước và họ không có qualify qua bank nên Sương sẽ biết lý do vì sao mà họ không qualify qua bank. Thì đa số người lender sẽ hỏi Sương là “em có biết lý do vì sao người này không mượn qua bank mà phải mượn qua private lender hay không”? Thì lúc đó Sương đã nắm rồi. Thì Sương sẽ giải thích cho người ta hiểu. Hoặc là những cái vấn đề về income chẳng hạn giống họ làm nhiều cái như trước đây họ làm W2 xong rồi tự nhiên bây giờ họ nhảy qua họ làm 1099. Mà nhà bank thì 1099 họ phải đòi 2 năm history khai thuế mới được. Nó phải tính theo cái business income qua hai năm.

Thì nhà bank nó mới tính. Thì có những người người ta mới switch qua làm 1099 nhưng mà mình biết là oh cái nghề đó thí dụ như thậm chí có những người người ta làm bác sĩ người ta cũng đi làm ở những cái phòng mạch tư nhân. Người ta vẫn nhận trả 1099. Chẳng hạn kiểu như vậy. Thì 1099 như vậy Thì mình cũng biết được là cái khả năng của người ta là mình cũng có overview chứ không phải là mình hoàn toàn không biết người đó là ai không biết người đó làm cái gì rồi mình đi cho vay thì cũng không phải là như vậy. Hoặc là thí dụ mình nói về cái nghề nails đi. Đa số mọi người đều biết là ở trung bình của một người làm nails thì minimum một tuần của họ cũng phải cỡ khoảng 600 đồng là thấp nhất. Ví dụ như có những thợ giỏi thì một tuần họ cũng phải $1,500 $2,000 đó thì mình không có phải chỉ nhìn vào thì 1099 có thể mình coi cái bank statement của họ có thể mình biết là một tuần họ nhận được bao nhiêu đó tiền thì cứ nhân gấp đôi lên là mình biết thật tế income của họ. Đó thì họ mình cũng có những cái overview như vậy. Chứ không phải là mình không biết người đó là ai và làm cái gì ở đâu lại mượn tiền của mình.

Vee : Trong trường hợp mà mình mình muốn cho người này mượn thì cái term của họ là interest only hay là họ có fully amortization?

Sương Nguyễn: Họ vẫn có amortization. Tức là mình làm cái 30 years amortization để chia ra cái monthly payment bao gồm interest and principal. Nhưng mà mình có một cái là mình gọi lại balloon payment. Tức là khi mà mình amortize, mình chia cái lịch trả nợ ra cho 30 năm để mỗi một tháng nó có gốc lãi tiền gốc và tiền lãi của mỗi tháng. Xong rồi sau đó khi mình vào tới tháng cuối cùng của cái term là cái kỳ hạn cuối cùng của 60 tháng thì phần principal, nợ gốc còn lại là bao nhiêu đó thì cái người mượn tiền phải trả hết theo cái tiền đó.

Sương Nguyễn: Ví dụ như họ có thể trả sớm hơn chẳng hạn sau một năm hai năm họ có thể trả sớm hơn hơn thì cứ theo cái lịch amortization schedule đó, cái số dư nợ còn lại là bao nhiêu thì họ trả theo cái dư nợ còn lại.

Vee : Có cái lý do nào mà mình phải làm fully amortization 30 năm rồi làm cái balloon 5 năm không? Thay vì làm 5 năm interest only không?

Sương Nguyễn: Tại vì có một phần nói là mình muốn mỗi một tháng thì mỗi một tháng cái tiền equity của cái người borrower bỏ vô thêm cho căn nhà. Thì cái trách nhiệm của họ sẽ càng ngày càng tăng lên.

Vee : Thì đúng mình muốn cái equity họ lên, nhưng mà đâu đối với cái người lender, thật ra mà nói, nếu mà mình nếu mà mình là người lender đó thì mình muốn họ trả tiền cho mình để mình lấy được Căn nhà đó.

Sương Nguyễn: Thật ra không có lender nào muốn như vậy hết.

Sương Nguyễn: Tại vì nói chung có rất là nhiều người mượn tiền người ta nghĩ là có chuyện gì lender có cái nhà của tôi rồi. Nhưng mà thật sự không phải như vậy. Không có bất cứ một người lender nào người ta muốn lấy nhà hết.

Sương Nguyễn: Tại vì người ta chủ yếu là muốn có một nguồn income ổn định từ tiền cho vay của họ thôi. Thứ nhất là khi mình lấy căn nhà của người ta thì về mặt tâm lý mình cũng không cảm thấy thoải mái. Tại vì người ta sẽ bị mất cái nhà. Thứ hai nữa là quá trình cho mình đi qua foreclose nó cũng phải mất một vài tháng. Phải mất một vài tháng thì mình mới bán được. Với lại ví dụ như private lender họ lấy cái nhà nhưng họ cũng đâu được lấy hết nguyên cái tiền bán căn nhà đó. Họ chỉ lấy được số tiền họ đã cho vay. Ví dụ cụ thể như vầy. Mình có khách mua nhà $200,000. Mình cho mượn 70% là $140,000.

Sau một năm, ví dụ có rủi ro bất trắc gì đó xảy ra. Tất nhiên không thể nào mà đảm bảo an toàn. Thậm chí bank, họ underwriting, họ thẩm định cái khả năng trả nợ của khách rất là kỹ rồi. Nhưng mà khả năng trả nợ đó là của hiện tại. Đâu có biết được ngày mai cái người mượn tiền nhà bank đó có bị mất job hay không? Cho nên vẫn có khả năng bị bị người đó bị thì vẫn có khả năng người đó bị mất job. Không có khả năng trả nợ thì ví dụ như khi họ bị mất job họ không có khả năng trả nợ thì mình phải foreclose. Thì mình bán được cái nhà mình đem lên list market để mình cho những người người ta đến đấu giá người ta mua. Thì cái giá đó ví dụ như khoảng $180,000. Tại vì giá $200,000 là lúc bang đầu. Khi mình worst case scenario mình tâm lý mình nghĩ lúc nào foreclose nó cũng sẽ không có được cao, như giá market. Thì mình còn $180,000 thì cái người lender họ cũng cũng chỉ lấy lại $140,000 thôi.

Sương Nguyễn: Chứ họ đâu có lấy lại được $180,000 đâu. Mà cái người kia, còn bị mất đi $20,000 so với giá ban đầu là bị mất vô trong cái phần vốn đã bỏ ra của người mua.

Sương Nguyễn: Thành ra cái chuyện mà foreclose đối với cái người lender không có lợi. Hoàn toàn là không có lợi. Tại vì đâu phải họ foreclose $180,000 họ được lấy hết $180,000. Không phải như vậy!

Vee : Trong trường hợp đó họ $140,000 thì thì dĩ nhiên nếu mà mình là interest only thì cái balance nó vẫn luôn luôn là một ở $140,000. Còn nếu mà mình cho họ mượn mà họ đã trả xuống rồi ví dụ là trả xuống còn $130,000 hoặc còn $120,000 thì cái max của mình lấy lại thì vẫn là chỉ ở mức đó. Vậy thì ở phương diện một cái người cho mượn tiền thì mình nghĩ là cái mức interest only để mà giữ cái balance nó luôn luôn ở mức đó để mà mình khi mà mình foreclose mình được cái giá cao nhất thì sẽ có lợi hơn cho mình chứ. Đúng không?

Sương Nguyễn: No, đó không phải có lợi, có risk nhiều hơn chứ. Ví dụ giống y như mình nói là cái tiền equity càng nhiều ở trong căn nhà thì cái trách nhiệm của người buyer, cái willing để trả nợ nó sẽ càng ngày càng nhiều hơn.

Sương Nguyễn: Bởi vậy cho nên Sương cũng có một vài người lender họ hơi bảo thủ. Họ muốn phải down minimum là 40%. Như vậy, nhưng mà cũng hơi khó tại vì người ta không có không có khả năng down nhiều tiền như vậy. Cho nên đó là lý do tại sao lúc đầu mình bắt người ta down nhiều quá thì nó lại khó. Nhưng mà mình muốn là càng ngày càng họ càng build up cái equity vô. Để họ bỏ vô nhiều tiền nhiều tiền hơn nữa. Thì nó less risk hơn.

Vee : Dĩ nhiên khi chúng ta nói là khi mà người ta có nhiều equity trong căn nhà đó thì Dĩ nhiên là họ muốn trả nhưng mà khi mà có chuyện, có rủi ro như trường hợp chúng ta vừa mới nói đây thì khi mà mình phải foreclose thì khi mà họ đã trả xuống một cái mức nào đó rồi, ví dụ lại trả xuống còn 130, 120 thì có tiền mình lấy lại vẫn chỉ là ở cái mức của cái balance của cái loan thôi.

Sương Nguyễn: Đúng vì mình đã lấy trước rồi. Mười ngàn đó mình đã lấy trước rồi thì nó vẫn là an toàn hơn cho mình. Vẫn an toàn hơn cho lender chứ.

Vee : Thì nó có hai trường hợp ở đây mình phải xem thử là cái mục tiêu cuối cùng của mình là gì. Mục tiêu cuối cùng của mình là muốn lấy nhà đó hay là mục tiêu cuối cùng của mình muốn cái cashflow thụ động passive income thì…

Sương Nguyễn: Quan trọng là làm cái private lender là họ chỉ muốn cái cash flow thôi. Họ chỉ muốn cái tiền interest thu về được thôi chứ không ai muốn lấy nhà đâu.

Vee : Cũng tùy chứ. Như mình mình muốn lấy nhà đó.

Sương Nguyễn: Bạn suy nghĩ kĩ lại đi. Bạn sẽ không muốn lấy nhà đâu.

Vee : Không. Muốn lấy chứ lấy chứ. Tại vì khi mà mình khi mà mình foreclose mình đi đến court mà không có không có ai outbid mình ở court thì mình sẽ được các căn nhà đó với cái giá mà bỏ ra. Thì sau đó mình mình giữ mình làm rental hay mình làm cái gì thì cái đó là chuyện của người lender đó. Đó là họ muốn passive chứ họ, họ muốn active chứ họ không muốn passive.

Sương Nguyễn: Thậm chí Sương cũng có biết là một vài trường hợp như vậy đó là muốn lấy nhà luôn nhưng mà thật sự thì cũng nói thì nói như vậy thôi. Nhưng mà nó cũng có risk hơn là cái chuyện mình passive income.

Vee : Dĩ nhiên là rủi ro nhiều thì cái tiền lời của mình càng nhiều.

Vee : Còn rủi ro thấp thì tiền lời của mình lại càng thấp.

Sương Nguyễn: Thì bởi vậy cho nên giống như khi nãy Sương cũng có nói có những người họ muốn có tiền down 40% thì họ mới cho mượn. Thì tất nhiên tiền lời sẽ giảm lại. Ví dụ như down trung bình 30% thì cái tiền lời của private lender là 8%. Thì nếu mà down 40% thì tiền lời còn 7.5% thôi.

Sương Nguyễn: Và down 50% thì tiền lời nó sẽ là 7%. Chẳng hạn kiểu như vậy.

Vee : Ok vậy thì cái uhm cái mức tối thiểu để mà họ có thể tham gia các chương trình này của công ty của Sương là bao nhiêu?

Thương thì họ có thể quản trị 100.000 là nó hơi khó cho căn nhà của bạn 160 170.

Sương Nguyễn: Trung bình của giá nhà ở Houston là cỡ khoảng $200,000. Thì khách down 30% thì mình cũng phải có at least phải $140,000 thì nó sẽ dễ làm hơn. Đó thì nói chung Sương cũng theo kiểu theo cái matching với nhau. Ví dụ giống như có nhiều người lender họ nói với Sương họ chỉ có khoảng chừng $80,000. Thì sometimes Sương cũng có những người khác họ mua nhà 200 ngàn họ có $120,000 rồi. Họ chỉ còn thiếu có $80,000 thôi. Thì những người như vậy thì họ lại không muốn làm qua nhà bank tại vì có $80,000 mượn qua nhà bank nó mất thời gian. Lâu lắc quá mà trong khi đó $80,000 đối với họ trả nợ easy. Thì họ cũng mượn. Cho nên thì cũng có thì Sương cũng để trong cái waiting list của mình là ồ anh này có $80,000. Người kia có $200,000 chẳng hạn kiểu như vậy. Thì Sương matching với nhau.

Vee : Có khi nào mà công ty của Sương gom hai người lender lại với nhau bỏ vào một cái loan không?

Sương Nguyễn: Khó lắm! Chỉ có một trường hợp Sương làm là do hai người đó là hai người anh em với nhau. Họ willing để họ làm. Tại vì dù sao có chuyện gì thì mỗi một tháng họ sẽ tự split cái tiền chia ra, split ra hai. Nhưng mà nó phức tạp lắm. Sương cũng chỉ có một lần đó là họ chủ động họ muốn làm thì Sương mới làm cho họ thôi. Chứ Sương không có thích, không có prefer khuyến khích làm như vậy tại vì khi mà có chuyện gì thì mất cộng hai người đó lại cãi nhau. Nó phức tạp hơn. Một người làm một món.

Vee : Tức là không có trường hợp nào mà Sương gôm hai người lại và bỏ họ vào một cái first lien hoặc là first and second lien?

Sương Nguyễn: Second lien Sương không làm. Tất cả Sương đều làm first lien hết.

Vee : Vậy mình cũng không có thích gôm nhiều người lại làm một cái first lien chung?

Sương Nguyễn: Không! Nó rất là phức tạp. Nên Sương không có làm. Sương không có làm cái trường hợp đó. Thì cái điều kiện mà muốn làm cái private lender đó thứ nhất là là cái tiền phải có dư.

Sương Nguyễn: Thứ hai là cái tiền đó, họ phải không xài đến trong vòng 5 năm. Tức là ví dụ như họ plan tôi chỉ dư $100,000 này rồi năm sau tôi cần cái $100,000 đó đem về để tôi đi mua nhà hoặc là tôi cho con tôi gì đó. Mình không làm được. Mình không làm được tại vì mình không có thể nào bắt người ta trả nợ cho mình trong vòng 1 năm như vậy. Đó rồi đó even mình làm cái term một năm thì nó cũng cần phải có sometimes có chuyện gì cái risk xảy ra lại mất thêm 5, 6 tháng, 1 năm đễ process xử lý cái foreclosure. Thành ra tốt hơn hết là phải có tiền dư và không xài đến trong vòng 5 năm thì mình mới chủ động. Thì đó bởi vậy cho nên là giống như thay vì mình tưởng tượng cái tiền đó mình mang đi bỏ trong nhà bank. Mình gửi tiết kiệm saving thì mình không làm tại vì tiền lời thấp quá. Thì mình đi làm private lender. Cái thứ hai nữa là tiền đó phải là tiền trong bank account nha. Tại vì Sương cũng có những người họ có tiền trong hộp.

Sương Nguyễn: Một hai trăm ngàn. Họ hỏi Sương làm. Sương không làm được tại vì cái tiền đó mình phải wired qua title vào cái này closing. Thì cái tiền phải từ bank account chứ title họ không nhận tiền mặt, tiền cash.

Vee : Vậy trong trường hợp, nếu mà trên người lender này có tiền ở Việt Nam, Trung Quốc và các nước khác. Họ muốn làm cái chương trình này thì họ có thể tham gia không?

Sương Nguyễn: Thật ra thì với cái tư cách của người lender thì Sương không check cái nguồn tiền của họ. Họ có tiền ở đâu thì Sương không Check cái nguồn tiền. Quan trọng là cái tiền đó phải có trong bank account ở nước Mỹ thì ví dụ như họ chuyển đến thì họ phải tuân thủ theo những cái luật về chuyển tiền thì cái đó họ tự làm. Nhưng mà Sương không check cái nguồn tiền đó.

Vee : Miễn sao là cái nguồn tiền đó phải ở trong ngân hàng của Mỹ? Phải có sẵn trong ngân hàng ở Mỹ và không cần dùng cái cho số tiền này trong vòng 5 năm,

Vee : Thì họ có thể liên lạc với Sương.

Sương Nguyễn: Có đa số những người lender của Sương quen đó nha là những người lớn tuổi. Giống như họ cũng tích lũy được sau một thời gian dài đó thì họ cũng tích lũy được cái tiền đó. Rồi họ cũng không muốn rắc rối trong cái chuyện mà mua nhà cho thuê họ phải deal với tenant này nọ cũng mệt mỏi. Thì họ, họ để cho vay.

Vee : Vậy trong trường hợp mà trong vòng 5 năm tới, ví dụ là bây giờ mình mình cho cho vay tiền đi song trong 5 năm tới thí dụ mà nhà rớt và cái người mượn tiền cũng không có thể không có khả năng để mà refiance thì trong trường hợp đó công ty của Sương có nhảy vào để giúp hay không? Hay là lúc đó –

Sương Nguyễn: Tại vì Sương – cái đó đó phải thông qua luật sư. Tại vì văn phòng của Sương thì là làm

Sương Nguyễn: mortgage loan thôi. Là mình mỗi một người có một cái license khác nhau. Thì cái license mà foreclose, cái người có license foreclose

Vee : Không hẳn là foreclose, nhưng mà ví dụ là họ cần phải refiance, nhưng mà bây giờ họ không có refiance được nữa. Thì trong cái trường hợp đó là người lender này chỉ có thể foreclose và lấy lại chủ nhà đó thôi. Đúng không? Thì Sương chuyển qua luật sư liền. Cái đó thì bên Sương có văn phòng luật họ chuyên làm về cái đó thì Sương sẽ giới thiệu qua văn phòng luật sư và luật sư sẽ take care cho họ từ đó về sau.

Vee : Cảm ơn chị Sương rất là nhiều ngày hôm nay đã chia sẻ với chương trình của chúng ta rất là nhiều các thông tin về private lending của công ty của chị đang làm. Và nếu chúng ta có muốn lấy thêm nhiều các thông tin khác từ cái chương trình này thì chúng ta có thể tua lại về cái phần đầu của chương trình chúng ta hôm nay để lấy thông tin để liên lạc với công ty của chị Sương Nguyễn.

Vee : Một lần nữa

Vee : xin cảm ơn chị đã đến với chương trình.

Cảm ơn anh Vi đã cho Sương cái cơ hội để được chia sẻ thông tin với các anh chị em và bạn. Thì hi vọng là sau chương trình này mọi người sẽ hiểu hơn về cái private lender, nó không phải là quá risk như mọi người thường nghĩ. Hay cũng không phải là gọi là hard money lending như là mọi người nghĩ là nó quá nhiều risk và nó quá bất lợi cho người mượn tiền hoặc là cũng bất lợi cho người cho vay. Thực ra thì nó cũng ở cái mức độ là có sự an toàn vừa phải chứ không phải là quá quá quá risk hoặc là quá mắc hoặc là quá cao, tiền lời quá cao cho cái người mượn tiền như là mọi người thường nghĩ về private lender. Nếu như mà anh hoặc các bạn có cái câu hỏi gì thêm trong tương lai thì có thể gọi điện thoại cho Sương, em, bất cứ lúc nào vào cái số cellphone của Sương là 346 309 6107..

Vee : Một lần nữa thì là số điện thoại của chị Sương là 346 309 6107.

Sương Nguyễn: Xin cảm ơn anh Vi.

Vee : Cảm ơn chị Sương và hẹn gặp lại trong một cái chương trình sắp tới đây.

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The post 9B: Sương Nguyễn – Thu Nhập Thụ Động Từ Private Lending appeared first on Real Estate Lab .

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9A: Rodd Phillips – Investing in Detroit https://realestatelab.live/9a-rodd-phillips-investing-in-detroit/ https://realestatelab.live/9a-rodd-phillips-investing-in-detroit/#respond Mon, 02 Dec 2019 16:33:17 +0000 https://realestatelab.live/?p=480 Show Notes [00:02:20] Rod’s LinkedIn: https://www.linkedin.com/in/roddrickphillips/ Rod’s email: SmilingMagicianEstates@gmail.com Free Facebook Group: www.EastWestVentures.com/AIMS Schedule a call with me: www.CallwithVee.com [00:11:14] Rod’s girlfriend got him the book that started his real estate investing career. Rich Dad Poor Dad – https://amzn.to/37PMmHY [00:12:53] Rod mentioned CAREI (Colorado Association of Real Estate Investors). CAREI was founded by our mentor...

The post 9A: Rodd Phillips – Investing in Detroit appeared first on Real Estate Lab .

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Show Notes

[00:02:20] Rod’s LinkedIn: https://www.linkedin.com/in/roddrickphillips/
Rod’s email: SmilingMagicianEstates@gmail.com
Free Facebook Group: www.EastWestVentures.com/AIMS
Schedule a call with me: www.CallwithVee.com

[00:11:14] Rod’s girlfriend got him the book that started his real estate investing career. Rich Dad Poor Dad – https://amzn.to/37PMmHY

[00:12:53] Rod mentioned CAREI (Colorado Association of Real Estate Investors). CAREI was founded by our mentor Bill Bronchick in the mid-90s. It’s now being run by someone else.

[00:14:03] Door knocking is a really effective lead gen method.

  • Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.
  • A short sale is a sale of real estate in which the net proceeds from selling the property will fall short of the debts secured by liens against the property. In this case, if all lien holders agree to accept less than the amount owed on the debt, a sale of the property can be accomplished.

[00:15:17] A double closing is the simultaneous purchase and sale of a real estate property involving three parties: the original seller, an investor (middleman), and the final buyer.

[00:20:07] The judgment that Rod talks about here is called a deficiency judgment. A deficiency judgment is an unsecured money judgment against a borrower whose mortgage foreclosure sale did not produce sufficient funds to pay the underlying promissory note, or loan, in full.

Rod delayed the foreclosure longer, which allowed the seller to stay in her home without paying her mortgage payment a while longer.

[00:20:38] Loss mitigation refers to the steps mortgage servicers take to work with a mortgage borrower to avoid foreclosure.

[00:24:14] Tim Goff was another mentor of ours. Unfortunately, Tim passed away a few years ago.

[00:37:23] Rod bought cheap houses at the Detroit tax auction. The first auction is in Sept every year. The second auction is in Oct. Houses that didn’t sell at the first auction will start at $500 at the second auction.

[00:40:24] Rod likes to buy in 48219 zip code

Full Transcript

Hey, this is Rod Phillips from TrueVest properties If you want to increase your income through real estate. Enjoy your life more and quit your nine to five. You should listen to the real estate lab podcast with my good friend Vee Khuu.

Unknown Speaker
Welcome to the show you were listening to the real estate lab podcast in this lab, we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.

Vee
It’s a good day to be alive and to invest in real estate. My name is Vee Khuu and you’re listening to my show the real estate lab podcast. Hey, just a quick announcement. This week I am releasing two episodes on the same day. Besides this regular program that you are listening to right now. I am also releasing their pilot episode of the podcast in Vietnamese. If you understand the language, hey why not go over and check it out also. Alright in today’s program, I have one of my best friends on as a guest. He is swimming upstream. This guy is doing something that most people would tell you to stay away from. I was curious to find out what exactly he’s doing and their reasoning behind it. So I asked him to join me as a guest. Plus, since I hadn’t spoken to him in about seven to eight years, you know, podcasting is just a fun way to catch up. My guest today is Roddrick Phillips. He started investing in real estate just a few months after I did in 2008. He had done flips, wholesaling and short selling. You know if you have just started doing this real estate investing in the last few years? I bet you haven’t heard of that term before. I know I’m describing him like he’s some old-time real estate investor, but trust me Rod is still super young. Rod is currently investing in the Midwest. Specifically the D, the 313, D town. Do you know where yet? It is Detroit, the Motor City, Michigan. You will hear his thought process and insight of why he invests there and what he’s seeing in that market.

Vee
Rod is very active on LinkedIn so you’ll be able to find him there or just in case you’re interested in following up with him, just send him an email at Smilingmagicianestates@Gmail.com. Don’t worry, you do not have to write it down. It’s going to be available in the show notes. Before we get rolling Don’t forget to join our free Facebook community at www.EastWestVentures.co/AIMS. Also if you want to chat anything real estate or you just want to tell me what you like to see more on the show. Hey, why not get schedule a call with me you can do that@ www.CallwithVee.com. And that’s Vee with two E’s. Last but not least, podcast algorithm is unknown to everyone except for the few that worked at Apple. So the only thing as a podcaster that we can count on are the numbers of subscribers. The numbers of five stars ratings and the reviews that we have. If you haven’t done so yet, it would mean the world to me if you could go over to iTunes and hit the subscribe button. Leave me a five-star rating if you think I deserve it. And also write a review.

Vee
Hey, welcome to another episode of The Real Estate lab podcast. I have an honor here to be talking to one of my good friends and the longest friends in the real estate game. I have known for I’ve known him for 10 years now or more. He has been really active in the Colorado spring market in Colorado. Welcome to the show Rod.

Rod Phillips
Hey, Vee thanks for having me on man appreciate it.

Vee
No problem man. You know, we got to talk a little bit a few weeks ago it you know, a breakfast meet turned into a six hours conversation. And that’s why that’s why I wanted to have you come on as a guest here. But for our audience who haven’t known you, they don’t know you at all. Let me take them back a little bit so they know your profile and where you’re coming from. So let’s turn back the clock. Let’s say you know, tell me about a time when you were growing up in your household. What was it like when you were eight?

Rod Phillips
Oh, let’s see. So I grew up on the south side of Chicago. pretty rough. Southside of Chicago those gangs, violence, things like that. But I was pretty protected by my mom and grandma, they sealed it My brother and I from those things, went to a private school there. A private schools in Chicago to me are very similar to the public schools here in Colorado, in my opinion, just to give you kind of a reference point. So, yeah, so you know, when I was 8, you know, went to a Catholic school, Catholic private school there Chicago, you know, grew up, I said, the Southside Chicago. Yeah, you know, not, I wouldn’t say that the best environment but a very loving environment, you know, a very family oriented environment, but not the best. So in terms of the location you got to me.

Vee
Yeah, definitely. And I understand the South Side of Chicago is a rough part and it still is to this day. Yeah,

Rod Phillips
yep. Absolutely. Yep. It is. But you know, I’m I’m glad that my mom made the decisions as she did because it allowed me to be in the position that I’m at today.

Vee
Okay, so she so your family put you in private school Catholic school. Were you in private school up until high school?

Rod Phillips
Now now so, so we moved out here. And 96 moved out to Denver, Colorado. And then I went to public school, went to public high school, and Denver so into Kennedy. Now can the school for three years and then I transferred to graduate from Lincoln High School? Yeah. So But before that, you know, so from first grade to eighth grade, I was in private school, you know, a Catholic school in Chicago, St. Helena. They closed down now, but that’s where I am. Okay.

Vee
So how does it how does that shape your experience Let’s say when you were going from a Catholic school in Chicago to high school here in Denver, did you have a mindset change on your friend change? What were you like in high school? And did it help you in terms of becoming like an entrepreneurial spirit? Or, you know, becoming an investor now?

Rod Phillips
Yeah, absolutely. So, coming from wherever up to Denver, Colorado, it sold me and it taught me that there’s a whole lot more out there, you know, where I was living in Chicago is different is different than Colorado, you know, it’s different. So, you know, just show me that there’s a lot out there to the world that kind of opened my eyes up to the world and, you know, just made, it just made me want to do more. I guess it presented when presented me with more, so I got to see more and I like okay, so there’s a whole lot more out here. You know, that can do a lot more than I did.

Vee
So what got you interested in investing in real estate? You know, you coming out here you see a lot more to do definitely different than Chicago. And while you were growing up, you know, how how did that even come to your mind that, hey, I have a lot more things to do now, maybe let me buy some houses.

Rod Phillips
So that has kind of interesting too. So I went to college, Colorado Springs, I went to UCCS graduate from there. After college, I had a few options. So one of my options was to go to China to model another option was to go to North Carolina to work. And wait,

Vee
wait, so you you had an opportunity to go to China to become a model?

Rod Phillips
Yeah, yeah. Yep. Yep. So

Vee
Why didn’t you take it man?

Rod Phillips
you know, I you know,

Rod Phillips
China’s a long ways away, you knows I was nervous I was nervous about leaving, leaving the family leaving my mom and my brother and things like that. But it’s an opportunity that I look back on like, Man, I wish I could have squeeze that in somehow some way, you know, because I would have been pretty fun to go to China to model.

Vee
Yeah, man. You know, maybe, you know, you became super famous then. supermodel.

Rod Phillips
Yeah, that’s what you know, that’s my agent said. He said, You know, I would have

Rod Phillips
been loved over there. in China. He said that he said I would have done pretty well. But he said, Yeah, so yeah, so that’s what I did. So I had the options of, you know, between China and going to work in North Carolina. So, and I made a choice of working in North Carolina because this is what all my college buddies you know, all of us was going to be in the apartment together.

Rod Phillips
It was all in this apartment. We will work in and doing jobs last summer with just with all your cosplayers It was fun. So now in reality, that’s another reason why I chose that. And I don’t regret that choice either because that’s how I asked me got into real estate. I was at a customer’s house, and you know, he was on the phone. And you know that he’s a black guy, he’s on the phone and, and he was speaking Spanish very fluently. And I was I was pretty impressed by it. And so I asked him, let’s say, you know, what is it that you do you know, here’s a beautiful home, you know, beautiful This house was beautiful.

Rod Phillips
So I asked him you know, what is it that you do and he said real estate. And at the time, I didn’t know nothing about real estate that at all. And he said, so many used to looking to get into it. So we had this conversation we veered off from my job. So at this job, I got paid by the job. So it was 100 bucks every job and it took jobs about an hour.

Rod Phillips
So me spending four hours with him I missed on quite a bit of money that day but it was worth it just and I was able to use him as a reference and things like that know to contact him for advice and and that’s how they are to it.

Rod Phillips
And then from there my girlfriend time who’s not my wife told I was like I was telling her that I was interested in this book Rich Dad Poor that was at the Barnes and Noble so we were at was at Barnes and Noble and you know saw the Rich Dad Poor Dad book and you know, they know what I should get it and then my my girlfriend at the time because now my wife told me to go ahead and get the book and then I was like, Nah, I don’t think I want to get into this I know get I’m going to get you know soon as like I’m going to get it for you. So then she got it for me and then that kind of opened up everything else. Now I got three for more rich dad poor dad books and the flood gate was opened after that.

Vee
so she got you down this rabbit hole?

Rod Phillips
Yeah she did.

Rod Phillips
By encouraged me to get that book. You know, it’s crazy how just, you know that book that books a great book. I think a lot of real estate investors have read that book as an intro. But as we know a lot of people, they read those books, but then they don’t take the action. They don’t move forward.

Vee
So what did you do to take action and how did you get started?

Rod Phillips
So after that, you know, lots of reading. And then after that, I was like, Okay, so what do I need to do? Like, what’s my next step? so I join, I think in Rich Dad Poor Dad, one of the books they might have mentioned joining like your local real estate group, one of the books that I read mention that it might have been out, was the guy from Woodland Park.

Vee
Richard Roop?

Rod Phillips
Yeah, yeah. Yeah. So might have been one of his books. I can’t I can’t exactly. Remember whose book it was, but somebody with me Joining the local real estate investment group. And then I researched ours and I found enough out CAREI. And then I started attending meetings, I started meeting people. And, you know, that’s where I met you, and some other people. And then I did that for a while, probably about 3 or 4 months and then outside to join the coaching there. And then at that joined the coaching that led to my very first do that that did that first deal, you know, just a deal just kept going.

Vee
So for those of you listening, you don’t know what CAREI is. CAREI is the Colorado association of real estate investment, investors. And the club has since been sold to someone else the original coach that Rod is mentioning no longer is with that club. Yeah. And so so now Rod, what was your first deal? Let’s tell the audience a little bit about that first deal.

Rod Phillips
So my first deal actually found door knocking. And I yeah door knocked for four months, four or five months I door knocked. And this is this was during a time you know remember this is during the time of all the foreclosure, all the short sales and things like that that at the time also you know the rules were a little different in the way that we did things.

Rod Phillips
So I door knocked, ended up finally found this lady who was about to be her her house about be foreclosed on, I think the following week, and we were knocking on the door. I couldn’t even get my elevator speech out and She just like I’m done. And I was like, Huh, I’m thinking she’s upset with me, you know, like or something and then I stepped out I’m done with this house and I’m just ready to walk away. And so, you know, like, Oh, you know, you know what, don’t walk away because you know, it mess with credit and things like that. So you know, can we can we talk about this what you can do with with some of your options are? So yeah, yep. So So tomorrow, I forget the time she said, we said so tomorrow at this time, and we can talk and I sold up, you know, so we talked to work out sorts out short sale with the bank.

Rod Phillips
And I ended up double closing that house it out and the way I did short sales, you know, like a lot of people that went to CAREI did short sale. So you know, we’re always honest with the homeowners, we tell them exactly what’s happening. We tell them what we’re doing. So there was like, no secret sauce going in, you know what I mean? Nothing.

Vee
Yeah. And, and now, let’s clarify a little bit. Because, you know, this was in 08, 09, and the term short sales is not a popular term. Now, back then, everyone was talking about short sales. So yeah. Can you explain a little bit what a short sale is?

Rod Phillips
Yeah, yeah. So sales is basically where you’re underwater in your house. So You can’t sell it for what you own it. So let’s say that you you owe 200,000, but the market crashed or recession or whatever, you refinanced a bunch, whatever. And now your house is worth 100. So the short sale is when you negotiate with the bank of the bank table takes less than what is owed on the house. So the house is worth 100 yo to 200 the bank agrees to take 80 or 90 or 100. So that’s what the source L is.

Vee
Right? And it may not be relevant now. However, as you know, we’re heading toward a recession and we’re due for one. You know, for two years now and you know, I feel like it could happen next year could happen next year. We don’t know when it’s going to happen. But when it when it’s here, you will feel the impact and hear this term. A lot. Yep, yep. You know, short sale will come back in a big wave.

Rod Phillips
Yeah, I believe so too. Yep. I believe I believe short sale will come back. You know, and especially in some of these markets, like the, you know, like the West, you know, like our market. We talked to a lot of natives here. You know, they say they can’t afford to buy a house, lots of natives. So, to me, that just kind of says that, somehow, some way things are out of whack, you know, and that’s just my opinion about it. Yeah,

Vee
yeah. We have a lot of new money from out of town coming in, and we have a lot of new jobs. Growth has been great, you know, in the last five, six years, especially after they decided to legalize marijuana here in our state, you know, the first wave of people coming in were just for that purpose, you know, to smoke pot legally. But then the second wave and the third wave just since that first one, have been working professionals just coming in here because the job growth has been tremendous.

Rod Phillips
Yep. absolutely absolutely.

Vee
So you found his lady and by door knocking you just you know go out and knocking on people’s door who are in foreclosure and needed help. Right so you found that that first one then you double close which was just means that you have this deal under contract then you found a buyer and you had a contract you sell with the buyer, you closing your first transaction. So double close, you have the contract with this lady to buy and then you have a contract you sell with someone else. And all the magic happen in escrow and that’s what a double close is and you’re in the middle.

Rod Phillips
Yep, yep, so double close this house. I made about 50 grand that I made which is pretty good first deal, you know, and I got deal of the month at CAREI that month also. You know, for for that deal. And it was it was crazy because, you know, it was tough finding a buyer at that time, you know, because the market was going out people were scared and things like that. And so little guy who owned the restaurant, he bought a cash he was going to buy for his mom to fix it up, and you know, put his mama to it. And that house right now is worth 400 Plus, I sold it for 150 what that guy bought it from me for.

Vee
Right and I want you to explain a little bit more on why you did what you did so that people listening don’t feel like you took advantage of this lady. And you obviously make 50,000 but she she lost her house. If you didn’t help her and you didn’t showed up. What would have happened?

Rod Phillips
Yeah, so about it. So if I didn’t help her house was going to go to foreclosure. She was going to have that on her credit for the bank was also Gonna go after her but adjustment to sort of difference in the and what was owed and what they took, they wouldn’t gone up to her for that.

Rod Phillips
So, also what I did also so I did a lot of things for this lady. One thing that I did is I, I delayed the foreclosure even longer. So remember I said this is a week away from foreclosure, right? So what I did was for her, I drove this out, you know, I said, I said, I understand your situation. I know what’s got, you know, I understand it’s a tough time you lose your home and things like that. So how about we drag us out as long as possible, so that you can stay in your house as long as possible.

Rod Phillips
And while you’re staying here, you build up cash, you build up capital, and you use that to move into your next place. So I drag this thing out for as long as I could drag it out four, five months. I drag it out and I had the loss mitigator. Oh man, he like he was he was on my butt about closing this thing. Things like so. What’s up the buyers There’s always he was always the OK, so the buyer come through and, and kind of delay or, you know, kind of give him some type of spiel and delay and you know, to kind of push it out a little bit longer and then you know, finally got it closed but so that’s what would have happened.

Rod Phillips
She would have had that judgment over so that’s so anothing I did with the loss mitigator I had him write in the, you know, in our documents at the end point on the term, but the term the you know, where you where they settle? Where they settle, they wipe the slate? Yeah, yeah, yeah. So we had them write that in there. And so they didn’t get a judgment against them. They called it even they said, you know, you don’t owe us anything so that was nothing I did. So this time around my plan is this time around. Banks aren’t going to be that nice. I think banks has got hit in the mouth last time. They didn’t have systems in place. They didn’t for all these Foreclosure, those short sales and things like that, but I think this time around, they’ll have systems in place for foreclosure to get them done quickly. They’ll have systems in place to go after people, you know, for the for the money that they own somehow some way till this is my opinion that’s what I think they’ll do this time around but, but yeah, that’s what I did for this lady, you know, try to help help her out as much as I could. And

Rod Phillips
it was a situation where her husband

Rod Phillips
got sick. And that’s what I found doing short sales, you know, most times when people get sick, or they lost their jobs or things like that, you know, and and I’m just a kind of person, you know, about helping people not trying to get over people, you know, this way too much money to be the real estate to have to get over somebody.

Vee
Right. Yeah. And just so you understand, the IRS consider forgiven debt or unpaid debt as income. So the, the debt that was forgiven if the bank didn’t claim that it was satisfied and paid in full they could have issue a 1099 or they could have came after her for the deficiency judgment and that’s what Rod is talking about here. All right, let’s let’s take a fast forward here and we were talking about the recession’s coming and and what you think will happen to banks this time around? Yeah definitely because you know now that they have system in place they will not be that the generous like they’ve learned all right so what’s your investment strategy now? What are you doing now?

Rod Phillips
So my investment strategy now is a lot of buy and hold. So our mentor, you know, Bill Bronchick, I remember when the when all this was going on in 08, 09, I’ll never forget it. He said he stood up there and he said, everything’s on fire sale right now! And he was saying, you know, buy as much as you can, that he had never seen anything like this, since he’s been investing in real estate. So that’s stuck with me that’s always stuck with me. And I know his strategy was a lot of buy and hold.

Rod Phillips
And also Tim’s strategy to you knows a lot of buying holds. And I remember that saying that a lot of wealth is made when you buy and hold real estate. So during that time, it’s hard to believe that you could buy houses in Denver, Colorado for 30 $40,000. Like I remember, there were a whole neighborhood’s out and was that city out that way? Where you could buy, you could buy it for 30 $40,000 $50,000. And these houses today are worth 300 plus.

Rod Phillips
So now what I’m doing, as I’m buying and holding in Detroit, and because to me, I’m looking at Detroit. I’m looking at these prices in Detroit. To me is looking a lot like Denver did with these prices. Now granted there was Denver economy is a little different Denver has a lot of tech and Detroit’s kind of they’re trying to get there with the tech. They’re not there yet. They’re trying to get there but so yeah, that’s what I’m buying. I’m buying in Detroit.

Vee
So that’s interesting. A lot of people are staying away from Detroit. And you’re going in and buying in Detroit. Can you walk me through your thought process in the beginning when you decided to go there to that market?

Rod Phillips
Yeah. So the reason for me and this was the reason for me was my brother. So my brother he was the one that got me to invest into, into Detroit. He kept telling me that he needs to buy their they need to either but I finally did stop by and start looking into buying there and I’m glad that glad I did you know I can look at the prices and and look at what you can get a rent and you know, it’s pretty it’s pretty Pretty good. That’s pretty good return on your investment there.

Vee
So what kind of prices are your mind now?

Rod Phillips
I’m buying? Let’s see the highest that I bought at was 25. And the lowest that I bought at was 7000 $7000 I got that one at the auction.

Vee
Let’s talk this through the $25,000 property was it the one where you have been having a hard time trying to evict a tenant?

Rod Phillips
Yes, yes. Is

Rod Phillips
that one so, so this one, so this one I bought from a wholesaler? And for this my very first property there in Detroit, it had the tenant in it. And I was like, Oh, you know, okay, so I need to, you know, my mindset is, is I need to take action. I need to, you know, I need to do as much due diligence as possible, but not sit on the fence forever. So I did my due diligence on this house. You know, look at the rent rolls. She was paying rent. So sometimes the rent was own time, sometimes it was half at the beginning of month, half at the end of the month, but the rent was always there when I looked at the rent rolls.

Vee
How much was she paying?

Rod Phillips
she was paying 650 which is for this house was about 150 bucks less than what you could get for it.

Vee
Okay, so market is around 800

Rod Phillips
Yep, for that area. Yep. About 800 bucks.

Vee
So did you have to fix anything after paying 25 k?

Rod Phillips
Yeah, yeah. So so that’s nothing with Detroit the Detroit is kind of tricky because you got to have a very good team there in Detroit, but we can we can touch base on that later if you want. But uh, so what I had to fix there, so I had to fix the roof. I got a brand new roof put on. I had to put a brand new HVAC system and I had to fix the ceiling where the Ceiling was leaking. There’s some plumbing work that needs to be done. Not nothing too major, just old pipes that have to replace or replace Those pipes. And that’s about it man is you know, paint and, you know, so this rentals in pretty good condition except for the roof.

Vee
Overall How much would you say you have spent on it? That House.

Rod Phillips
Overall probably about after it’s all said and done I’ll spend about 10 grand will call it 15 of the team plus the 25.

Vee
So you have 40 into it right? Yep, yeah.

Vee
Are you bringing in the market right now at 800? Are you still doing 650

Rod Phillips
they’ll still doing 650 and I’m still trying to get this tenant out of the house. Okay, so we’re talking as a chancellor.

Rod Phillips
It’s been, yeah, six months so and it’ll end up being longer than six months, it’ll end up being at least at least eight months, because so with this tenant, I don’t know if she’s a professional at this or what her deal is, but she’s dragged this out, you know, she’s dragged us out.

Rod Phillips
In March she didn’t pay rent. So Detroit has has these has these laws and rules and things like that on on landlords because they try to crack down a slum landlords, which I get because they’re going to get people to buy there. And then they, you know, put people into these raggedy homes, unsafe homes and things like that.

Rod Phillips
So Detroit is trying to clean it up I understand that, but then at the same time, it hurts good. Investors like myself with some of these tougher rules, you know what I mean?

Rod Phillips
She paid rent. She paid rent in March. She didn’t pay rent, so she didn’t pay rent in February. She paid rent in March. So she gave money for March. And then that money in March was from March and February. Okay. And she didn’t Yeah, so she didn’t pay all of it. She only paid a portion of it. So then we signed a new lease in March and then later She reached out and she said, Hey, that money they gave you that was for March and April. And I was like, No, you know, hold on. That’s not for March and April, you old February, would you mean, that’s march in April?

Rod Phillips
You know, so then we, you know, went back and forth on that. And, you know, eventually we had taken her to go to court. So to the court, she ended up paying the difference, you know, that the rest of what she owe. She ended up paying that.

Rod Phillips
But then after that she hired a free attorney, you know, so this was I was saying, you know, this is, I get that if you’re a slumlord, but when you’re a good investor, and you’re trying to do right by your tenants that that, that doesn’t put a good taste in your mouth, you know, so you know. She ended up hiring a free attorney. She hired a free attorney. So she she had a free attorney, and I’m paying for attorney. So we agree on things. We agreed on certain things.

Rod Phillips
She wanted everything in the house to be replaced, you know, see just making things up a broken window here, a broken windows there and these things weren’t broken. She made up something you know that it was made. bathroom door. And this is something that you’re putting the agreement that the bathroom door had to be replaced. And then once that was replaced, a lot of these other things will pay rent.

Rod Phillips
So then I sent pictures of the house with the bathroom door on it. And then one of the pictures to my attorney who sent it to her attorney. This expressed it all comes Oh, you know, now the doors broken, you know, the door handles broken, you know, so she was just making things up, you know, just trying to paint me as a slumlord, just trying to get up paying rent basically.

Rod Phillips
So her and her attorney drove that whole negotiation process out for about three months. It doesn’t take three months to to negotiate on what needs to be fixed in a house, you know. So my attorney, my attorney will reach out to their to her attorney and work boils at whatever was happening on their end. They just wouldn’t get back you know, and during that time also her attorney also, he went on vacation for like two weeks or something like affected me. So that doesn’t know that hang up or whatever.

Rod Phillips
But so then what ended up happening was, you know, so then she signed the agreement, I signed the agreement. And then her and her attorney, the free Attorney, they ended up parting ways her attorney, I’m guessing that some, you know, he couldn’t work with her something like that, because she’s trying to back out of signing the agreement, you know, because I had agreed to fix the things she had on the list.

Rod Phillips
So then, you know, once we had everything signed, she said, Oh, you know, that’s not my signature on there. So see, that’s what I mean, like, she has to be professional at this, you know, so now, so now we, one of the things that we put into the agreement was that if she kicks anybody off the property that you know, now we can go to court and she kicked someone off the property one of the one of the contractors to keep them off the property because that’s what she was doing before I was sending contractors is over, and she would kick them off the property sent it they couldn’t work on a property, you know, that they had to be licensed or these people were like, you know.

Rod Phillips
So the second group, the second group of contractors, it was just sent out there she did the same thing to them and these people are licensed so the now ow we’re going back to court so my attorney gave her the 30 days 30 notice to quit. So that 30 day notice is up October 11, which is a Friday and then that Monday, he’ll file for another will know will go to court, which is another two to three weeks. So now that puts us into November. Yeah. And then yeah, and then after that, it’ll be another about 10 days or so. You know, so she’ll be there to be there for almost eight months. You know, not paying rent. Not paying rent. And if she does end up paying rent, you know she owes 650 times eight and she’ll have to pay that all at one time. You know, it’s not a portion type thing.

Vee
It seems like it’s almost like she is going to be able to You get free rent for almost an entire year. Almost right. That’s the route we have to take as investors, because cities like Detroit, or states that are tenant friendly, you will typically run into that situation. Sooner or later. And, yeah, you just have to kind of eat the cost and consider is that as your cost of operating your business? Yep. Absolutely. Because you do have a huge upside here and it could happen, right. So that’s why you you ultimately went back for more and picked up two more properties from auction.

Rod Phillips
Oh, absolutely. You know, because it’s a risk that I’m willing to take, but I would do things differently this time around, you know, so like I said, You know, I have to buy that one just to get things moving.

Rod Phillips
Because once I’ve got that one, that’s how I found my contractor, that’s how I found my attorney. That’s how, that’s how I start to sort out property managers and things like that. So yeah, so so from that one, I realize, okay, so this might sound crazy, but 25 for that house was a little bit too high. You know, I said, the pay 25 for you know, is that

Vee
And you shouldn’t have renew to the lease either.

Rod Phillips
It’s all absolutely not absolutely, I should not have renewed that lease, you know, but that’s just kind of, I made the mistake. We know that this is a business, you know, and sometimes I veer off from that and i and i live you know, I get a little personal with things you know, and I know better we know better as investors you know, that you have to treat it as a business at all times. You know, so when I was out there and I got to talk to her, she gave me this big sob story. Seeing the sob story, you know, see, you know, see about her having a kid and then single mom and things like that, you know, and I was raised by single mom, you know, my mom and grandma, so I’m like, okay, you know anything I can do to help you know what I mean? So yes, I renew the lease and then came back to bite me in the end, you know in the end she.

Vee
Rod, not to sound racism or profiling anything. I’m just wanting to know if she’s also African American?

Rod Phillips
yeah yeah yup she is.

Vee
yeah I mean she she you know had you where she wanted you emotionally. I mean she really well it seems

Rod Phillips
yeah yeah you know she does she does she does she did she plays she’s a professional. She is definitely a professional. And we know that from time to time in this business you’ll run across people that are professionals you know and i happen to run across one of my very first property in Detroit. But for me it did not stop me it didn’t put that sour taste in my mouth but you know what I’m never going to buy in Detroit again. is maybe made me say Okay, you know what, I just need to buy better.

Vee
like I said, so then your next property now is is way better, right? You bought it for what? 7000 apiece.

Rod Phillips
So let’s see. So actually I bought about one other property after that one my brother and I went in as partners on that property. We bought that one for about 20 and now has a great tenant in it, no problems with that tenant. And that one, you know, had a tenant in place also. And then the next one after that, I bought from my contractor who says the, I mean, I’ve never had a Do you remember Jose, the contractor that Tim had? So my contract in Detroit is far better than Jose. And not only just in prices, but he’s better just in like, he said he just overall good person. You know, he’s a he’s a genuine good person, you know, so, so I bought that. Bring up the top a little bit but I bought that second house. You know what brother and then about the the third house for my contractor. He told me about this house. And this is a nice house. Nice house. nice neighborhood. So he told me about that. So I bought that one. And then I bought two more at the auction. So then the two about the auction, bought one for 7000. The other one I bought for 10,000.

Vee
Wow, amazing. Kind of prices. Yeah. What auction? Is it?

Rod Phillips
So let’s add Detroit tax auction. So they had that every year is in September. So we have first auction in September. And then they have the second auction in October also. Yeah, yep. So in a second auction there when I was told as in a second auction things that didn’t sell in the first auction. They start at 500 bucks. No, crazy. Yeah. Isn’t that crazy?

Rod Phillips
I mean, when you look at prices that we have here in Colorado and some of the prices and some of the other places out west, you know, 500 bucks for a house I mean, you know, that thing of burn down and you have the land that you bought 500 bucks, you know it’s a Win To me, it’s a win. So, you know,

Vee
just to play this out, you know, may not happen. What’s your replacement costs on your insurance policy

Vee
for those houses?

Rod Phillips
So I have 40 to 50 grand so I 50 grand in certain policies.

Vee
So you can basically it’s so you can have the house you know, burn down, you still make 30,000 on the flip.

Rod Phillips
Yeah. So there was anothing till you know. So Detroit still trying to rebound is still trying to come back but the city’s not since changing. You know, it has definitely changed.

Rod Phillips
Yeah.

Vee
What what are you seeing there now? What’s improving and what businesses are coming there?

Rod Phillips
So Google’s there, they have an office downtown that I actually got to see when I was out there last and August. Beautiful, a beautiful office.

Rod Phillips
Microsoft has an office downtown. And you know, like said they’re just trying to bring in more tech. They’re doing a lot of remodeling the whole downtown area, you know that area is changing. And so I believe what their idea is, is to start downtown and fix all that up and then kind of spread out from there.

Rod Phillips
If you want to me Yeah, definitely. Yeah. Yeah. Because from my understanding from the people that I talked to, that was there, downtown was just a place you did not want to be, you know, you did not want to be there. And when I was there, but I mean, you know, I’ve been there, you know, hanging out downtown, you know, walking around downtown to remind me a lot of downtown Denver, sort of remind me of. You know, they got casinos down there. You know, and all the sports sports teams are downtown, you know, kind of like, I like how they are in Denver. So remind me of that. And I like that. I like that the sports teams are downtown.

Rod Phillips
I think that attracts people. Think of the tracks businesses.

Vee
All right. So what’s your plan now for these two properties that you just picked up from auction?

Rod Phillips
Some my plan now on one of them. I believe I’ll do a Airbnb on it. So I about this thing for 7000. You know, get it all nice and spit in an Airbnb. The other one, I’ll rent it out. So the one that I’ll, so they’re all in this in the 48219 zip code. I really like that zip code. I think that zip code is going to be one that’s going to be changing. I met with a guy by accident. When I was out there. His name’s John George. And he runs like bliss like busters and I guess he’s been doing it for like 30 years. But I guess I got to meet with him. I got to go into his store to shop his coffee shop. And it’s a cold and it’s it. I was just blown away by this building. You look at it from the outside. It says it doesn’t look like anything. Doesn’t look like were to just look like a little small storefront, but then you go inside. And this is amazing building, you know, just amazing. I can’t even explain it something that you just have to see, which are all night. But I was I was blown away. And then from that, you know, I got to talking to one of his crew members, and he was telling me what his plan was. And I was like, Okay, now because he doesn’t, it was changing, you know, like the zip code. So, so, so yeah, that’s my plan for those are tools to, to buy and hold to hold on to, you know, kind of learn from my mistakes in Denver of not holding more properties. You know, he was able to buy that 30 4050 $60,000 you know what I mean. Yeah, totally. Yeah, yeah. I mean, you know, we could have held on to, you know, those properties that we were flipping and wholesaling and, and things like that. If we could have held on to them instead of, you know, selling them. You know, that’s an extra million $2 million right now that we have extra. Yeah, easy, you know, easy.

Vee
Yeah, definitely. Yeah. Now, so Airbnb, that’s that’s interesting because Detroit is not like a destination city. Right? Well, I mean, why do you, you see people going there are people going to do?

Rod Phillips
So I think people will go there because of the Casinos that are there. I’ve talked to quite a few people, they have business meetings, this is crazy. They have business meetings in Detroit, you know,

Vee
Because it’s so cheap?

Rod Phillips
I’m not sure why. Maybe that’s why. But yeah, I’ve talked to quite a few people, they have business meetings in Detroit, you know, and these people from different industries, sales people, to superintendents, you know, as they have business within the trade is very interesting. And that’s what I think and and when I was in So, what also gave me an idea was when I flew into Detroit, you know, they had the Writing’s on the to Give you the wrecks and things like that, you know, right and, you know the English and that they will talk about this but it was also in Japanese, you know, so that so that that struck me is interesting that you know that there must be a lot of Japanese people coming over to Detroit. I’m not sure what they’re doing their their their own business or their their nose

Vee
They know something that we don’t.

Rod Phillips
Yeah, yeah,

Vee
Or they could be working for Toyota or Honda.

Rod Phillips
yeah. But that that struck me as interesting, you know, seen it right in there. And I was like, Okay, so, you know, there’s people coming in from Japan, obviously, quite a few people. If you’re going to put that in order to have the directions on the size of the airport. That means that you have had quite a few people coming there.

Vee
Right. Yeah, So now, you know, just just talk about your, your plan in Detroit for a little bit here. Obviously, they’re trying to bring bring tech into the city they’re trying to make Detroit for lack of better word great again, you know?

Vee
So I’m trying to see, you know, there are a lot of downsides to investing in these Detroit also, such as crimes, such as hard eviction law, you know, you’ve been dealing with this lady for a long, long time. Yep. So, this is not a fast play at all. This is more of a long term game for you.

Rod Phillips
It is it is. So as I guess the combination of both. So let’s look at the the two I just picked up an auction right. So let’s say the one at 10,000 and I’ll put 20,000 in to it and his house 30 or rented out for about 900 bucks a month. I’ll make my money back and five, six years or whatever. So I’ll still be making money. You know so we make money so even if even if the tradeDetroit doesn’t go where I think it will go I’ll still be making a profit quickly on so I’ll be making a high return on my investment you know i mean so but you’re right though like you know the crimes coming down a little bit crimes coming down Detroit used to be ranked number one believe they’re down like three or four now as far as crime for that so they’re working on the crime.

Rod Phillips
The police chief there pretty good police chief small world so my my good friend from Chicago actually used to work for this police chief when he was a police chief in Cincinnati and he was the one that told me like man like this police chief will turn that city around, you know, so that kind of gave me a little bit of hope Also, your crimes coming down and also Detroit is very, very tricky.

Rod Phillips
You know, one of the downsides that we are talking about like you acts as a district tricky because one block would be a beautiful roll of houses. You literally go one block over and you have burned down houses and there are vacant houses and just lots and then you go one black hole from that, and then there’s beautiful houses and then you go block away then you go a block or from that, and then there’s two houses on the whole block, you know, like, it is is something that you have to see you know, so you have to have people on the ground that you actually trust if you’re going to be invest in Detroit because otherwise you will get burned and like said, you know, like I said earlier that I have been fortunate with my contractor, because he he’s my boots on the ground.

Rod Phillips
And he he’s also an investor, and that’s the reason why he moved to Detroit because he got burned. So he got burned because he was trying to buy there. And they told about this house and it was you know, they they told me was beautiful things like that and he goes up in to see it. And it’s not what they sold it to him as. So then they’re like, you know what, like, I need to be here. So he moved there. And he was able to, to do things himself.

Rod Phillips
Actually see it. So if you’re going to invest in Detroit, you need to have people that you trust on the ground, you know, and so like to go back to my first house, my first house, I was told that, you know, the house was on a good block. And, you know, it was, you know, obviously a great tenant and it looked like a great time for the rent rolls. They told me it was on a good block, and, you know, things like that the house look good. And, you know, I had him do a video for me, you know, we did a, we did a FaceTime video of the house. And even through all that, they forgot to mention that this house had a massive leak in the kitchen from the roof. Just completely miss that.

Rod Phillips
So, I didn’t ask that because I, as we walked through the house to FaceTime, I’m assuming that if you see a leak or you see a hole in the ceiling that you would tell me about that and when they did tell me about it so so that’s why you definitely you need people that you trust there and that is that’s that’s one tip that I would give to anybody want to to buy Detroit is finding people that you trust finding those someone that you trust they’re connected look at these houses for you.

Rod Phillips
You know so for you know, another good thing was that my contractor he with these auction houses Yeah, so I went up there went out there with him. And we drove around we looked at his house but then there was other ones that I want to see after I flew back to Colorado, so I’m on the phone with him and talked to him it’s nine o’clock Colorado time, it’s 11 o’clock his time and again, you know, there’s two more houses man, I want to mention it in him. And he’s like, you know what, I’m gonna go check them out. And I was like, really? He was like yeah I’m gonna go right now and I’m gonna check them out. And he drove to this house 11 o’clock at night. Oh, wow. Check out these houses for Yeah, man. Like Whatever contractor that, you know, you know, like that would do things like that, you know, like, those things are kind of hard to find. And he’s been a good, a big help for me and my success so far and investing there.

Vee
Definitely Yeah, just like in any market, you need a good team and it started with your realtor, your attorney, your contractors, your boots on the ground. And you mentioned he went there at 11pm right. I mean, honestly, that’s like the best time to check out a house, in my opinion. Oh, yeah.

Rod Phillips
That’s that’s that’s so that is interesting that you said that because that was some of the feedback that he gave me on one of the houses that I sent him to he said he was like, don’t buy that house. He said because I drove by there and it was just all kinds of activity going on outside that they really didn’t outside the house. He was like, he said, don’t buy it, though, you know by So yeah, that’s funny you said that because you’re right. That is the best time because you kind of see what your kind of see if there’s people hanging out or whatever or if it’s quiet there’s no one around. Yep.

Vee
Yeah, definitely. And, you know, for for those of you listening if you are interested in investing in the Detroit market, definitely get in touch with Rod and, you know, get in touch with his team so that you don’t have to do everything that he did and you don’t have to learn the market the way that he did and go though all the painful lessons that he did.

Rod Phillips
Yeah, absolutely. You know, and so that’s another thing. So from this experience and experience the my contractor had been bouncing around ideas of trying to do things for out of town investors, because you have a lot of people in Detroit who look at out of town investors they like we don’t want you here.

Rod Phillips
We don’t we don’t want to you know, we don’t want out of town investors here because you guys are raising up prices or whatever. You know what I mean? But they don’t they have a lot of people They’re like that, but then you also have people there that are like, yeah, you know, bring your money here picks up these names, we want that.

Rod Phillips
So because of those people that don’t want you there you, you need to have those those, you know, those good team. So part of that part of what I was thinking about doing was building something to where, buy these houses, fix them up, get them all certified with the city, or sort of, you know, with the lead based paint and all that all that other good stuff. And we talked about that till later on about but you know, some of the regulation that the city has as far as lead based paint goes, but you know, what rentals but uh, but I will get these things, you know, certified things like that, and then I would sell them to out of town investors at a good price and obviously, we’re still make money, but where they wouldn’t have to worry about a problem tenant because I have a property management because I you know, have property manager company that puts in a quality tenant, and I was even thinking about this Something like, you know, like a year guarantee or something like that, like Do you have any problems with this tenant? Or they don’t pay rent and I’ll pay the rent for up to three months but is this something that was bounced around? And now No, I think I might do that sometime in the future you know this we’re out of town investors because you know, people don’t people they kind of look at us as as a way to get money. You know, take to take money from us you know, like, you know, you’re not here you can’t see these properties and there’s so many people that have gotten burned by people that say oh, this is a beautiful neighborhood, beautiful house, you know, things like that they buy it and then they go out and see it. And it is the only house on the block. You know, and

Vee
definitely, no, let’s let’s plan for that. lets you know when you feel is a great idea to have a turnkey operation going in Detroit. Let’s do a follow up episode. When you have it ready to go.

Rod Phillips
Absolutely,

Vee
absolutely. That’s awesome, man. Rod, thank you so much for your time today, man, I really appreciate you jumping on here. I know you have kids at home that you need to attend. I really, really appreciate your time here with us.

Vee
Oh, thanks for having me. Man. I appreciate you having me on as a guest.

Unknown Speaker
Love this episode of The Real Estate lab podcast? Share the show with all your friends, subscribe and give the show a five-star rating on iTunes. Until next time, have an awesome work week.

Listen, subscribe, rate and review – Apple: https://apple.co/2BdPdeJ

The post 9A: Rodd Phillips – Investing in Detroit appeared first on Real Estate Lab .

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https://realestatelab.live/9a-rodd-phillips-investing-in-detroit/feed/ 0 Show Notes [00:02:20] Rod’s LinkedIn: https://www.linkedin.com/in/roddrickphillips/ Rod’s email: SmilingMagicianEstates@gmail.com Free Facebook Group: www.EastWestVentures.com/AIMS Schedule a call with me: www.CallwithVee. Show Notes



[00:02:20] Rod’s LinkedIn: https://www.linkedin.com/in/roddrickphillips/ Rod’s email: SmilingMagicianEstates@gmail.com Free Facebook Group: www.EastWestVentures.com/AIMS Schedule a call with me: www.CallwithVee.com



[00:11:14] Rod’s girlfriend got him the book that started his real estate investing career. Rich Dad Poor Dad – https://amzn.to/37PMmHY



[00:12:53] Rod mentioned CAREI (Colorado Association of Real Estate Investors). CAREI was founded by our mentor Bill Bronchick in the mid-90s. It’s now being run by someone else.



[00:14:03] Door knocking is a really effective lead gen method.



* Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.* A short sale is a sale of real estate in which the net proceeds from selling the property will fall short of the debts secured by liens against the property. In this case, if all lien holders agree to accept less than the amount owed on the debt, a sale of the property can be accomplished.



[00:15:17] A double closing is the simultaneous purchase and sale of a real estate property involving three parties: the original seller, an investor (middleman), and the final buyer.



[00:20:07] The judgment that Rod talks about here is called a deficiency judgment. A deficiency judgment is an unsecured money judgment against a borrower whose mortgage foreclosure sale did not produce sufficient funds to pay the underlying promissory note, or loan, in full.



Rod delayed the foreclosure longer, which allowed the seller to stay in her home without paying her mortgage payment a while longer.



[00:20:38] Loss mitigation refers to the steps mortgage servicers take to work with a mortgage borrower to avoid foreclosure.



[00:24:14] Tim Goff was another mentor of ours. Unfortunately, Tim passed away a few years ago.



[00:37:23] Rod bought cheap houses at the Detroit tax auction. The first auction is in Sept every year. The second auction is in Oct. Houses that didn’t sell at the first auction will start at $500 at the second auction.



[00:40:24] Rod likes to buy in 48219 zip code



Full Transcript



Hey, this is Rod Phillips from TrueVest properties If you want to increase your income through real estate. Enjoy your life more and quit your nine to five. You should listen to the real estate lab podcast with my good friend Vee Khuu.



Unknown Speaker
Welcome to the show you were listening to the real estate lab podcast in this lab, we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.



Vee It’s a good day to be alive and to invest in real estate. My name is Vee Khuu and you’re listening to my show the real estate lab podcast. Hey, just a quick announcement. This week I am releasing two episodes on the same day. Besides this regular program that you are listening to right now. I am also releasing their pilot episode of the podcast in Vietnamese. If you understand the language, hey why not go over and check it out also. Alright in today’s program,]]>
Vee Khuu 53:27
8: Nick Ameluxen – The Journey of A VW Technician to Syndicator https://realestatelab.live/8-nick-ameluxen-the-journey-of-a-vw-technician-to-syndicator/ https://realestatelab.live/8-nick-ameluxen-the-journey-of-a-vw-technician-to-syndicator/#respond Mon, 25 Nov 2019 04:30:00 +0000 https://realestatelab.live/?p=475 Full Show Notes [00:01:36] Nick’s email is Nick@QuantumCapitalInc.com LinkedIn: https://www.linkedin.com/in/nicholas-ameluxen-04a89911a Facebook: https://www.facebook.com/nick.ameluxen [00:02:06] Join our free Facebook Community to learn from other real estate investors at www.EastWestVentures.co/AIMS [00:02:48] Schedule a call with me at www.CallwithVee.com [00:06:44] Nick bought Volkswagen stocks and quickly realized he didn’t have control in it. [00:07:01] House hacking is when you...

The post 8: Nick Ameluxen – The Journey of A VW Technician to Syndicator appeared first on Real Estate Lab .

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Full Show Notes

[00:01:36] Nick’s email is Nick@QuantumCapitalInc.com
LinkedIn: https://www.linkedin.com/in/nicholas-ameluxen-04a89911a
Facebook: https://www.facebook.com/nick.ameluxen

[00:02:06] Join our free Facebook Community to learn from other real estate investors at www.EastWestVentures.co/AIMS

[00:02:48] Schedule a call with me at www.CallwithVee.com

[00:06:44] Nick bought Volkswagen stocks and quickly realized he didn’t have control in it.

[00:07:01] House hacking is when you live in one of the multiple units of your investment property as your primary residence, and have renters from the other units pay your mortgage and expenses.

[00:09:21] Jack and Gino’s Wheelbarrow Profits Podcast
Jack and Gino’s new book “The Honey Bee: A Business Parable About Getting Un-stuck and Taking Control of Your Financial Future” – https://amzn.to/2KJRzam

[00:17:37] Nick shares his tips on what to look for in value add deals.

[00:19:22] Joe Fairless’ book “Best Ever Apartment Syndication Book” – https://amzn.to/2XA0znL

[00:26:36:] Networking is key for Nick’s success.

[00:28:59] Napoleon Hill’s quote “Whatever the mind can conceive and believe, it can achieve.”

[00:29:34] Hal Elrod’s “The Miracle Morning: The Not-So-Obvious Secret Guaranteed to Transform Your Life (Before 8AM)” – https://amzn.to/2KIMe32

Full Transcript

Nicholas Ameluxen 0:02
I don’t need anybody’s help. I can do this on my own. And I think once I realized that you can go further together, and faster.

Unknown Speaker 0:11
Welcome to the show you are listening to the real estate lab podcast. In this lab, we decode the stories, secrets, and skills of the most brilliant minds in real estate investing and turn that wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.

Vee 0:31
It’s a good day to be alive and to invest in real estate. Welcome to the show. My name is Vee Khuu and you’re listening to the real estate lab podcast. If you’re a first-time listener, welcome to the show. And if you are a returning listener, thank you so much for your support. Our guest today is Nicholas Ameluxen. Nick has been investing in real estate since 2015 in Austin, Texas. Originally from Denver, Colorado. He has moved to Austin back in 2014 with his wife Sarah. For 11 years, he was the master technician for VW and Audi, before meeting his investing partner, Mark, and joining quantum capital. Now his business partner Mark is actually an interesting character. He is one of the writers for a very famous American sitcom that you might have heard of “Family Guys.” Currently, Nick focuses on asset management, acquisition and investor relation for quantum capital, both in Austin and in Los Angeles.

Vee 1:36
To contact Nick, you can send him an email at Nick at quantum capital inc.com. You can find him on Facebook, Nicholas Ameluxen, and you can also find him on LinkedIn. Don’t worry, you do not have to take note of the contact information it will be available in the show notes section. Today, Nick and I will discuss how he did his first deal and how he made the shift from working As a master technician for Audi and VW to a full-time syndicator.

Vee 2:06
Before we get rolling on the show, I would like to personally invite you to our free Facebook community, just head on over to www.EastWestVentures.co/AIMS to join. Alright, if you haven’t done so yet, I would encourage you to go over to iTunes and hit that subscribe button, you do not want to miss and a future episode of The Real Estate lab podcast. Okay, so by hitting that button, it will make sure that you get the latest drop of the podcast The moment I upload it. Also, while you’re there, give me a five-star rating and leave a review. I would love to hear from you about what you think about the show.

Vee 2:48
If you want to talk to me personally, go ahead and schedule a call. Go to www.CallwithVee.com and that’s V with two E’s. Alright, enough of that. Let’s get on to my conversation with Nicholas Ameluxen.

Vee 3:07
Hey, welcome to another episode of The Real Estate lab podcast. We have Nick here today is an honor to have you here on the call with us, Nick.

Nicholas Ameluxen 3:15
Happy to be here. Thanks for having me.

Vee 3:17
Awesome. Now, Nick. So let’s take a step back here so that our audience knows where you’re from. And so they can have an idea of, you know, how you get to this point where you’re at in life. Can you think back to your childhood and say, You’re eight years old? What was it like growing up in your household?

Nicholas Ameluxen 3:39
Yeah, well, I grew up in Denver, Colorado. At the time, it was I have two siblings, my sister, and my brother, and they were always the smart ones they did with the other ones who did well in school. So growing up, I knew I didn’t want to follow a traditional path, and I kind of fought against that, you know, as much as I could. Even you know, through high school into college, from college, I actually, I dropped out of traditional college and went on to I was a Volkswagen technician for about 11 years before starting in real estate, and that’s kind of how I got how I got here. But, yeah,

Vee 4:18
so you at a young age, you didn’t want to go to traditional school and you went to a vocational school and became a tech in the car auto industry.

Nicholas Ameluxen 4:32
Yeah, I knew kind of early on. I mean, even from high school, you know, we had to do I remember at a high school business class, and one of the one of the things that we had to do was do business plans, and even back then my business plan was real estate. So I knew eventually I wanted to end up in real estate. I just, you know, never really took the leap and then one day, just decided, you know, why am I Why am I not doing this?

Vee 4:55
So interesting. You’re still in that class. Your business plans was about real estate. What inspires you What gave you that idea?

Nicholas Ameluxen 5:03
You know, I don’t really know. Honestly, I remember thinking, I’m gonna date myself. It was 2008 and it was my senior year and I just thought like, Oh, I’m going to go flip houses like that’ll be what I do when I get out of high school. And I didn’t follow through on it, but I remember that’s that’s where it all started. I don’t I don’t really remember what sparked it, but maybe I was watching HGTV show or something.

Vee 5:26
As I mean, I started in 08 also. What high school did you go to?

Nicholas Ameluxen 5:29
Mullen

Vee 5:30
Mullen? Okay. I have heard about that school mainly because of the football coach. Yeah.

Nicholas Ameluxen 5:37
drama about that a few years back.

Vee 5:41
I actually graduated high school here in Aurora in 2006 and 2008. I started flipping houses too.

Nicholas Ameluxen 5:50
See I should have started.

Vee 5:53
Just somehow you you decided to start a back then but you did not. So you went on to School and you did 11 years in the auto industry. So when did you purchase your first deal? When did you apply this this mindset of wanting to invest in real estate and making it real for you?

Nicholas Ameluxen 6:16
Yeah, I wish it was a little bit more planned out. I bought my first single-family house at the time just for my family in 2015. Right, right after we moved out to Austin. And at the time, my goal to transition out my automotive career was investing but it was I was looking at, you know, stocks, the stock market. And at the time I was buying Volkswagen because I thought, you know, I knew Volkswagen. Anyways, long story short, the whole diesel gate thing happened.

Nicholas Ameluxen 6:44
Yeah, so that taught me a very valuable lesson early on that if I’m going to do investing, or if I’m going to, you know, build any sort of business, I need to have control. And so, at that same time, I started listening to podcasts about investing and somehow wandered onto bigger pockets.

Nicholas Ameluxen 7:01
And then from there that just kind of like flip the switch and we turned the that single-family we were living into into a rental bought a duplex house hack the duplex. Bought another single family and we were buying in Austin so they were seeing pretty good appreciation. And we started looking at you know, how can we we capture this move on to something bigger and that’s when we started looking at multifamily investments and kind of ballooned from there.

Vee 7:29
So how many years from that from the time you start buying your first deal until the point where you say no, I need to go bigger.

Nicholas Ameluxen 7:38
It was sometime in around halfway through 2018 we were looking at selling one of the first house we bought actually and transitioning that into more property and I kept thinking like you know, I’m really enjoying this but where can I like how can I get a better deal and Austin and it kind of transition like I have to hit the ground. Meet with people like started with wholesalers are trying to find the best deal I can in Austin. That makes the most sense. And then I thought, I’m going to put all this work into buying one or two deals a year of single family rentals. And that’s when I kind of like flipped a switch. Like why am I instead? Like, if I’m gonna do one deal a year? Why not try and do one large deal a year?

Vee 8:22
Okay, so you decided to say, All right, I’m going to do one large deal a year. How did you research this, this new found niche that you wanted to get into? How did you get the education? Did you listen to podcasts? Or did you actually go to different seminars? networking events?

Nicholas Ameluxen 8:43
Yeah, well, I’ve been listening to podcasts and books and reading books pretty much since 2015. When I when I started getting interested in real estate, so by then I had had a lot of knowledge and taking very little action. So one of the podcasts, I’ve been listening to the Was this this group of guys? And I always find myself going back to their podcast when I was talking about apartments. So I just actually reached out to them and kind of joined up with like a mentorship group. And then you know, from there that’s kind of how I started implementing that knowledge.

Vee 9:17
And you mind sharing that a group of guys? What was their podcast?

Nicholas Ameluxen 9:21
Yeah. So Jake and Gino, the wheelbarrow profits podcast.

Vee 9:25
Awesome. I listened to that groups also. In fact, I’m have been listening to them for a few years before they even had that podcast. They were just, you know, sharing content here and there. And I just, you know, I remember I was in the office listening to them a few few years ago. And, you know, it’s been great seeing that journey going from, you know, just started that that whole program with mentoring and now being able to coach so many successful students.

Nicholas Ameluxen 9:56
Yeah, I mean, it’s been transformational for me. I think the one thing thing that really helped me get my change my mindset was reaching out and finding a mentor, whether you, you know, go through a group like I did or not it, I think it’s, you know, multifamily, at least as a team sport, and you need to find people who have done it to help you, in my opinion, or at least, you know, do it together.

Vee 10:18
I imagine you research a bunch before you committed to Jake and Gino, what is it that you like about their program?

Nicholas Ameluxen 10:27
A lot of it was they were it might be because they were the first people I heard that are kind of talking about this. And I have been listened to them for the longest but also over the years, I had reached out to Gino on multiple occasions just over email, like asking a question, you know, not part of the group, nothing of that and he would, you know, immediately respond.

Nicholas Ameluxen 10:48
And I just knew after looking at all the other groups, they all have, you know, something great to offer. But here I was not even a part of his group, which is some guy who heard him on the internet, sending them emails and he would respond which I thought was I wanted to be I wanted to surround myself with people like that. I want to have that personal touch.

Vee 11:07
Cool. Cool. So you join that program and you ultimately purchase your first deal. How long did it take you to do that?

Nicholas Ameluxen 11:16
So I joined their program. October of 2018 is when I started really looking at multifamily.

Vee 11:25
Less than a year now.

Nicholas Ameluxen 11:26
Yeah, we closed on our well I closed on a 12 unit in July and Atlanta. I was a small part of a group that came together to buy that and then my own deal out here in Austin a 53 unit we closed in August, August 1.

Vee 11:44
So you just closed it.

Vee 11:47
Okay, got it. So I know a lot of people in the apartment world at least they are interested in investing in Texas. How did you or what did you do differently To be able to find that first deal and ultimately close on it.

Nicholas Ameluxen 12:04
Sure. I don’t know if it’s anything I did differently. I’ve always heard Austin was a very competitive market. But unfortunately with me when I was still working full time, the the value that I can bring was being the boots on the ground. So I was stuck with the market. I mean, look, I mean, I love Austin. It’s great market but you know, it is very competitive. I don’t think I did anything earth shattering or groundbreaking. I just went out and looked at a ton of deals. You know, we underwrote a ton. We toured a ton made offers on the time before we had one accepted.

Vee 12:37
And on first do deal, you do a syndication or you bought it with your money with someone else?

Nicholas Ameluxen 12:44
Yeah. So the first deal, we did not syndicate through the process of looking for properties out in Austin, and just kind of networking with everybody I could. I met up with my partner on these Austin deals, who was also looking to invest in Austin. We just kind of kept it in house I guess you could say

Vee 13:03
yeah kept it in house. So how did you meet your partner for that deal?

Nicholas Ameluxen 13:07
Yeah actually a while ago on bigger pockets so when I decided that multifamily was where I was going to put my my focus my effort I’ve started reaching out to everybody on bigger pockets who syndicated or own apartments or had experience with it and just offering for you know, coffee or a phone call. And actually, pretty much everybody replied, it’s a very nice group of people on there usually, but that’s how I met my partners through that.

Vee 13:34
So that right there shows that you are doing something that different than the most people out there because on bigger pockets for the most part, you just don’t even think about reaching out to people you just pause and hope that someone would reply to you. But you when the active route, you know, you seek out knowledge and you seek out professionals who have done this for a long time to soak up their knowledge. and expand your network.

Nicholas Ameluxen 14:03
Yeah, I love I mean, I love bigger pockets for the podcast the forum I think has gives people value in and the networking aspect I think is the greatest part. The one thing I, at least for the multifamily side I feel like sometimes asking the question to the general public on bigger pockets can be a bit confusing especially if you don’t really know if you’re looking for general advice because so many people from so many different backgrounds come at you. But as far as you know sinking up with people in your in your field and in your industry and then your niche within that industry, I think it’s irreplaceable.

Vee 14:38
That’s definitely is a good place a good forum for any of the newer investor passive or active to go and start your investing journey there. Now, let’s talk about your first apartment deals again. Besides so you bought it with your money and it’s in Austin, you found your partner through bigger pockets. Walk me through the financing part. Because I know for commercial properties, you have to have a few pieces. One of it is the key principle. Did you have the network to close the loan? Or how how did that happen?

Nicholas Ameluxen 15:19
Yeah, through my partner is the the networth to close the loan.

Vee 15:23
Okay, so your partner has the network, he was willing to sign the loan, and you were the boot on the ground. Both of you put up the same amount of down payment?

Nicholas Ameluxen 15:35
No, it was a representative of our our portion. Okay. So

Vee 15:40
I would imagine he since he is signing on the loan, he would get a bigger piece. So how did you even convince him to join in this deal with you being that is your first?

Nicholas Ameluxen 15:53
Sure. Well, it helps that he’s a multi family investor that’s been doing it for 15 plus years. So most of the stuff, the deals that I was showing to him, you know, it wasn’t anything, anything new. It’s all stuff that he was familiar with. As far as you know us coming together for our first deal, like they kind of started with the initial phone call of bigger pockets. And then as I was continuing to look at deals and Austin if I found something I thought might work based on what we had talked about, I’m going to start sending his way. And then from there, it kind of evolved was looking at deals together. So it wasn’t like an overnight like, Hey, I have this deal come sign on the loan. For me. It was all relationship building. And it took time. I mean, it took almost nine months of working together for you got a deal accepted.

Vee 16:39
definitely So you mentioned earlier, you have been looking at a lot of deals and before you even go to him, you have to look at a deal and make sure that you think it’s something that will work. Can you share some of your underwriting criteria what you’re looking for in a deal?

Nicholas Ameluxen 16:54
Well in Austin, because everything I do is kind of Austin specific, we look for 20 to 100 units. It’s B and C class. We look all over the whole, Austin MSA, but we really like assets that are closer to the core. So as far as our underwriting characteristics, I mean, it really depends on the location, price per door can fluctuate across Austin, crazily cap rate, you know, we usually want to be above a five, five. That’s not always possible going in, but we also do value add deals. So sometimes there’s a component of it where it’s obviously not as as attractive as a stabilized deal. So

Vee 17:30
So can you explain a little bit on the on the value add deal? What do you typically look forward to going in and building?

Nicholas Ameluxen 17:37
Yeah, I mean, we want to look for improvements that give us return. We try to avoid things like structural, electrical, anything that you don’t get rewarded for doing but get punished for not doing that makes sense. Yeah, we want properties where there’s at least 10% difference between market rents and inplace rents. Okay. That we can achieve, you know, those those rents without, well that we can achieve those rents without a huge lift, if there is a huge lift that we get a representative increase in value through the increasing rents.

Vee 18:13
So rent increasing is one that you look for. And another area that you look for, I would imagine is finding ways to reduce your expenses or bring in a vendor for your, say laundry incomes, that kind of deal.

Nicholas Ameluxen 18:29
Sure. And now that we, you know, we have our one deal closed, we have two more that are closing, a lot of people say that 20 to 60 unit range is kind of hard to manage, because it’s usually not enough for a full time onsite manager, but not well not enough to support the payroll. So one thing we look for now is to buy buildings very close to each other. So you kind of get Oh, ok.

Vee 18:54
Ok. So it’s kind of like so I’ve read this in Joe Fairless’ book. He also like to buy small, if you’re going to buy a small unit buy them close together so you can group everything together in the back end, and then you can sell it and when, like one big portfolio?

Nicholas Ameluxen 19:11
Sure, it also helps with managing because then we can have one full time manager and a full time maintenance tech over 130 units versus 60 units and 70 units.

Vee 19:22
Okay, got it. Got it. So on that on the buildings that you’re trying to close now, they’re they’re fairly close to your first two that you purchase.

Nicholas Ameluxen 19:33
Yeah.

Vee 19:34
Okay. And you’re still paying with your own cash?

Nicholas Ameluxen 19:39
Yes.

Vee 19:40
Oh, wow. Okay. haven’t met that many people who are able to do that. Yeah. You’re the first.

Nicholas Ameluxen 19:47
Yeah, I mean, it worked out we had we were both in a situation where we had to 1031 some money.

Vee 19:54
Okay, well, you had to 1031 so I was under the assumption that when you sold your first property, you can avoid capital gain there being that you live there for a while.

Nicholas Ameluxen 20:04
I only live there for a year and a half. Oh, so I didn’t know that when I moved out. I found out later come tax I were looking at selling it. So we had to.

Vee 20:15
I see. Okay, so are you is your plan is to kind of eventually roll out of all your single family home and put them into bigger units?

Nicholas Ameluxen 20:26
Yes, yeah. And moving forward, we’re going to look at going after, well, maybe not larger at will probably stay away from the 50 to 20 and start looking at 50 to 115, Austin, and then syndicating those deals.

Vee 20:40
Okay, so, for now, your business plan going forward? Do you foresee going out of Austin or do you still want to stick in that main market?

Nicholas Ameluxen 20:50
Yeah, I like Austin. I think it’s a strong market. We got pretty, pretty good job growth coming in. There’s a lot of things I like about it.

Vee 20:57
Can you tell us a little bit about things that you like?

Nicholas Ameluxen 21:00
Well, it’s pretty like heavy tech, obviously, we have the new Apple campus. We have Oracle, we have Google, we have Samsung, we have Dell, and more and more jobs being created. Big companies moving here. And it’s, you know, the number one place to live three years in a row. The only bad thing about it is the traffic but I think that’s big cities everywhere now. Huh? Yeah. But as far as why we like Austin is, I mean, its growth is exploding. If we can get in a in a good area in the path of progress, which is where we’re finding these these smaller deals. It just makes sense to us.

Vee 21:34
Yeah, so and not not a lot of people nowadays are looking forward to smaller size deals. Everyone, you know, going at 100 and above 100 200 doors is the minimum that that they want to to buy. Meanwhile, you’re coming in looking at the smaller size and you’re scooping them up.

Nicholas Ameluxen 21:53
Yeah, yeah, I mean it. We just see value in it. I understand that on both sides of the coin, but It was also, you know, what kind of pool do we want to play in? Do we want to if we go too small, then we’re competing with everybody. If we go to large we’re competing with much bigger players. So we like we like our size right now.

Vee 22:13
So let’s change topic a little bit. Going from single family home to your first apartment building was changing your mindset.

Nicholas Ameluxen 22:25
Oh, man so much. I mean, back when I was just doing single family rentals and duplexes. You know, I like to tell people I was actively passive. You know, I didn’t, didn’t hound the streets for the best deal. I wasn’t knocking down doors, I wasn’t sending letters I was working, saving up enough to have a down payment and then looking for a little bit and ended up buying and then another nine months would go by and I would save up to buy and you know, it’s very slow. A lot of effort put into it, but enjoyable. I just kind of thought I could do it all by myself. And so when I wanted to start looking at larger units, my mindset was, I don’t need anybody’s help. I can do this on my own. And I think once I realized that you can go further together and faster, it was just a complete mind, mind mind shift. And then also just going out, you know, before I was never attending meetups, networking, going to events, taking people out for coffee. And that kind of, you know, changed my perception as well. There’s so many wonderful people in this industry in this market in this area, and you meet some pretty incredible people, but also, you know, you you build members of your team that you just can’t do, you know, everybody talks about team building, but a lot of that is just meeting everybody you can and that was I guess the big mind shift change because I was very anti partnership anti joining up with people anti joining a mentorship group. I mean, that was a huge leap for me as well,

Vee 23:58
but what why is that, why did You not like joining a mentorship program,

Nicholas Ameluxen 24:03
I have kind of the, I guess that somebody would call it the IMA mentality where it’s like, I’m going to do everything. Okay. And after, especially after joining bigger pockets and going on the forums like they’re very, I don’t want to say everybody is but most of them are very anti mentor anti coach, and I haven’t experienced every mentor coach. So there can be very good reasons behind that. But as far as in where I was, you know, I knew when I became a technician, I had a mentor, and it helped me, you know, grow as a technician. So I knew if I was going to do this full time, I should probably look into getting a mentor. But I’ve been listening to podcasts and reading forum posts for years that were like, you can find all that information for free. And you can you can find it for free, but it’s not going to be curated. It’s not going to have actionable content with it. And it’s also going to be you know, well, I guess that goes back to the curated part. It’s going to be covered by 17 different people’s opinions, most of them unqualified. What you’re asking,

Vee 25:01
right and and I see that it’s like me not knowing how to fix a car, go online go on YouTube different forums to find out how to fix one thing in a car. Whereas I can just go to a shop and just say, here you go. Do it for me or teach me how to do this.

Nicholas Ameluxen 25:21
Yeah, exactly. Yeah. Great, great analogy.

Vee 25:25
So then, besides the mindset shift, have you had any other change in your habit at all?

Nicholas Ameluxen 25:33
Well, I think the mindset change really did change my habits. So you know, I set daily goals for reaching out to people.

Vee 25:43
How many people do you need to reach out daily?

Nicholas Ameluxen 25:45
Well, it’s kind of slow down I guess I should say now that we have three deals closing because that takes up a lot of time. But for a while it was I was reaching out to three people in day

Vee 25:55
on on bigger pockets or anyone bigger pockets. Yeah. or

Nicholas Ameluxen 25:59
anywhere, anywhere. At first has bigger pockets. And then as I went to more events, you know, it kind of went that way and meetup groups and but really I mean everything at least that I’ve noticed and multifamily so far most of it is repetition and just putting in the work. So I guess habit wise it’s just treating it like a business, putting in the work each day and when you don’t feel like it, and then following a framework that works.

Vee 26:28
So what would you say is a single habit that actually give you 80% of your results up until now?

Nicholas Ameluxen 26:34
Man, that’s a tough one.

Nicholas Ameluxen 26:36
I would say the the one thing I’ve changed that’s given me the most benefit is is networking. If I had to give anybody any advice would be go out and attend as many meetups as you can. Most of them are free. If that’s a concern, reach out to people.

Nicholas Ameluxen 26:52
Do you have any advice for people who have never attended meetup or go to Any networking events on how to on their approach or how to work the room when when they get there?Sure. Well, if you’re like me, I was a huge introvert. So going to a meetup was terrifying. Before I before I did that I joined Toastmasters. So if you’re scared of like public speaking or then join a group like Toastmasters, I still go It’s fantastic. As far as working the room, I mean, just I mean, everybody’s there for the exact same reason as you are to meet people. So it’s just walk up to people and just start introducing yourself and asking about them. You know, that’s usually why you go to networking events is to network so it’s not out of the blue to go up and introduce yourself to somebody. Ask them what they do or how they got there. who they are.

Vee 27:44
Okay, then how about online when you reach out to people on bigger pockets? What do you usually say?

Nicholas Ameluxen 27:50
I usually you know introduce myself, and I say like, I’m an apartment investor in Austin, Texas, looking to surround myself with like minded individuals would you ever be interested in connecting, you know, moreover, if they’re local, I usually ask, connect more over coffee or if they’re not, you know, a phone call.

Vee 28:09
Okay, so mindset change, habit change. And let’s say that you’re experienced now, right? Is there anything that you wish you would have known? before you started this whole journey? One thing you wish that you had known when you started out?

Nicholas Ameluxen 28:28
Yeah, that it’s possible for me to do it. You know, I always, especially when I started listening to podcasts, you hear about these people who, you know, are really making it happen. And I always you always tell yourself like, even subconsciously, at least I did, like, Oh, they made it happen, but I couldn’t do that. And I think once I realized, like, yeah, you actually can do that. It was a huge change. So the one thing I would tell myself is, our wish I knew was that it is possible. You just got it. You put in the work, have the guts to go out there and do it and make it happen.

Vee 28:59
Yeah, it’s kinda like I think Napoleon Hill said that if you can see dream, you can achieve it.

Nicholas Ameluxen 29:05
Yeah, exactly.

Vee 29:06
So is that the motto that you go by?

Unknown Speaker 29:10
I wish I wish I could say 100%. Yes, I’m getting there. I’m starting to push myself more and more out of my comfort zone. And the things that weren’t positive. So I don’t know if I’m 100% broken of it, but

Vee 29:25
I’m always trying to work on something new. And I guess that’s as that now, do you have a morning routine? By chance?

Nicholas Ameluxen 29:34
I don’t. I’ve been trying to implement the Miracle Morning. I read that a long time ago. And now that I’ve stepped away from what I was in Ford Focus on real estate full time, I’m trying to re implement that. Right now. I’m really excited because my morning routine now is waking up and taking my kids to school, which

Nicholas Ameluxen 29:53
so I’m pretty happy with it right now.

Vee 29:55
Nothing, nothing can beat that. Yeah. Now what would your life right now with your career Right now, what are you most curious about at this point?

Nicholas Ameluxen 30:04
I want to see I mean, what I’m most curious about is how big we can grow this and what we can, you know, make unique about our, our multifamily investment business, how we can differentiate ourselves how we can help the most people and not just being another face in the crowd. I’m interested to see, you know, where we can take this.

Vee 30:24
What’s your business plan to make this happen?

Nicholas Ameluxen 30:27
Well, right now, the biggest thing on our priorities is getting these deals closed and stabilized. And then from there, really reaching out to more and more people and seeing what we can do to go after more deals or larger deals. And what how we can structure that either for ourselves or for our investors to really make that attractive. And then just building that that investor base and continuing to focus in on strong markets in niche areas that maybe are being overlooked.

Vee 31:04
But cool, man now so you’ve been doing this for a while, have you run into or stumble into any hurdle that really gave you a huge lessons? Like any any failure that you ran into, or appeared to be a failure?

Nicholas Ameluxen 31:22
Yeah, I mean, pretty early on. We already talked about Volkswagens that really taught me I want to be any investment I’m in I want to have control. And that was a big life lesson. And then as far as real estate, we got pretty lucky with our first couple of properties. We acquired the duplex. I learned inherited tenants can be awful, even in landlord friendly markets like Texas. I would I don’t know really what you can do about that on the front end, except only by vacant properties, but

Nicholas Ameluxen 31:53
it’s possible. Just be careful with your inherited sentence.

Vee 31:56
Well, I mean, in the apartment market, I cannot imagine You don’t want to inherit any tenant.

Nicholas Ameluxen 32:03
Yeah, exactly. Yeah. And that’s, I mean, that’s completely different animal, if you’re in a house hack, a duplex, maybe see if you can get get them empty. But essentially, when we bought our duplex, the one tenant just destroyed the place against they were very upset. And then just left town. So that was kind of a life lesson. But I guess I would say through managing my own properties, I realized one thing, which kind of led me to to multifamily is I don’t want to manage the day to day like the tenant relationship. Maybe not the center of the ship. I don’t want to be a property manager.

Vee 32:40
I put it that way. Yeah. You want to be an asset manager? Yes. You manage the manager?

Nicholas Ameluxen 32:45
Yes. I realized very early on that that is not one of my skill sets, nor one that I’m extremely interested in developing. So I had to look at it at an investment area where I could utilize that.

Vee 32:58
Okay, so what are you what Do you enjoy most of my work? Besides, you know, managing the manager? What are you good at?

Nicholas Ameluxen 33:04
I mean, I love acquisitions. That’s kind of the sexy side of real estate. I feel like, Yeah, I do enjoy asset management, I enjoy, you know, seeing how we can push these properties to their full potential. overseeing renovations. All that I love seeing the before and after and being involved in that process. I think that’s really unique. Yeah, definitely. and turn it into something beautiful.

Vee 33:28
Yeah. Same here. I mean, I used to fix and flip and the feeling that you see the before and after it just like Nothing can compare to it. Yeah, the photo is one thing but being there, and you know, visualized back Oh, shoot. This house used to be a dump. Look at it now. Yeah. I imagine it could be the same for for apartment when you turn something like in the D class building into a C, C plus.

Nicholas Ameluxen 33:58
Yeah, yeah. It’s nice to To see your you know, what you envision for this property come to life? You know, it’s a it’s a fun process.

Vee 34:09
Do you like to my B and C class buildings are you care about some lower one?

Nicholas Ameluxen 34:17
primarily focused on B and C class.

Vee 34:19
B and C. Yeah. Okay. How do you source your your deals? Currently,

Nicholas Ameluxen 34:27
every deal we’ve gotten has been brought to us by a broker as far as apartment deals and that’s a lot of that was because of time. You know, I hear a lot of people chase you know, even at this scale off market, truly off market going directly to owners. I found much more success building those broker relationships, I think if they more than deserve their fee if they can bring you a good deal, especially before it’s listed, and it was also a time constraint and chasing after great Owners requires time.

Nicholas Ameluxen 35:02
And while I was working full time, I had to leverage pretty much everything I could, especially my time. So I, I focused on building relationships with the people who constantly focus on building relationships with the owners of the market. So I guess that was a long answer to we get all of our deals so far through brokers.

Vee 35:19
Can you share a little bit more about how you build a relationship with a broker, especially for someone who listening might be new to the game?

Nicholas Ameluxen 35:28
Sure. I’ve heard a ton of strategies. All I can say is the one that’s worked for me but now that the others won’t. If I’m meeting a you know, a broker for the first time, I have a kind of like a credibility book of who I am what I look for who the partners on my team are, that I send, usually after before a call, and they’re busy people, they don’t really want to be enough if they’re not nice people, but most of them are focused on getting the deal closed because that’s how they feed their family. So if you can Show them that you know what you’re looking for, you know what you’re asking for, you have the competency to close. I think you’ve checked a lot of the boxes, you just don’t want to raise any red flags, especially on your, you know, your first couple of conversations. So

Vee 36:14
what would be a red flag?

Nicholas Ameluxen 36:16
I think being very unclear about what you’re looking for, like if they if you are calling a broker, and they ask you, what are you looking for? And you say, a good deal. And Austin? Or, you know, so is everybody. So how can you be? How can you stand out? And how can you be specific, so we try to focus in on age, location, size class, and then stick to those as well. You know, they might send you stuff that’s outside of that. And then the best thing you can do is give them positive feedback on why that doesn’t work, or why it does work and what they want to sell as much as you want to buy. They just want to make sure that you are the person that can actually buy and not just tie property for 30 days.

Vee 36:57
30 days. So talk about that a little bit. What’s the What’s the timeline in in the Austin market from the time you get an accepted LOI to the time your money go hard and your financing your inspection and all that.

Nicholas Ameluxen 37:14
Yeah, so, you know, just like with everything in real estate, it’s totally negotiable. We typically do 60 day closings will probably bake in one or two extensions if we need to into the contract. Where we’ve been flexible in the past is doing our due diligence period before money goes hard. So typically we asked for 30 days, okay, one you know if we’re going to negotiate we don’t when we can’t go any more aggressive on price maybe we do a higher deposit, maybe we do a shorter due diligence period. I haven’t done a deal where money is gone hard day one, I don’t think I could that just makes my stomach upset thinking about it. Just because so many things can go wrong that you know, neither you nor the seller know. But as far as the closing timeline and that’s pretty much it. 60 days, we usually ask for One or two 15 day extensions if required by the lender. That’s all that’s happened. But yeah, that’s why I said, you know, they don’t want to have a property for 30 days because I feel like the typical ask is a 30 day due diligence period. So they want to tie up a property and then have somebody back out 30 days in that says, you know, remarketed all over again.

Vee 38:20
Now in terms of your financing, once again, are you looking for long term debt or conventional debt? institutional?

Unknown Speaker 38:29
Yeah. Our first deal, we did agency debt, it was a Freddy loan. Okay, we project our hold times between five to seven years right now, at least in Austin. So we like debt that matches up with that and if we’re doing a heavy value add, we might look for something with a flexible prepay, okay, but we’re pretty conservative when it comes to leverage we’re not trying to get very high LTV is we’re fine with you know, 70-75 and attractive rates, longer terms. Your five to seven year terms but with a flexible prepare, kind of meets up with our strategy,

Vee 39:05
does it? I imagine right now, with everyone talking about the recession’s coming up. Does that worked out with your business plan also to stress test these deals when you coming in?

Nicholas Ameluxen 39:18
Yeah, and that’s part of the reason we don’t try and go super aggressive on our debt, just because of where we are at in the game. Like if we can lock in a low rate for a long amount of time at conservative leverage. That seems pretty attractive to us. And it still makes the deal work. I wouldn’t want to I mean, I know people still are, and I’m not speaking from a position of education, or authority on this, but I wouldn’t want to be in like bridge debt or anything, floating rates or short terms where you have to in two or three years or two years from 18 months transition to a different product. Unless you I guess by additional years, I mean, the debt world. There’s a foot for every shoe. Just finding the right one.

Vee 40:03
Yeah, find whatever works for you.

Nicholas Ameluxen 40:07
Yeah, what fits for you the deal? And I guess your temperament? I’m a little bit less or more risk averse. I think that maybe some people.

Vee 40:15
Okay. So, Nick, is there anything else that you want to share with a new investor who were in your shoes? Maybe in 2015 when you first started?

Nicholas Ameluxen 40:30
I mean, you hear all the every almost every says learning market, learning market learning market. I think that’s really important. That would be the first thing I would tell anybody is learning market, meet as many people as you can in your market. And then you know, believe it’s possible, you can wait on the sidelines for something to happen, but you’ll probably be waiting a very long time. So go out there take action. I guess that’s the best thing I can say is education is great, but you need to actually take action. So go out there and do things steps.

Vee 41:01
Yeah, education without action is the most expensive hobby you can have.

Nicholas Ameluxen 41:06
There you go. Yeah.

Nicholas Ameluxen 41:09
That’s really accurate. Yeah.

Vee 41:11
Well, Nick, thank you so much. Man, you have been awesome throughout this podcast episode. I appreciate you taking the time to record this episode with me and I’m sure the audience learn tons of value from you.

Nicholas Ameluxen 41:23
Well, thanks. I was really happy to be here. So thanks for having

Unknown Speaker 41:27
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The post 8: Nick Ameluxen – The Journey of A VW Technician to Syndicator appeared first on Real Estate Lab .

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https://realestatelab.live/8-nick-ameluxen-the-journey-of-a-vw-technician-to-syndicator/feed/ 0 Full Show Notes [00:01:36] Nick’s email is Nick@QuantumCapitalInc.com LinkedIn: https://www.linkedin.com/in/nicholas-ameluxen-04a89911a Facebook: https://www.facebook.com/nick.ameluxen [00:02:06] Join our free Facebook Community to learn from other rea...



Full Show Notes



[00:01:36] Nick’s email is Nick@QuantumCapitalInc.com LinkedIn: https://www.linkedin.com/in/nicholas-ameluxen-04a89911a Facebook: https://www.facebook.com/nick.ameluxen



[00:02:06] Join our free Facebook Community to learn from other real estate investors at www.EastWestVentures.co/AIMS



[00:02:48] Schedule a call with me at www.CallwithVee.com



[00:06:44] Nick bought Volkswagen stocks and quickly realized he didn’t have control in it.



[00:07:01] House hacking is when you live in one of the multiple units of your investment property as your primary residence, and have renters from the other units pay your mortgage and expenses.



[00:09:21] Jack and Gino’s Wheelbarrow Profits Podcast Jack and Gino’s new book “The Honey Bee: A Business Parable About Getting Un-stuck and Taking Control of Your Financial Future” – https://amzn.to/2KJRzam



[00:17:37] Nick shares his tips on what to look for in value add deals.



[00:19:22] Joe Fairless’ book “Best Ever Apartment Syndication Book” – https://amzn.to/2XA0znL



[00:26:36:] Networking is key for Nick’s success.



[00:28:59] Napoleon Hill’s quote “Whatever the mind can conceive and believe, it can achieve.”



[00:29:34] Hal Elrod’s “The Miracle Morning: The Not-So-Obvious Secret Guaranteed to Transform Your Life (Before 8AM)” – https://amzn.to/2KIMe32



Full Transcript



Nicholas Ameluxen 0:02
I don’t need anybody’s help. I can do this on my own. And I think once I realized that you can go further together, and faster.



Unknown Speaker 0:11 Welcome to the show you are listening to the real estate lab podcast. In this lab, we decode the stories, secrets, and skills of the most brilliant minds in real estate investing and turn that wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.



Vee 0:31 It’s a good day to be alive and to invest in real estate. Welcome to the show. My name is Vee Khuu and you’re listening to the real estate lab podcast. If you’re a first-time listener, welcome to the show. And if you are a returning listener, thank you so much for your support. Our guest today is Nicholas Ameluxen. Nick has been investing in real estate since 2015 in Austin, Texas. Originally from Denver, Colorado. He has moved to Austin back in 2014 with his wife Sarah. For 11 years, he was the master technician for VW and Audi, before meeting his investing partner, Mark, and joining quantum capital. Now his business partner Mark is actually an interesting character. He is one of the writers for a very famous American sitcom that you might have heard of “Family Guys.” Currently, Nick focuses on asset management, acquisition and investor relation for quantum capital, both in Austin and in Los Angeles.



Vee 1:36 To contact Nick, you can send him an email at Nick at quantum capital inc.com. You can find him on Facebook, Nicholas Ameluxen, and you can also find him on LinkedIn. Don’t worry,]]>
Vee Khuu 41:44