Your Peers Began Investing in RE, How About You?!
REIC Newsletter — July 2017
It’s July and it’s SUMMERTIME, woohoo!!
I just got back from a CRAY month of June travels (9 states + Costa Rica), and am about to embark on some more…but first, squeezing in a July REIC newsletter with lots of RE and investment learnings!
Before diving in…
KUDOS!! Lots of you are pinging me with your RE & inv updates, ranging from questions on potential deals and personal finance planning to inv brainstorming and more. I LOVE it cause (1) it shows how much progress we’re all making & (2) I’m learning a TON from all of you. Keep it up ;)
TIME MGMT: Gotten feedback that the newsletter is hefty, so I’ve shortened it. For those on the go, just read the first 2 bullets after each header section…that’s the prime stuff ;)
REMINDER: The next REIC mtg is on hold until my much needed travel slows down in August…in the interim, keep emailing / texting / FB messaging me your updates and questions!
PS — ALERT for 2 rental income FSBOs on the east side of LA → triplex in Echo Park for $1.05mm and a quadplex in Frogtown for $899k. Lmk if interested and I’ll connect you to the agent!
PPS — Link here to an AWESOME Personal Finance Primer, which summarizes 28 things my little bro knows about personal finance at 28 y/o. It was inspired by a NY Times piece called “Index-Card Financial Advice.” → What if you could fit everything you needed to know about personal finance on one piece of paper?
FYI Avery’s Writing Primer business can create slick, one-page mktg pieces for a variety of content forms (video tutorials, press interviews, company vision statements, etc) so feel free to ping him!
PPPS — Shout out to Chris Rodriguez and his parents Bob & Nancy for their amazing Omaha hospitality. Home-cooked meals, free fireworks, wake-boarding and all sorts of RE inv advice…EPIC! And yes, I’m back in the mkt looking for my 2nd Omaha MFU inv property, lmk if you come across any leads ;)
PPPPS — I just made my 1st angel investment in Edoughble. It’s safe and scrumptious edible cookie dough, co-founded by the amazing Rana and John Lustyan. I am soo pumped for them and their incredible progress to date…go team!!
PPPPPS — My upcoming travel, holler if you’re local:
- Orange County / San Diego: July 21–23
- Ohio: July 27–30
- Chase Surf: TBD August
AS ALWAYS, HELP US CONTINUE GROWING: I urge you to invite others to REIC!!
If you believe friends/colleagues/family members would benefit from (1) attending mtgs in person or remotely (2) joining the list serve OR (3) even have a good speaker/resource to recommend, pls send them my way…we’re now 200+ strong and get better with every new member!!
GOOD RECENT ARTICLES FROM BIGGER POCKETS
- Why It’s Time to Consider Adding Rent-Controlled Properties to Your Portfolio — Rent control is often associated w/ low ROI, but the reality may be the contrary. Further, RC properties can improve diversification of your RE portfolio. Where there is complexity and fear, there is also opportunity…CAVEAT: prob a better bet for experienced investors. Thx to Arteen for sharing this gem!
- I’m Using Ancillary Income to Cover 63% of My Mortgage: Here’s How — I LOVE this. Maximizing income from your property and tenants is not just about rent…there are many more ways to drive recurring revenue streams or above market returns, just need to be creative!
- Plan to Sell Your Primary Residence? STOP… And Consider This First. — For those buying a 2nd home, consider keeping your 1st property as a rental and not stretching your finances on your 2nd mortgage. You’ll have your 1st inv property much faster this way!
- 4 Reasons You Should Sell That Investment Property — Many of us are buy & hold investors and NEVER think about selling…that’s just cray! Selling is just another tool in the investor toolbox, and if done opportunistically, it can accelerate your LARGER financial goals ;)
- How to Prepare for Your First Ever Note Investment — There are many ways to invest in RE…ever think about being the “bank”?
- How to Use an MLO (Master Lease Option) to Invest Creatively — Entering an MLO as the lessee can provide you the opp for a larger investment with little to no money down…plus optionality for a downstream purchase as your liquidity improves. Def a highly creative RE tactic to be mindful of!
- Are Your Children Stopping You From Achieving Financial Freedom? — GREAT READ for all you parents out there, with some traditional assumptions well challenged. Yes, children are expensive, but they’re NOT a reason to dismiss your goals of financial freedom. Back to the old adage of “How I Can” vs “Why I Can’t”
- This Simple Advice From Warren Buffet Guides Me to Deals No One Else is Finding — Zig when others zag ;)
- The Ultimate Guide to Quickly Estimating a Property’s ARV (After Repair Value) — Easy to use framework for how to est value using comps against your subject property, and includes great references and supporting visuals. Fantastic resource for buyer/seller negotiations, appraisal prep, and much more!
WORTH READING & WATCHING
- Many people talk about why they can’t invest in RE → lack of capital, confusion re financing structures, etc. What’s great about RE is that there are SOO many ways to finance a purchase (gov programs, partnerships, private money, and much more). Means that the only real excuse to not invest is…dare I say…lack of effort?!
- Part of a Stanford Class taught by Reid Hoffman, John Lilly, Allen Blue, and Chris Yeh
- By far one of THE MOST impressive and thoughtful interviews on company scaling and core leadership principles I’ve seen
American Gods by Neil Gaiman
- Need a fun summer novel? This is it
How to Succeed as a Chief Growth Officer — by KelloggInsight
- 5 touchstones for how to drive LT growth and innovation
- HIGHLIGHT: how to prioritize a LT growth vision and consumer advocacy, and can also make a strong case that passes the muster of all corp leadership, incl CFO
- A newly-emerging role that many (incl myself) may consider at future companies
As a Man Thinketh by James Allen
- Lots of parallels to popular meditation training, but distilled down into in a concise text
- Shout out to Chris Lopes for recommending!
- The Millionaire Real Estate Agent by Gary Keller, Dave Jenks & Jay Papasan
- The Old Man & The Sea by Ernest Hemingway
QUICK LEARNINGS: REAL ESTATE & MORE
PERSONAL TACTIC — Show up in person
I got my 1st out-of-state MFU under contract within 30 days of my 1st Omaha visit back in February. During that trip I filled my mtg calendar, shadowed experienced investors, and my inv team saw how serious I was about getting my 1st deal. I just visited a 2nd time → I learned a ton more, met with even more people and again feel I’m that much closer to my 2nd investment. If you’re serious about RE investing, show up in a mkt you’re researching, and you’ll be pleasantly surprised by the acceleration of results!
ADVICE FROM BILL THE GC
I recently visited my twin bro’s new home in Southern Pines, NC to help tear up decades old carpet and adhesive…key learning = rent a floor sander. Apart from that, I also got to spend time with his GC and his words of wisdom:
- Home Sealing — A “tight” building is easier and less expensive to heat, cool and ventilate. The seal quality of a home is measured by how many times the air is re-circulated through in a certain time frame. Know your target metrics, and have a contractor take the appropriate measures to properly seal your home during any reno or construction
- Quality Rapport w/ Sub Vendors — Bill’s GC services are priced at a premium, but his work is high quality and timely. His timeliness is directly impacted by his reputation as always paying sub vendors on the actual days they work. Therefore, sub vendors prioritize his projects, show up on time, and get the work done…and those that don’t are cut from his to-call list
- Client Selection — Bill meets with prospective clients to feel them out, and turns down high-paying work if he believes it will be more pain than it’s worth (a bad “gut” feeling upfront, concern about ability to pay, lack of clear project vision, etc). He’s built a stable and “happier” business with his selective approach. He actually had my twin bro and wife over for dinner…now that’s a personal touch ;)
DEAL STRUCTURING ADVICE — Investing in a 1st Home-to-Rental Conversion
Seeking advice for a friend → His bro just bought a 2nd home, and he’s talking to his bro about keeping his 1st home and converting it to a rental property. My friend would like to invest in the 1st home.
How Would You *Simply* Structure It? My Thoughts:
- Make it a hybrid debt / equity vehicle
- Provide XX capital upfront, which entitles him to:
- XX% of NOI (and mutually agree to definition)
- XX% of sale proceeds after mortgage paid off
- For any major capital calls (new roof, siding, etc), contribute XX%
- Original property owner keeps name on title and mortgage (no change)
- No 2nd lien on property
- NOTE: It’s like a note investment, but because there’s unlimited upside since it’s % based and not capped, the increased risk that comes with it is that there’s no asset-based guarantee via a 2nd lien
WORDS OF WISDOM FROM A $BN FUND MGR
One of my earliest mentors was Bill Wilby. His track record includes overseeing $120bn+ of assets and 70 fund mgrs at Oppenheimer Funds, serving in US Army Intelligence in Vietnam & Europe, teaching at Kellogg School of Management and holds multiple degrees from U of Colorado and West Point.
Bill once told me he’s uniquely capable of sleeping at night while overseeing $60bn+ of people’s retirement savings…but not all of his peers could boast the same. With great power comes great responsibility, but he emphasized that one must be calculated, confident and calm in high-stakes decision-making. Otherwise, one risks seriously sacrificing his personal and professional health.
Today, I do my rigorous HW upfront and make the optimal high-stakes decision with the facts at hand. If the facts change and/or I need to course correct, I adjust my strategy with the same upfront approach. Those who make high-stakes decisions with little rigor whipsaw their teams and their own mental sanity, and drive instability among the ranks. Hard pass.
A MUST KNOW RE RENTAL CAR INSURANCE
I learned a VERY important car insurance lesson that can save you much $$. If you have auto insurance for your main vehicle, you *prob* don’t need to buy additional insurance when renting a car. Most auto policies cover rental cars, and credit cards can offer additional coverage. For example, my rental car in Omaha was DESTROYED by a once-in-a-decade hail storm (photos attached), and my comprehensive (key term) auto coverage covered my vehicle after the $500 deductible. THEN, because I paid for it on a Visa Chase Freedom card, Visa will cover the $500 deductible…meaning no out of pocket fee and no increase in premiums! Now, it requires A LOT of paperwork, but def good to know!
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NOTE: I publish a wkly newsletter about RE, leadership and personal finance. I also organize a monthly mtg of RE investors across the US. Message me below or on LinkedIn if you’d like to be included!