Richard

David:
This is the BiggerPockets Podcast, show 685.

Justin:
The way that I look at Invelo and what we’re trying to design is, we’re not just trying to create a product, a software product. We’re combining software, education and community. Because I really feel like all of those pieces are really important. Now, on the software side, we are a true end-to-end solution for a sales journey. So you can pull lists, you can manage prospects, you can manage leads, you can manage deals, you can market out to potential home sellers.

David:
What’s going on everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast here today with my co-host, Roberto Abasolo, and we’ve got an amazing episode for ya. Today, Rob and I are interviewing Justin Silverio, the creator of Invelo, a software that helps you find off market properties and reach out to the owners to get stuff locked up at well below market rates through the targeting of motivated sellers. Justin explains the system that he created, how it can help you as an investor, and how to use it, which is pretty freaking cool. Rob, what were some of your favorite parts of today’s show?

Rob:
Well, first of all, I’m hurt that you didn’t notice that I was wearing the t-shirt that accompanies my favorite book in the world, BRRRR, by prolific author, David Greene. But secondly, this show’s awesome. I think it’s a really cool platform for literally any type of investor out there. I think it applies to wholesalers, flippers, short-term rental people. Really, if you’re just looking to acquire assets, and if you want to get them under market, this seems to be a very, very comprehensive tool that can help you do that.

David:
Absolutely, and if you’re watching on YouTube, Rob and I are both wearing our custom made BiggerPockets t-shirt. His says, BRRRR Recycle with the recycling emblem. And mine says, Will You Be My Mentor? So if you’re not following us on YouTube, consider checking that out. You get to see all the facial expressions, the nuances, and Rob’s coif, which has its own personality, and it shows up differently on every episode. So a matter of time before that coif gets its own Instagram. So until then, check it out on YouTube.
Before we bring in Justin, today’s quick dip is, listen all the way to the end of the show. Because if you want to ramp up your investing success, BiggerPockets can help you do that. We are going to give you a discount code for a Pro membership, as well as explain all the new things that make Pro better that we at BiggerPockets have put into place for you. And I can promise, you will be impressed when you hear about this. So listen all the way to the end and get that discount code if you are not a Pro member. Rob, any last words before we bring in Justin?

Rob:
Yes, I have a quick, quick tip number two, and that’s, if you want to buy these awesome t-shirts, you can order them. They’re linked on YouTube in the description of this video, so be sure to do that. Which one you’ll get, that will be up to you. But they’re both great shirts, very comfortable, very soft cotton on my skin, Dave.

David:
That must be why you are in such a good mood today. Makes sense. If you want to be in a good mood like Rob, get one of these t-shirts. All right, let’s bring in Justin. Justin, welcome back to the BiggerPockets Podcast. How many times is this now? How many times have you been on?

Justin:
This is three. This is three. Very exciting. Each one of them is all very exciting to be on.

David:
And they go back pretty far. So you were on episodes 58 and 194, you must have just been a puppy back then in episode 58. What was going on in your life when you did your first BiggerPockets interview, and what’s going on now?

Justin:
It’s funny. At the time, I didn’t think I was a pup, but now looking back, yes, absolutely. Back then on the first one that I was on, I was still building out my investment business, and flipping homes. And trying to get into the routine and just learning through the process of buying properties, the right finishes to do, the renovation, selling. So still really learning and growing the business.

David:
I don’t know that we’ve ever dug super deep into your story. I’m curious though, what was going on in your life that made you say, I’m going to do this crazy, beautiful, frustrating, no idea where it’s going to take me journey of real estate investing, and then what made you stick to it?

Justin:
Yeah. Growing up, I was always around entrepreneurs, my father, my brother, my uncles. I always knew I wanted to do something on my own, but I didn’t know what that was. And it was when I was working at my accounting job in a private equity venture capital shop, that I got a lot of exposure to larger companies. And I always wanted to be on the deal side, but I just didn’t know what it was. And then I came across, it might have been HGTV, flipping properties, and looking at it and saying, “You know what? This is actually really interesting.” Growing up, my father was in construction, so I always thought construction was amazing. There was an art to it that he was building these properties from raw materials, and I loved that, but I didn’t have exposure to it, knew how to build, but I knew numbers really well.
So I said, you know what? This kind of combines both aspects of what I enjoyed, numbers and learning more about construction. So I asked my father, I said, “Hey, you want to team up and start buying properties, renovating them, and then selling them?” And he agreed. And he was always very supportive in the fact of, hey, let’s try something out that you enjoy. And if you love it, take over and keep running. So that’s really was my first step into entrepreneurship and I absolutely loved it. I just fell in love with real estate, just the ways that you could structure deals, how you can help sellers in really challenging situations. That aspect, I only learned when I started to buy properties of how much I can help a person’s life out by doing this. And that is I think what really got me invested even more and excited about the industry, and then it just kind of spiraled from there.

Rob:
So now since actually developing your real estate portfolio, would you say… Because you started a couple of companies, so you were developing your real estate side of things, that’s probably crazy. And then you’re like, hey, you know what? I should make my life a little crazier, I want to start a company. What led to that decision?

Justin:
That’s just how I am. And it’s funny, my wife always says that. She’s like, “For as long as I’ve known you, you’ve always had two things going on. You’ve been working or you’ve been studying for this and studying for the CPA. You’re working and then starting real estate business. And then when you left your full-time job, now you opened another business.” And for me, it’s more, I love business and working, and identifying challenges and trying to solve them. So as I was going through my real estate investment journey and purchasing properties. And the tactical way that I would always market is I would send direct mail. And that method of marketing worked really well for me, and I really understood the strategy behind it, how to stand out from your competition, and really looking at all the numbers.
And I did it in a way that was very unique to anything else that was on the market or offered to real estate investors. So that’s when I said, you know what? I see a huge void in the market of how to market properly to home sellers and help other investors become more successful. So that’s when I started my other business, my marketing business, Open Letter Marketing. And really it was just solving an issue or a big void in the market that led me to that business, and now ultimately to Invelo on the technology side, solving another huge need in the industry.

Rob:
So yeah, you build this company, because Open Letter Marketing is rather successful. One would most of the time think, I’m good, I did it. I’ve built a great company and a great real estate portfolio, but you did it again. So from an entrepreneurial standpoint, when you’re starting companies, do you feel like you want to fulfill a need for a large group of people, or is it just an internal desire to also do more? What actually drives the idea of starting completely fresh when you’re already pretty established?

Justin:
Yeah, I think it’s a little bit of both. For me, once I have a company up and running, and it reaches the level of I guess “success,” or the company is systematized and you have people running the business. For me, I can never really sit back, I always want to do more, or get into something different, or add onto that. And that also kind of combines with, if there’s a huge void in the market, and if I’ve had a challenge going through that, and I see that other people have that same challenge, I want to create a solution. And I will not stop until I find that solution. And if I can help other investors or other people in the industry out by solving that problem, then that’s kind of what I’m looking to do. And that’s where I find the most success is when I can see that people are becoming successful because of either using our product or service. That makes me so happy to be able to offer that, and to share those successes with other clients and customers.

David:
You know I love that. I love that your motivation is to help other people win, and that you understand business in America is accomplished by creating something that helps other people do better in life. It’s not accomplished by taking something away. It’s this opposite of the predatory education person that says, “Pay me a $100,000, I’ll teach you how to flip a house.” You’re like, “Hey, one of the hardest parts of flipping a house is finding a deal. You can find better deals if you go off market. Here’s the system that you can use to go there.” And I wish we had more people in the space that took that approach. I’m curious, before we move on to more about your system, just about the motivations itself. Do you find yourself frustrated with elements of our business, and that frustration is what motivates you to create the solution to the problem? Or is it a different motivation that’s driving you?

Justin:
No, I think it comes from the frustration within our industry. Our industry has skyrocketed since I started investing, there are so many more people, and technology has grown and things have shifted. But I would still say that technology, while it’s grown, it still hasn’t had a huge effect on us, and people haven’t leveraged it to the point that they should really be able to utilize. And for no other fact that there’s just not a lot of companies coming into this industry and really trying to take that on. But seeing from the front line with a lot of our customers at Open Letter, just the frustrations that they go through in their day-to-day lives, and their business, and even same with me. And I can easily relate with them, and we can talk about the nitty gritty of how much time it takes to do such a simple task, and why that is, that shouldn’t even be around in 2022. And making sure really if all these other people have these issues, it’s keeping them back from really truly getting to success where they want to be.
So just trying to get through those struggles, and give them a little bit more of a direct line to success. Rather than going up and down and trying to figure out how things are working. So for me, it’s always, again, it goes back to education. I can provide anybody the same tool, but everybody’s going to use it differently. It’s providing them with the education and the best practices of what I’ve learned through my journey, and even a lot of other investors through their journeys, that we connect with our customers. I always want to provide that education and the best practices to get people to their goal faster.

David:
Can you give me an example of a problem you encountered, a frustration specific to the business, that you then said, okay, I’m going to figure out how to solve this and then make it part of one of my companies?

Justin:
Yeah, I would say the first one with Open Letter Marketing is direct mail. Most everyone was utilizing yellow letters. That was the biggest name, that’s what everybody used when they started. So I said, all right, well, everybody’s using that product, that’s awesome. Because I’m going to use something completely different. And I’m going to stand out from everybody else, and I’m going to understand not only the strategy or not only what to send people, but the strategy behind it. How we can send specific pieces in different messaging to get people to call us back. And I’m going to do it in a way and test and try, and track, and adjust until I feel like I have a really solid strategy down. And only at that point when I fully understood that I did, and tested it against other competitors and what other people were using, that’s only when I started to form Open Letter Marketing.
And really it transpired into the same thing with Invelo. Hearing a lot of people talk about how challenging it is to manage their databases, to make sure that they remove people that sold their homes out of their database so they’re not marketing to them, or people that say, take me off your list. Or when they refresh your list, how do you update all your records in your databases? And if they have multiple databases that they’re managing, how do you get these all in sync? Just hearing that over and over and over again, I was like, there has to be a better way. And not seeing that solution out there, I said, I’m going to make sure that I solve that, not only for myself but just for the real estate investor community.

Rob:
That’s awesome, man. I have been workshopping, and I know you probably don’t want to give too many tips to a competitor. But I’ve been workshopping like a marketing company where I send letters out, but they’re all printed on headshots of Dave, but I’m still kind of wire framing what that could look like. Dave won’t sign over the rights to his headshot to me yet. But moving on here. So we’ve kind of established you were kind of a pup getting started out, and now you’re a bit of a Rottweiler here in the service industry. And then now you started Invelo. You started talking about some of those frustrations that led to why you started that company. But can you just give us an overview of what it is? And then from there, I want to dive in a little bit more behind some of those frustrations that you’re solving with your service.

Justin:
Yeah, sure. So the way that I look at Invelo and what we’re trying to design is, we’re not just trying to create a product, a software product. We’re combining software, education and community. Because I really feel like all of those pieces are really important. Now on the software side, we are a true end-to-end solution, for a sales journey. So you can pull lists, you can manage prospects, you can manage leads, you can manage deals, you can market out to potential home sellers. So you can do all that within the database. Now the unique thing that we do is, we offer that complete package under one umbrella, which gives you so much more than just the one off those individual components. From there, you have one database to manage, everything’s in sync. You can understand analytics and KPIs from beginning to end.
So I’ll give you an example. Most investors that market direct-to-seller, they usually have different phone numbers for each list that they market to. And they do that because they want to understand when somebody calls me on this phone number, they’re an absentee owner, or they’re driving for dollars, they’re on my driving for dollars list. With our system, because it’s all in one, you don’t need those additional phone numbers because from when you started to pull the list all the way to when you have a deal, that list is always attached to it. So now you don’t need to purchase different phone numbers just to identify the list that they’re on. It’s done for you all in the system. And right now, because most investors have to manage their whole sales journey through multiple databases, they don’t talk to each other and they’re not in sync. So they still need those kind of little nuanced issues and complexities in their system. So that’s kind of what we’ve been working on to solve.

Rob:
Yeah, I think that this would really hit home for… it hits home for me because I remember getting started out, there really was no level of organization, not even a little bit. So most new investors are very frantic, frenetic, they’re just trying to figure it out. They’ve got like a notepad. I probably have notepads on my desk here with information. So purely from an organizational standpoint, I could see how this could be a game changer for having an actual system. I guess what would you say, how could a newbie getting into real estate? What would probably be the game changer here for them? Is it just giving them a system and a CRM to actually get started on? How would this really be a game changer for someone starting today?

Justin:
Yeah, so going back to how we developed the system, we always wanted to help walk the user through best practices. So whether that’s from pulling a list or creating a prospects database, we are guiding them through the process. And we do that on the technology side with giving them easy preset list that they can click one button, enter in their geography, and then they can see a list of all those records that meet that criteria. And these lists that we’re providing, they’re not just the basic lists that you can pull anywhere else. They’re done over the years. They’re implemented from experts analyzing and making sure that we have the right criteria for them. Very unique lists that other people aren’t using. We do all that, so the user, really the goal is for them to navigate the platform and think, oh my God, I am the smartest person. I know exactly what I’m doing. But really it’s the intelligence and pushing people through that process.
But also, it’s from the education standpoint. So we have created many, many videos that teach people from step one all the way through putting a deal together. So we talk about all the things, like where should your farm area be? What should you look at? What are the stats that you should look at to identify if it’s the right area? How do you pull lists? Why is it important to pull lists? How do you market to sellers, how do you talk to them? How do you put a deal together? So we walk through everything and share all of the tips and best practices, so they can really go step-by-step, and utilize the education with the platform, so it’s a much easier and straightforward process.

David:
All right. I have two questions that I’m just chomping at the bit to ask you. The first, because I just don’t want to forget, is going to be, how do I want to phrase this? I’ve noticed anytime there’s a system, there’s two components to a system, and we tend to only focus on the first one, which is the actual steps that are needed. So oftentimes when someone is given a system or taught a way to do things, it’s very similar to a checklist. Here you go, here’s your system, just go do this. But the second part of the system is even more important, and it’s the skill in the execution. If it was so simple that it was just a bunch of checklists, a monkey could do it, and then everyone would be successful. But there’s actually a skill that is necessary to be able to accomplish whatever the said system would be.
So the first question that I’m going to want to ask is, what skills do you find are necessary to make a system like this work? Because you got to have some ability to talk to people, you got to have some creativeness in your brain to be able to put these things together. And the second question, which is what I’m really getting at, is for someone like me, a little bit more established of an investor, I’m probably not going to send out letters and talk to every incoming call myself, right? I’m going to want to leverage this out to other people. Is there a way that this could be implemented, and what would be the pieces that I would need if I wanted to add this to my ecosystem for investing? So we’ll start with what skills are needed and then could this be leveraged?

Justin:
And on skills that you needed, you’re talking from a user standpoint, from an investor standpoint or?

David:
If somebody says, hey, I want to take Justin’s system and I want to go put it into place and execute it, what are the skills they need to know walking in, that they have to be able to perform?

Justin:
With our education, we really look at this system as anywhere from a new investor to an intermediate, to experienced investors. So we try to identify and outline all of the different pieces. And our plans are even outlined that way. So for our free plan, that is mainly used for beginners. And we give them a path that’s going to be much easier and kind of more of the starter plan, where there’s presets, they don’t really have to do much kind of thinking through the process, like what lists, what marketing to be able to pull, it’s done for them. So with that, I would say that investor has to understand the process of a real estate deal. How to make offers, all of that, those tactical skills. We do provide that education along the way. But really if somebody’s new coming into this, and they have never done any direct-to-seller marketing or used Excel spreadsheets or anything like that, from a fundamental understanding standpoint, they have to understand how technology works and how a CRM works.
And we try to do that through the onboarding process of teaching them the different aspects. But we try to guide them through that process of step-by-step. But I think from a technology standpoint, that’s probably the biggest thing that they have to learn or understand. From a real estate investor perspective, they should understand the whole acquisition side. So they should understand how to put a deal together and structure. And really the path that we have them go through in the system is very much in line in a seamless process.

Rob:
That’s really cool.

Justin:
Again, our plans offer, you can have teams in place. So for instance, as you’re going through and if you have somebody that just does your marketing or just works on pulling lists, or you have an acquisitions manager. You can actually create a team and assign different records to different team members, so they can make sure that they’re going after the right properties that they’re assigned to. You can have notes back and forth to your team members, so you have different pipelines. The system is really broken down into three main kind of databases, prospects, leads, and deals. Prospects are the people that you have a property that you want to reach out to. Leads are people that raise their hand and say, hey, I might be interested in selling. And deals are the one you purchase, but now you need to do something to make money.
So when I break it down like that, the prospects and the marketing are really your marketing team. Your marketing team, they would be pulling the list, they would be managing your prospects database, they’d be marketing to those prospects. And then your acquisitions team would be only looking at your leads pipeline. And the leads pipeline can be broken out. So people can be assigned different records, you can make sure that they’re communicating with those prospects. And if they’re not, you can get updated the record or the lead has gone stale. So you can send followup marketing to them.
And then the deal is you can have a dispositions manager. So if you have a dispositions person and you just purchased a property, and now maybe you want to assign it or you need to renovate it, you can still bring that property through the deals pipeline, and have your dispositions manager manage that aspect of the system. So we broke it down into three main pieces of the system, because that’s ultimately how much larger investment companies are built out. You have your marketing team, and you have your acquisitions people and dispositions people.

Rob:
Let me see if I’m understanding this, because it seems like a relatively… When you lay it out, it seems very straightforward in a good way. So with the first bucket, you’re saying that, that’s your marketing and outreach. Are the actual tools in there… You’re saying you’re pulling lists. And when you say pulling lists, you mean lists of properties and everything of people that you want to reach out to?

Justin:
Yes. So motivated tellers. Yeah, and the features. So we broke it out into those three sections, because there’s features and functionality that are going to vary based on where your property is in that pipeline. So for prospects, we have a list builder aspect, so you can pull lists and bring them into your prospects database. And when you have prospects, before you start to go market, really the skill behind that and what we train people and show them in the platform, is to really understand their prospects before they even spend any marketing dollars. And we see this from investors that are even doing tens or hundreds of thousands of dollars of marketing a month. We see this all the time with Open Letter Marketing, that they’re still not really understanding their prospects before they go to market. And what that creates is they spend a lot more money than they need to, to get a conversion on their marketing dollars.
And just to give you an example, we’re able to identify in your prospects database, which records are high, medium, and low quality, right? Who’s more motivated to sell? And we can do that through sifting and sorting, and understanding, list stacking, all those kind of segmentation filters. But the importance behind that is because if you have a marketing budget, and now you spend 70% of your budget toward your high quality records, 10% to your low quality, 20% to your medium quality, you still have the same marketing budget, but you’re allocating your funds much more appropriately, and you’re going to actually increase your ROI by doing that.
So that’s just one aspect of the prospects database that we really hone in on because we don’t want to just offer a prospects database, we want to show you how to maximize your dollar, your marketing dollars. So helping people through that and getting them to understand that, there’s a lot of education in it. But that’s the big piece, we want to educate people. We don’t want to just give them the tool and say, here you go, good luck. We want to help guide them through that.

Rob:
And by the way, for everyone at home, we’re actually going to do a product demo where we show you the tactical aspect of the platform. So stay tuned for that. Because it’ll help visualize what we’re talking about. But Justin, when you’re talking about the list, I want to make sure that I’m clear. Because you’re saying a lot of the times people are just burning cash because they’ve got, let’s say a 30,000 person-list, and so they’re marketing to 30,000 people. When in reality, if they just really shaved down that list to people that actually might convert, they could spend way less money just focusing on a much smaller set of people?

Justin:
That’s correct, yes. And the way we do that too is by pulling different lists in our list builders. So we have the ability, really we have hundreds of different filters, but we narrow it in and offer seven different lists that people can just basically click one of the presets, enter in their geography, and pull that list so that it comes into your prospects database. And if they pull all those seven different lists and bring them in, one of the tactics that we use is saying, hey, which properties are on two or three or more lists? And by doing that, we can identify which records are on multiple lists because they’re potentially more motivated because maybe they’re an absentee owner, their property is vacant, and they have a lot of equity in their house.

Rob:
Okay, that’s what I wanted to know because you mentioned that you can find the motivated sellers. Is it simply because they sort of check the box on a lot of things that might be criteria for what’s considered a motivated seller? So I’d even imagine something like, and maybe this is a feature, maybe it’s not. But someone who’s delinquent on taxes for example, is that a filter that would tend to show someone is a bit more motivated or would be a more motivated buyer?

Justin:
Yes, absolutely. So as you pull in lists into the database, you can specify the quality of the list that you’re importing because for tax delinquent, vacant properties, driving for dollars, to me, those would all be high quality lists because they’re generally more challenging to pull. So it thereby would make it a little bit of a better list as well as it’s more situational. If somebody has tax liens on their house, then they have a more desire or more of a need to sell. Somebody that just has equity in their house. I don’t see that as a high quality, that’s more of a lower quality list. But then if you start to stack all these lists together and identify which properties are on one of these high quality lists and multiple other lists, and then you can segment all those records into a high quality or your high quality records list, and then you can start creating a marketing campaign specifically for those people.

David:
That is a principle that I find… I’m really glad to hear that you’re incorporating that. It works in many ways, in many forms of business. In general, what you’re looking for is, each of these lists have some properties that are more likely to be a motivated seller than other lists. And by combining them all, and what’s that graph where there’s circles that intersect, there’s a name for that.

Rob:
Like a Venn diagram?

David:
You know what I’m talking about?

Rob:
Yeah.

David:
Is that what this is, a Venn diagram? Where it’s like you’ve got this and you’ve got this where they intersect-

Rob:
Big circle and then there’s like a little middle in there.

David:
Yeah, yeah.

Rob:
Yeah.

David:
There we go. Thank you Rob for being a nerd.

Rob:
You’re okay.

David:
A Venn diagram. The more list that you add into this and the more intersection points are, the higher the likelihood starts to become that you’re going to get the motivated seller, which is the deal. It’s very similar when you’re looking at a property itself, where I’m looking at, okay, I’m probably not going to get a house for a 50% of what it’s worth, but can I find a house that has several elements that all come together in the same property that are all base hits? So is there a way I can add value? And then can I get it for less than market value? And then can I get some perk from the seller that’s going to make this deal better? Is this in an area that’s going to appreciate more than other areas?
Is this in a tax advantaged strategy that’s going to save me money somewhere else? And if you put six of these things together in the same deal, what looked like a boring deal that was in plain sight to everybody is actually very, very exciting because they didn’t see all the different elements of it. It almost sounds like you’ve created software that’s doing the same thing with finding motivated people. Any of those properties on a list on its own doesn’t necessarily jump out, but when you combine it all together, you start to get a very attractive asset to pursue.

Justin:
Absolutely. And that can vary depending on your investment strategy. And at one point, there was a time that I was doing wholesaling in suburban areas, and then I was doing infill new construction in the city where I was doing multifamily condo conversions and whatnot. So in the suburbs, it would be looking at absentee, they have tax delinquents. But in the city, it would be a house or a property that was one or two units, but was on a lot of over 5,000 square feet. And if it was, that means that I can convert that as well as it was on a specific zoning, but I can convert that to a three or a four unit now. They’re completely different strategies, but really understanding where the threshold and what you can actually do with the property that’s on different lists, was the key to everything.

Rob:
Oh, I actually had a quick question on your list. You find it, you find the prospects, and then when you reach out to them, you’re saying that, that’s your first set of people, that’s your first someone on your team that could do that. Is that then done through another platform, or is it still, can the outreach actually happen from Invelo?

Justin:
Yeah, the outreach can still happen through Invelo. So we have direct mail, we have ringless voicemail, we have email that is offered within the platform. And then if you are using a system outside, we do offer integrations and exporting from the system into other databases. But the important thing is you’re still capturing the cost to do that marketing outside of the system. So again, we can still funnel back the KPIs and record that information in our system, so you know which marketing activity is actually performing the best.

Rob:
Okay, that’s very cool. So you’re saying the integrations, if there are other tools that are part of your ecosystem, they can possibly be I guess connected or integrated like you said?

Justin:
Yes.

Rob:
So that you don’t have to actually walk away from a current ecosystem that you’ve worked. Because that’s always a hard thing for me. I do different tech stacks and everything like that. So whenever a new software that seems cool comes about, I’m always like, oh, can it actually connect with everything? And when it does, I’m like, oh. It’s a pretty easy sell for me whenever I do that, because I’m like, all right, I get to keep everything in my dashboard and then connect all the tools and make my life a little bit easier.

Justin:
Yep, absolutely. Absolutely. And that’s a big thing. We’re working on the Zapier connection as well as direct connections to many different platforms that investors use. And that’s really critical for us, like you mentioned, is for it to be a very simple integration, so people can access different platforms that they use for maybe different segments of their system. So it’s really all contained within Invelo, but then it can talk to all those other platforms.

Rob:
I see that. Okay, that’s cool. Yeah, I’m in now because… Oh, I was in before, but let me just say I am a big fan of Zapier because I’m an automation nerd. I am trying to automate so many aspects of my business and of my life, and Zapier’s what I use to literally, it automates with my Slack channel, with all my CRMs, with my emails, with my payment channels. It really does help connect the ecosystem. So that’s cool. All right. So it is a way of even adding to automation if that’s what you want in your business.

Justin:
Yes.

Rob:
Which you should, if you want to scale up. Automation is king.

Justin:
Yeah, automation is critical. Automation is critical, and we really try to leverage that within the platform. So the complexities that I was mentioning before, if you’re marketing to a bunch of records or sellers, if one of them sells their home, you don’t want to continue to market to them. And neither should the investor really have to go back and scrub all of their records to see who sold their house. The system can just do it for them. Our database, our properties database that Invelo holds, is updated every single day. So if a house sells, we immediately get notified, and then we move their record out of the marketing for the user. So really you don’t have to think about that stuff.

David:
So you’ve been in the game for a long time, Justin. In your opinion, what’s the right avatar of investor, the person who’s listening to this, how does someone know if this strategy is the right strategy for them?

Justin:
So as far as strategy, I mean this system can be utilized for anybody that’s going direct-to-seller, that is marketing off market, or even people that are working with other wholesalers or real estate agents, and they want to manage all of their leads and records into one database, it could be used for either one. But the real value comes on the direct-to-seller marketing. And we really look at people that are doing single family, to small to mid multi-family, that’s kind of the investment focus that this system was built out for.
And anybody that’s either a newbie to an advanced investor, the newbie investor, we have a lot of that education to help train them or educate them on best practices. And the functionality and features that we have in the system will work not only for beginners, but also advanced investors. So when they really get deep down to understanding, hey, I want to be able to skip trace my records or find other people because this person hasn’t called me back. And I want to find who else owns the property or is associated with the property, they can even do that in the system as well.

David:
Now what about geographic locations? Is it going to work the same in Manhattan, New York or San Diego, California as it’s going to work in Columbus, Ohio? Or do you find that certain price points of certain areas have more success than others?

Justin:
No, I would say this system will work… Again, this system is for management of records. So we have access to all properties throughout the whole United States. I believe it’s over 155 million records that we have access to. And we have data points on all of those properties. So anyone who’s doing it in Manhattan or somebody else who’s in Ohio, the system will work for them. Now, with data, there’s always going to be, as you get to the larger commercial size properties, the data’s a little bit more challenging when they’re going and standardizing all that data. So that’s why I look at our system as really single family to mid level multi-family owners, or investors.

Rob:
Yeah. I’m wondering about the use cases for this, because we talked about the size of the homes that really thrive within the platform, but the actual type of investor as well. Outside of the experience level, are you seeing a correlation between wholesaling or flippers, or are there even opportunities for people in other more niche areas like short term rentals for example? Is this something that can work for basically every type of asset class?

Justin:
Yes, absolutely. So it’s a lot on the acquisition side. So when I look at what people are doing or what the investment focus is, or strategy is, whether it’s wholesaling, rehabbing, short-term rentals. I look at that more of what you’re going to do with the property afterwards. So in order to acquire the properties, you still need a system and you need a proper process in order to go through to acquire those properties. What you do with it on the back end, that can be anything that you want, but you can still manage everything within the system.

Rob:
Okay, that makes total sense. I think I really am so curious about getting into this world because I do typically get stuff off the MLS, and so I’m often paying market prices. I mean, obviously of course it’s possible to get below market prices too, but I’ve been really giving a lot of thought to basically my acquisition strategy, and if there is a way to get in the door for less than market, especially right now. So that’s really cool. Effectively, it’s a kind of pick your poison afterwards. You find the house, you acquire it, and then however you actually want to use it, that just depends on your individual investment strategy.

Justin:
And I’m really excited to go through the demo with you guys because that’s going to help clarify because there’s so many points and so many details that go along this process, that sometimes it seems like it’s over complicating things, or it’s really confusing. But the way that we designed the platform, it’s extremely intuitive, and the step-by-step process is actually much easier than you think. The system does a lot of the complicated pieces in the back end, so the user doesn’t even have to think about it, like those automations that I mentioned before.

Rob:
Very cool. Well, if you’re cool with it, I’d love to actually jump in and check it out.

Justin:
Absolutely.

Anson:
All right. So we’ve learned a bit about how Justin created Invelo and the whole process of that. I’m super excited to have a demo of the entire thing and how it works. Again, if you don’t know me, I’m Anson Young. I wrote Finding and Funding Great Deals out through BiggerPockets, I’m a rehabber, a wholesaler, a BRRRR investor. And technology, CRM, list building, skip tracing, marketing. All of these things are so integral to my business and how I can be successful and how I’ve been successful, that I’m very excited to learn how all these kind of snap in together and hopefully make my life easier. I think we can start there, and get this demo rolling.

Justin:
Awesome. Yeah, I’m excited to show you what we have going on with Invelo. So we’re first going to start off with the dashboard. You jump into Invelo, and this is kind of your home screen of where you land. So you get some basic KPIs about what’s happening in your database through the different aspects of prospects, leads, how many records are in your database. You get this nice product navigation over to the right for a little help desk, academy and education. And then you can also see any tasks or marketing campaigns that you have currently going on. So again, just a step back, this platform is a true end-to-end solution.
So you can build your lists, you can manage prospects, leads and deals, you can market out of this platform. So it really can do everything. So you can house all the information in this one platform, so you’re not going back and forth between multiple software platforms or databases. So this is the primary spot. And then I’m really just going to take us through the natural progression of a sales journey, from building lists to managing prospects, leads and deals, and also show you some marketing and some additional bells and whistles that we have with Invelo.

Anson:
Nice. I like that you land just right on the screen, and you can see all kinds of things. I like that.

Justin:
And the big thing to call out here that you don’t really see if you just land in here, is the sold records and the vacant records. So Invelo will automatically update this information every single day, because our prospects database is updated daily. So any properties that sell or go vacant in your prospects database, we will actually identify those. And not only that, if you’re marketing to those prospects and those houses sell, we’ll actually push them off of your marketing campaign so you don’t continue to market to them. And they’ll actually land on a sub database called Removed Records, which I’ll show you in a little bit. So let’s start off over on the left hand side. If we click on List Builder, now you can see the screen of how to pull list. So we make this very easy for people either starting out with real estate investing, and we also have the flexibility to get really advanced functionality and criteria.
So just starting out on the easy side, you can see down here we have these Invelo presets. These are all presets that we have identified to be the very best list that you can pull from this system. And there might be some that you recognize and some called related party, and some other ones that you might not recognize. But we actually have found through our own research that these lists perform exceptionally well. So really to get started, all you have to do is click the button, and you can see on the left hand side we have all of this criteria.
Now you can go into this criteria and you can just remove anything that doesn’t meet what you’re looking for. And then the only other thing that you really have to do is you can add a geography. Now you can do this based on city, state, and county or ZIP code. I’m just going to click on a city here. And then if you do want to get a little bit more advanced, we can go into the properties, MLS and owner info to really scale down and look at other filters like vacancy or owner type. Under property, you can see we have tons of different filters that you can really utilize.

Anson:
So if you’re just starting out and you just need one of these seven or six quick starts, you can just click on one of those, then put in your geography, your ZIP code or whatever, and it’ll just basically kind of get you a good place to start.

Justin:
Yeah, exactly. Because the two biggest things that new investors and even some experienced investors have, is they don’t know how to pull a list properly, and they struggle with creating a really good marketing strategy. So in this system, we really set everyone up for success by creating these presets. So you really don’t have to think about what to pull. And we just automatically have them here, so it’s basically a one click away.

Anson:
Yeah, it’s great.

Justin:
Once I click to apply filters, we have a list of all the properties that meet the criteria, and we also have this map. And within the map you can see the different colors. And this shows you the saturation of properties that meet your criteria in the specific area. So if I actually click on this, we can zoom in, and then we can get down to where we see the individual properties and see some basic information about the property. From there, we can actually import the list.
And the great thing with Invelo is that, you can see up here, you already have 47 out of 50 records. So when you have Invelo, you can import records into your database and you get a quota every month. But if we find that you already have the records in your database, we’re not going to apply those against your quota. We’re already going to identify you have 47 out of the 50 that meet this criteria. So we’re only going to import three of them, and we’re going to apply the lists and tags, whatever we select here, to all 50 records, whether they’re already existing in your database or you’re importing them new.

Anson:
So if you’re doing list and tags, is that just a way to organize this, or does it serve some other function?

Justin:
Yes, the list will always identify. When you’re selecting a list, you’re telling the system where these records are on which list. So because we pulled an absentee list, we’re actually going to go in and as you saw, I just clicked absentee from the dropdown menu to acknowledge that these records are part of an absentee list. And then tags, there’s various tagging strategies, which probably would take another video to shoot that. But we’re basically just identifying where these records came from, they came from the Invelo database.
And also if it’s in a specific area, what my investment opportunity or objective is. So I can select both of those. The only last thing that I want to show is the auto ad. So this is a really unique feature to Invelo, where you only have to pull a list one time, and Invelo will automatically add new properties that meet this criteria to your database, anytime a new property meets this criteria. So again, because our database updates daily, your absentee list that you’re pulling here will always be up-to-date. And you don’t have to do anything else but enable, name it as a preset, save it and import the records. And in the future, your database will always be up-to-date.

Anson:
So you’re not just scrubbing these lists, now you’re automatically adding new prospects to your database. So if a new absentee owner pops up, you don’t have to go search for it, and then add it to your marketing list or something.

Justin:
That’s correct.

Anson:
This just automatically adds it in.

Justin:
Yes, yes.

Anson:
What in the world?

Justin:
As you know, pulling lists and refreshing lists, and making sure that you’re not duplicating those records that are already in your database. A lot of people struggle with that. And this solves that issue.

Anson:
Yeah, that is so much work saved. And then automatically just adding it means that you can just market. You market to that same audience so to speak. And you know that it’s the most up-to-date, your solds are knocked off of there, and then you have new ones added to it. Yeah, that’s pretty crazy.

Justin:
And when we get into marketing, you’ll see how this whole system is automated from when it gets into prospects to when you actually market to them, everything is actually automated. So I’m going to just cancel out of here and just jump into our prospects database. So over here on the left hand side, I’m going to click on Prospects. And you’ll notice that the left side menu is in the order in which your sales journey generally moves, right? You first have to-

Anson:
Yeah, you build your lists.

Justin:
Yep. Build your lists.

Anson:
You push them into your CRM or some sort of database, and then you’re off to the races, right?

Justin:
Exactly. And we break it down by prospects, leads, and deals. You’ll notice that there’s different database for each of the three. And that’s critical for us because we understand that there is different features and functionality that you’ll need throughout the journey. And I’ll show you a couple of those when we jump into prospects here. So here is our prospects database. You’ll notice on the left hand side, we have active and we have removed. And again, this is what I was talking about. If any record is identified that it’s sold, then they’re going to be pushed to the removed database. And by them being in the removed database, you will not be able to market to them.
You can only push them manually back into active in order to get them back on your marketing. So let’s jump into one of these records. You’ll see anytime that you import, whether it’s through List Builder or through your own CSV, your own list, whether or not you just use your property address to import. And again, importing can just be done by a single click. Selecting one of your lists, and quickly importing the list. You can go through this process, you just add the lists and tags, and you can import.

Anson:
Because a lot of times, you might have a driving for dollars list or something that you want to add into your marketing. And this is just telling Invelo like, hey, this is my list. You’re tagging it differently from maybe the Invelo list. And then now you can differentiate, you can sort it, you can organize it.

Justin:
Exactly. Exactly. And the cool thing is Invelo uses its properties database. So if you only import the property address, we’re actually going to fill in all the details relating to that property. So here’s an example of what you can see. Just by using a property address when you import, we’re going to tell you all of the different building details, property characteristics, land info, estimated value, tax info, last sale date.
And if it is on the MLS, we’ll actually show you listing price, listing date. In addition to that, we’ll also show you the contact that’s associated with this property. And with Invelo, you can even skip trace. So we can skip trace not only this person here, but we can actually skip trace additional people who may own this property. So you can see I just skip traced, and it just added a number of records. And at the top is going to be the best match that we found.

Anson:
So it’s got a star next to it, so you know-

Justin:
Exactly.

Anson:
Okay.

Justin:
Yes. So as you start to market to this person, and let’s say that you send a direct mail piece to this address here, but it kicks back. So we’ll even show you that it is deliverable, but let’s say that it gets kicked back. You can click on Don’t Mail, and you can change the primary mailing address to the next one. So there’s always opportunities to continue to market, and use different details within the record. Again, the phone numbers, we’ll provide you with the phone numbers if they’re on the DNC or do not call list, we’ll give you email addresses if we have them on the person. And we’ll also identify if they are a litigator. So a potential person that can potentially sue you for soliciting to them, which is really, really important.

Anson:
That’s very important. So it automatically tells you basically, hey, this is DNC, do not call list. This is a litigator list. It also tells you if it’s deliverable or undeliverable based on the USPS records or however you guys do it, right?

Justin:
That’s correct. Yep.

Anson:
Wow.

Justin:
So again, the litigator list is really identifying which people are either attorneys or have litigated against other people who have solicited to them in the past. So this tells you do not market to them because they could potentially sue you if you cold call or send them a text message. So that’s really important information, because it can save you thousands or tens of thousands of dollars so you don’t market to those people.

Anson:
Makes sense.

Justin:
And then if we have any marketing related to this person, the marketing campaign would show up here in this record as well.

Anson:
Very nice.

Justin:
Now, just going back again, the prospects database, the important thing with prospects that many investors don’t do that really need to understand is being able to segment your prospects. So you can see we have this Quality column here, and what we’re trying to do is we’re trying to really show people that they should narrow their records down into their highest quality prospects bucket, so that they can actually send out more marketing or be very focused on the marketing to those specific people. So for instance, I have 17,000 records in my database. I can come in here, and I can just manipulate with some filters, and pluck out the top quality records based on either by lists or by list count.
So right here, I’m just creating lists saying, I want to see all the records that are on my tax lien list, or driving for dollars list, because I know that those are two of my best lists. And anyone that is on three… Actually, let me slide this up, three or more lists. So you can see there’s 2,300 people out of 17,000 people that are on my two best lists, and that are on three or more lists. And again, that’s critical that they’re on multiple lists, because they potentially have a higher need to sell because they’re on an equity absentee and tax lien list.

Anson:
Wow. So it’s automatically list stacking for you.

Justin:
Yes.

Anson:
Just by moving the slider over, telling you, hey, if I want two lists, three lists, four lists, these people who’ll show up on multiple lists, it’s just automatically stacking them and telling you these are the highest priority, right?

Justin:
That’s correct. Yep, that’s right.

Anson:
Okay.

Justin:
So we can even save this highest quality. I could share it with my team if I’m on a team plan, and I’ll show you what we can do with this list in a minute when we get to marketing. So those are some of the features and functionality. There’s a lot more features that go into prospects and automations, but I’m going to continue to move on so we can show you a little bit more of the platform. Moving on to leads. So once you have a prospect that you’re marketing to, raise their hand and say, hey, I’m interested in selling. Now, you convert them to a lead. And the leads pipeline you can see is set up a little bit differently, although you can always get back to your list view. But the card-

Anson:
This is like a CardView, right?

Justin:
Yes, exactly. CardView, Kanban style view. So you can actually move your records along the natural pipeline or path. We always have the ability to change the column headers, move them around, add new ones.

Anson:
Oh, so it’s not set, you could customize it.

Justin:
Absolutely, yes. You can customize it.

Anson:
Yeah, that’s huge. Wow.

Justin:
So let me take you into one of these records, but before actually I do, you can see the organization of all these records. On the top right hand side, I could actually change this so I can say, show me all the people that have the highest motivation to the lowest motivation. So these are the ones that I really want to focus on. Or I can say, let me see all of the people that have the oldest activity, I haven’t touched them in the longest amount of time. So now your acquisitions team or even yourself, can really start from top down and make sure that you followup with the records that you haven’t communicated with in the longest time.

Anson:
Yeah, that makes sense. You got to prioritize that.

Justin:
Absolutely. So if we jump into one of these records, you’ll now see that the lead tab is available, and the lead tab allows you to provide a little bit more information in the logical progression of communicating with the person, the seller. So we can identify motivation, last time you contacted, occupancy, reasons for selling. So really everything that you’re naturally going to ask them from your first conversation about just getting a sense of how motivated they are, and what the potential repairs are, condition of the property and their situation. You can even identify or put in a projected analysis, so you can enter in all the information about what you can sell the property for, your construction costs, and come back to a projected profit. And you’ll see why that is going to be a nice feature for when you actually convert them to a deal.

Anson:
So it’s like a little calculator based on what you put in there.

Justin:
Yes. Yep.

Anson:
Awesome. Yeah, that’s great.

Justin:
So as you move these records through and you can convert them to a deal, you can actually even call out who is the owner for the deal. So you can actually have an owner for a lead, you have a lead owner, and you can have someone for a deal. Basically, your acquisitions and your dispositions team. So if you’re in a team plan, you can assign people different properties that they’re focused on.

Anson:
Yeah, that’s great. Yeah, take ownership of it, and it’s up to them to followup or sell that deal.

Justin:
Yes. So I’m going to convert this. I’ll say that I am the owner, and now I’m logged into my deals. And again, you’ll see that the deals section has kind of its own information. And again, we’re trying to identify and provide you with all the information that you need for purchase when you purchase the property, any terms, your closing agent who you’re using, your holding costs. And eventually when you sell, you can enter in the actual costs. And then we provide an analysis down below. Now, before when we were in the leads, we showed you our projected profit. So even here, we show you a projected profit. So we can show you an actual budgeted versus actual profit.

Anson:
So you’re moving from traditional CRM to now you’re analyzing KPIs, and being able to really break down numbers inside of your business, inside of just the one platform.

Justin:
Yes, that’s right. That’s right.

Anson:
Okay.

Justin:
So just going back out again, you can see the deals board looks very similar to the leads board, but now you’re managing what happens after you purchase the property or after you get it under contract. Because as we know as investors, we don’t make our money once we purchase the property, we have to do something to it to actually make the money. Whether that’s selling it, renting it, building, and then selling. So you can manage your deals through this pipeline as well. So again, just going back to the dashboard over on the left hand side, you can see that there’s additional tabs here that are grayed out, which we will be exploring and adding more KPIs. Because as the system we add… And we’re adding features all the time, but we will be able to go really deep into the analysis of every step of your journey to show you and highlight areas of improvement or different KPIs that you really need to keep an eye on.

Anson:
And if you’re following along, you don’t know key performance indicators, KPIs, basically all the numbers that are attached to your business. If you want to know cost per deal, basically there’s a hundred ways to break that down. But if you’re looking at your business as an overview, KPIs or key performance indicators are probably the best way to know what you’re doing and the best practices to get there. So yeah, just wanted to clear that up.

Justin:
Thank you. So the last piece that I want to go into, and again, there’s other parts of the system that we could go into, but these are kind of the top ones. This last piece here is marketing. So if we look at marketing, and I’m just going to show you the active. We have two ways to market. We can market to prospects and leads. So prospects, think of it as you’re blasting your marketing out to all of your prospects, or at least the highest quality prospects and leads are more like a followup.

Anson:
So that was the list that you pulled through Invelo, and then the list that you uploaded for driving for dollars or wherever you’re getting your lists, those are your prospects that you’re kind of blasting out a bunch of marketing to. And then your leads are the ones that they’ve already raised their hand and said, I might potentially be interested in selling. And then you’re just following up with them or you’re touching them with a different piece or something, right?

Justin:
That’s right. That’s right. Yes. Yes. So when I click on ad campaign here, again, you’ll see that we have a number of presets for both prospects as well as leads. And again, we’ve created these based on a lot of testing and functionality through my investment business and many other investors around the country. So we know that these ones, these marketing campaigns are the best of the best. We know they work, we understand the strategy behind them. So for a lot of investors that are coming into the platform that might not have done marketing before, they can really just click one of these, and move forward. And we actually take them through the steps of how to create this campaign.

Anson:
So it’s all in one.

Justin:
Exactly. And again, if I just go back out. You have the ability to send direct mail, ringless voicemail, email, and you can also create custom sequences within a marketing campaign. So you can actually take the list that’s in your marketing campaign of those records, and upload them to a cold calling platform or a ringless voice, or text messaging platform. So there’s many various ways that you can do that. But again, all of the data, all of the information is stored within Invelo, so we can provide you with those KPIs.

Anson:
Which is huge. Because even if you’re not using something that you don’t provide in here, like texting. You could still track those KPIs inside of here, which is huge. It used to be a huge pain in the butt to try to do this with any other CRM that I’ve used anyways.

Justin:
Right. And with our Zapier connection that we’re adding into the system, you’ll be able to actually send those Zaps to the third-party platform, so it’s a lot more seamless and automated.

Anson:
So from the very top, you’re automatically adding things to your marketing list and you’re automatically scrubbing them, which is awesome, which then go into your prospects. But now you’re continuously updating your marketing if it meets those same criteria, and then starting them the right way inside of the sequence. So if something becomes vacant two months into the sequence, it’ll automatically just put them to the top, and send them the first thing instead of the third thing.

Justin:
That’s correct.

Anson:
Is that-

Justin:
Yes.

Anson:
Does that make sense?

Justin:
Yes.

Anson:
Wow. So yeah, that makes sense. That’s like all the way down, making it super easy for you because this used to be crazy to try to do multi-touch campaign. And then you had a bunch of new leads that come in or a bunch of new prospects that you’re pulling in, and then you’re trying to start them from the top while you’re trying to keep these at the third one. Oh man.

Justin:
And this is a huge issue for a lot of people that are doing driving for dollars and getting a couple of 100 a week, or they have tax liens that they pull every month, and they’re like, all right, well, I have a new list and I want to put it through this campaign, but how do I? Do I create another campaign with just a couple of 100? Or do I put them into the existing campaign and inject them into wherever they are in that campaign in the sequence? So it was always a struggle for investors on how to figure that out and make sure that they were moving it along the same flow as any other record that would be in this campaign.

Anson:
Yeah, that’s a huge headache. I mean, especially on that driving for dollars example, now all you have to have is just the address. You push it into Invelo, it automatically fills in the mailing address info and any of the other information that you would go manually look up. But now all the way down to marketing, the new ones that you’re adding are in the correct sequence, and they’re automatically just being pushed into your marketing funnel.

Justin:
Again, there’s a lot more features and functionality behind marketing. It gets pretty advanced, but we can also keep it very simplistic so the user can go through nice and easy, select which preset they want, follow the prompts, and start the campaign very quickly.

Anson:
Just go do one touch postcard or set up a three mailing sequence to see how their driving for dollars list is performing.

Justin:
Right. And as you can see, if I click this drop down here, we can also get access to all of the active leads’ followup campaigns. So you can also-

Anson:
Oh, that’s right. Because the leads had a different sequence or a different set of marketing just automatically in there.

Justin:
Yes.

Anson:
Okay.

Justin:
You can even set it up so you can create a status that says followup needed. And any time a record goes into that status, it automatically triggers the followup campaign.

Anson:
Oh wow. Okay. So you don’t even have to think about it, you just move the card over, and then they’re just added to the marketing. And you don’t have to really think about it as long as you’ve set it up the way that you like it.

Justin:
Absolutely.

Anson:
Oh wow. Okay.

Justin:
So again, there’s a lot of functionality that goes behind the marketing, but we try to make it and automate it so it’s very easy. So the things that most investors have to really think about and the inconvenience or inefficiencies of thinking about, did I remove the solds? Which campaign do I add these people to? We really try to take that away from the investors, because we know you’re busy doing other stuff, you shouldn’t have to be thinking about this. We really automate the whole process for you.

Anson:
Yeah, my brain’s already turning because I can see a bunch of time is saved through this system. And then also where you can scale a little bit quicker and not have to maybe even hire somebody to watch your marketing like a hawk. Because if you set this up, you can get pretty far with just automation, and having it scrub your list, and then having it automatically send out mail based on followup or based on added prospects, you can actually save a bunch of time and money by just having this already set up in here.

Justin:
Yes. Yeah, there’s countless times where I hear investors talking about hiring virtual assistants just to scrub the sold properties off of their database, and this just does it automatically for you. That’s just one little area-

Anson:
Yeah, I’ve been there.

Justin:
… of where the automation can take over, and really help out and save a lot of time.

Anson:
Yeah, I think anybody who’s done any kind of amount of marketing has been there, where they’re trying to hire this out or trying to beat up an Excel spreadsheet to do it for you. But none of us know how to program those things.

Justin:
The only one last area that I just want to show you is our education portal, because this is something that we are truly passionate about and really try to provide additional value to our users. Because the goal for us is to provide best practices, and help them through the platform through education. So we’re not just giving everybody a software and say, hey, good luck. We really want to provide them with the education and understanding of how the logical step should be to go through and be as successful as they possibly can. So within the academy, we have Invelo training, that really goes through every aspect of starting out, to mindset, to how to find properties, how to talk to sellers, how to put deals together. So we go through all of these, we have all these videos. In addition to that, we have industry experts teaching all master classes.
We have new master classes coming in the pipeline every single month, from people within the real estate investment industry and even outside. So we know that entrepreneurship, it’s more than just focused on real estate investing, it takes over your whole life. So we really focus on, and we have fitness experts, health experts, psychologists coming in, people talking about how to manage being a great parent and a spouse while trying to start a business or run a business. So we understand that people have all those challenges and we really try to get advocate and show people that these are how people get through it. These are how really successful people that have built amazing businesses have done it. And you’re not the only one. Other people have these challenges, and you are within the community that people really value this.

Anson:
Yeah, I see just a ton of names, big names here. I think that, that’s what a lot of companies are missing is this holistic approach to not only teaching the platform, which is a no-brainer, like this is how you use Invelo. But now you’re talking about how to talk to sellers, and then how to keep talent. How women in investing, the different roadblocks. It is this whole thing where, yeah, you just going through these master classes alone is totally worth it. That’s crazy.

Justin:
You nailed it. Holistically, our approach is a holistic approach. We’re not just really honing in on just real estate investing. There’s so many other aspects to entrepreneurship, so we really want to provide that value. And that’s the approach that we take is, how do we get all the users successful? And that’s really where we hone in on for our Invelo training is, this is how to become a successful investor, and here’s how Invelo can help you get there faster. So we always try to provide that value first and foremost, and then how the platform can help you get there.

Anson:
That’s huge. Not a lot of companies think about that whole investor, because it’s not just sending out mail, it’s all those other things, like you’re also a parent and you need to go work out or do whatever you need to do. And then if the investor is successful, of course you as a company’s going to be successful because you’ve helped them get there, and they’re going to remember that of course.

Justin:
So that’s everything. That’s the demo that I wanted to take you through. Hopefully you enjoyed that, and you got a lot from it.

Anson:
Yeah, absolutely. This is crazy. So just from A to Z, just the little bit that you showed me, and I’ll be going back through the Invelo training too, to learn how to do some of these other things. But I’m super excited because this solves a lot of problems that I didn’t even know I had, and now I know that they could be solved. All right, Justin, thanks for that demo. That was hugely helpful. Where can people go to find out more about you and contact you?

Justin:
The best area is to go to our website, inveloapp.com. And it’s I-N-V-E-L-O A-P-P.com. That is the best place that they can go to learn more about Invelo.

Anson:
Nice.

Justin:
How about you Anson? How can people get a hold of you?

Anson:
You can find me on BiggerPockets, Anson Young there, or on Instagram @younganson, or on YouTube or wherever else you can find my name. So I’m out there somewhere.

Justin:
Awesome.

Anson:
All right, so back to you guys over there, and we’ll wrap up here.

Rob:
Okay. Well, that’s a really cool tool, man. I feel like I’m ready to go out and get really just discounted off market deals. That’s legitimately my new mission for 2022. So this comes at a pretty good time.

David:
I’ll tell you what, BiggerPockets is getting… we’re getting better and better at finding the tools that somebody needs to achieve what they want. I remember a couple of years ago, just only a couple of years ago, we were having these conversations with people to say, how are you doing this? And they were just grinding their way. They were calling the city and requesting a list of people that were in violation of not paying their taxes, or had unpaid utility bills or something, and they were physically calling those people. And then we had a robo dialer for the first time ever, they could automatically dial, and it would save you time. And that was amazing technology. And now, we’re putting together a list that you have the highest likelihood of hitting a motivated seller, and the software’s doing all of it for you. It’s almost unfair how easy this is becoming compared to how people had to do this five or 10 years ago.

Rob:
That’s right. Yeah, technology makes things a lot easier. And a really cool thing, probably the coolest thing about Invelo is that it is now included in the all new BiggerPockets Pro membership. So if you sign up for BiggerPockets Pro, they just supercharge it with all these insane benefits. And you’ll get free access plus $50 in marketing credits to in Invelo, which is awesome.

David:
When it comes to real estate, I live my life one quarter mile at a time, and BiggerPockets is my 10-second car. That’s exactly right. People thought if you’re not being teased by what everything Invelo can do, you can get access to this if you become a BiggerPockets Pro member, as well as several other cool things. They have a rehab estimator tool that’s simply fantastic. That’s one of the number one questions that we get asked is, how do I calculate the cost of rehab? There’s now a calculator that can do that for you. So you can go find the deal, you can put the deal under contract, you can close on the deal, you can estimate it, you can get all the numbers that you need for what the rehab’s going to cost, what the rent’s going to be, all within the BiggerPockets ecosystem.

Rob:
But wait, David. But wait, there is more. I know you were like, are we done? I’m like, no, there is more my friend. You also get Rent Ready’s property management software with the all new BiggerPockets Pro, which is awesome too. So you’re getting a ton of value. And if you use promo code New Pro, you’ll actually get 20% off your first year of the Pro annual membership, which again, supercharged here and it’s now your one stop shop to get to start scale and manage your whole real estate portfolio, which is, that’s a dream come true for all of us just getting our start here, man.

David:
It’s a dream come true if you want a better life. That’s absolutely true. If you want the same life you have. If you want a boring life, if you want to be grinding away at a job you probably don’t love until you’re too old, and bent over, and aged to enjoy life, well, hey, keep doing what you’re doing. But if you want a better life and if you want to have a haircut like Rob’s, this is how I’d recommend you get there.

Rob:
That’s right. So again, so if you use promo code New Pro, N-E-W P-R-O, you’ll get 20% off your first year of a Pro annual membership. Other than that, Dave, where can people find out more about you online?

David:
Well, they can use that promo code at biggerpockets.com/proupgrade, and you can get all the information there. And then like Rob said, use the code New Pro. And then once you do that, go online and tell me that you signed up for a Pro. You can find me on social media @davidgreene24, LinkedIn, Instagram, Facebook, everywhere. And you can find me on YouTube at David Greene Real Estate. This is David Greene for Rob Headshot Abasolo, signing out.

Throughout 2022, mortgage rates have more than doubled, sending affordability and demand in the housing market down sharply. With lower demand, lower prices often follow, which is why we’re in the midst of a housing market correction. I believe this correction has been caused primarily by rapidly rising mortgage rates and will last for as long as rates keep rising. The question, then, is, what will happen to mortgage rates next year? 

Given that the Fed announced another 75 basis point hike in the Federal Funds Rate (FFR) last week, many are expecting mortgage rates to keep rising. The Fed has stated that they intend to keep raising the FFR through this year and at least into the beginning of next year. This has many expecting mortgage rates to shoot up to 8% or perhaps even higher in 2023 (the average mortgage rate is about 7.1% as of writing). 

However, many prominent forecasters are calling for mortgage rates to drop in 2023. The Mortgage Bankers Association expects rates to end in 2023 at around 5.4%. Economist Mark Zandi expects rates to fall modestly to 6.5%. Rick Sharga of ATTOM data sees rates peaking around 8%, then falling to below 6% by the end of 2023. Logan Motashami thinks it’s feasible that mortgage rates will come down next year. 

What’s that all about? If the Fed has told us they’re raising rates, and there is all this economic uncertainty, how could rates fall? I know this seems crazy, but this forecast has economic logic, so we should look into it.

The Fed Doesn’t Directly Control Mortgage Rates

First, we must remember that the Fed does not control mortgage rates. When the Fed says they’re “raising rates,” they’re talking about the Federal Funds Rate (FFR), which informs, but does not control mortgage rates (or credit cards, car loans, etc.). So while the Fed only indirectly impacts mortgage rates, they are directly impacted by the yield on the 10-year Treasury bond. 

I measured the correlation between the yield on the bond and mortgage rates, and it’s super high at .99. But you don’t need to do any math to understand this. You can see this in the chart below—mortgage rates and the yield on the 10-year bond move together. 

The 10-year yield and mortgage rates move in lockstep because of how banks make money and manage their risk/reward profile. Imagine you’re a bank with billions of dollars to loan out. Every day you have to evaluate who to loan your money to, how risky each potential loan is, and what profit (interest rate) you need to earn in order to compensate for the risk. The interest rate on a loan goes up according to how risky the lender deems the loan. 

The least risky loan in the world is lending to the U.S. government in the form of a bond (called a Treasury Bill). That’s all a Treasury Bill is—a loan to the U.S. government. And it’s very low risk because the U.S. government has never defaulted on its debts. To date, the U.S. has made every single bond payment it’s obligated to pay, so it’s very low risk for a bank or any other investor to hold U.S. bonds. 

Right now, the yield you earn on a 10-year Treasury security is about 4%. So a bank can earn 4% interest with pretty much no risk. But banks want to earn more than 4%, so they make loans to businesses and individuals, often in the form of mortgages, in addition to buying treasuries and lending to the U.S. government. 

Mortgages are not particularly risky in the grand scheme of things, but any person taking out a mortgage is still less creditworthy than the U.S. government. So, if the bank is going to lend money for a mortgage, they are taking on more risk than they would if they instead lent that money to the U.S. government. To compensate for that increased risk, the bank is going to charge you a higher interest rate. Typically, banks charge about 170 basis points (a basis point equals 0.01, so 170 basis points equals 1.7%) over the yield on the 10-year Treasury bond for a 30-year fixed-rate mortgage. 

How Could Mortgage Rates Fall in 2023?

There are two theories: 

First, bond yields could fall and take mortgage rates down with them. Many economists are predicting a global recession in 2023. During a recession, investors tend to look for low-risk investments, and as we’ve discussed, the lowest-risk investment in the world is a U.S. Treasury bill. This surge of demand for U.S. Treasuries could drive up the price of bonds (more demand equals higher prices), which drives down yields because bond prices and yields are inversely related. 

So the main reason mortgage rates could fall in 2023 is because we could enter a global recession, raising demand for U.S. Treasuries, which sends bond yields and mortgage rates down. 

The second reason mortgage rates could fall in 2023 is due to the current spread between yields and mortgage rates. Remember when I said that banks charge mortgage borrowers a premium on top of bond yields due to excess risk, and that premium is usually 170 basis points? Well, right now, that premium is 292 basis points, 72% above the normal spread! 

The spread tends to increase when there is a lot of economic uncertainty. Just check out the graph below. Since 2000, the spread has gone significantly above 200 basis points just three times: the Great Recession, the beginning of the pandemic, and now. The current spread is the highest it’s been since 1986. 

We’re still in an uncertain period, but over the course of 2023, things could become more clear (let’s hope). If inflation starts to come down and the Fed pauses or even reverses its rate hikes, I would expect the spread between the 10-year yield and mortgage rates to normalize a bit, which could bring down mortgage rates, even if yields stay high. 

Conclusion

Of course, we don’t know exactly what will happen, but it’s important to understand that there is a reasonable scenario where mortgage rates fall in 2023. 

Nadia Evangelou, the Senior Economist and Director of Real Estate Research for the National Association of Realtors, summarized the situation well when she said there are three likely scenarios in 2023. “In scenario #1, inflation continues to remain high, forcing the Fed to raise interest rates repeatedly. That means mortgage rates will keep climbing, possibly near 8.5 percent. In scenario #2, the consumer price index responds more to the Fed’s rate hikes, and there is a gradual deceleration of inflation, causing mortgage rates to stabilize near 7 percent to 7.5 percent for 2023. In scenario #3, the Fed raises rates repeatedly to curb inflation and the economy falls into a recession. This could cause rates to likely drop to 5 percent.” 

This makes sense to me. It means we’re just going to have to see what happens with inflation to know which way mortgage rates (and potentially housing prices) will head next year. 

Do any of these scenarios make sense to you? What do you think is the most likely outcome in 2023? Let me know in the comments below! 

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By now, you’ve heard about how real estate is a great way to build wealth. I don’t disagree with that. However, before getting started, you should also consider the downsides of owning real estate and the opportunity costs. For most real estate investors, it’s better to be a limited partner or take on roles that don’t involve much of the day-to-day operations, which I’ll discuss in more detail.

Here are some of the downsides of owning your own real estate.

Downsides of Owning Real Estate

Being a landlord

As you already know, being a landlord and doing your own property management is very tough. For one, you’re responsible for the property and everything that goes on. This includes finding and screening tenants, maintaining the property, and dealing with any issues that may arise. 

Additionally, you’re also responsible for collecting rent and ensuring that your tenants are paying on time. If they’re consecutively late, you may have to pursue legal action to get the money you’re owed.

Furthermore, being a landlord also means that you’re responsible for any damages that may occur to the property. This can be a financial burden, as you may have to pay for repairs out of your own pocket. 

Being the asset manager

Let’s say you eliminated these responsibilities by hiring a property manager. This seems like a good idea, but it’s tough to find a great property manager (PM), even for a large apartment building (however, you can find one through BiggerPockets here).

Even with a PM, you ultimately still have to be the asset manager, which has multiple functionalities, including managing the PM and making sure that they’re doing their job.

Here are some responsibilities as an asset manager:

• Making sure that the property remains in good condition.
• Controlling your operating expenses.
• Making sure the rooms are rented at market rate. This sounds simple, but it’s much easier for your PM to rent out the units at 5-10% below market rate, so that’s what they’ll usually do.
• Making sure your PM is not stealing your money, which can happen through leases or by marking up maintenance requests.
• Monitoring the pro forma, including rent growth, vacancy rate, concessions, etc.
• Preparing the asset for sale.
• Dealing with loans and accounting.
• Be prepared to take over PM responsibilities at any moment.

Basically, even if you hire a property manager, your investment is still not considered passive income. There are still many tasks to take care of and plenty of issues to deal with, so don’t assume that your real estate investments will be passive income and you can do it on the side. Some can actually become huge headaches. 

Starting small

Another common misconception that beginning real estate investors have is that “it’s better to start small.” The risks are actually higher when owning smaller properties because having a few bad tenants can really hurt your business. Whereas in a 100-unit apartment complex, two or three bad tenants are only a small portion of the overall building.

Additionally, bigger projects can afford you to hire full-time staff, which will make your job much easier. 

House hacking

House hacking is a popular strategy nowadays. Buying a duplex or triplex and renting out the other units to get a healthy cash flow, refinance this property, then repeat, is a great way to build financial wealth step by step, but there are some major downfalls.

The first downfall is that this will only work in a secondary or tertiary market. It’s almost impossible to cash flow well in a gateway market like New York, Los Angeles, or Seattle. If your rental revenue can cover the debt service, you’re doing well already.

The second downfall is your living quality is limited. Depending on the circumstances, you might be living with strangers inside your own unit, which can be bad if they turn out to be terrible roommates. Obviously, if your screening methods aren’t sound, you could be stuck in a bad situation for a long time.

Smarter Ways To Build Wealth

Although what I’ve been saying seems discouraging, I’m not proclaiming that owning your own property is entirely a terrible idea.

What I want to emphasize is the opportunity cost of your money and time. We all have limited time on this Earth, so let’s think about how we can utilize it to our advantage. Here are some tips on how you can invest smarter.

Investing in a syndication

A good operator can make great profits consistently. I’ve seen portfolios with over 30% historical IRR on average. With this type of return, you can basically double your equity every three years.

It’s very important that you do enough upfront work to understand the operator’s strategy. There are many things to consider when choosing an operator, so here’s an article on this topic.

As a limited partner, there isn’t really anything that you need to do besides waiting for payday. Some operators focus on cash flow, while others focus on doubling your money as quickly as possible. The latter is generally riskier. There aren’t many investments that can beat the returns of a good real estate syndication. Why bother spending hours every week on your own deal when you could achieve better results by spending a few hours a year?

Being a general partner

If you want to be part of a syndication as a general partner but don’t want to deal with the day-to-day operations, such as asset management, construction management, sourcing deals, etc., then here are a few responsibilities that you can take on.

Loan Guarantor – If the syndication requires a recourse loan, then a loan guarantor is needed. The guarantor needs to have enough assets and liquidity. 

Capital Raising – This might be the perfect role for you if you have a strong network. It varies from case to case, but usually, you have to raise at least 30% of the required capital.

Diversification

Even among real estate syndications, there are many ways to diversify your portfolio. In terms of property type, you might want to invest in more than one type of property. For example, COVID-19 halted the hospitality industry but boosted the demand for industrial properties, so don’t put all your eggs in the same basket.

You can still diversify even when investing in the same property type. Multifamily, for example, varies significantly from market to market. An important attribute of a market is its location quotient, which is an indicator of the professional specialization in the area. For example, San Francisco has a very high location quotient in technology, so when many people in technology are suddenly allowed to work from anywhere, the multifamily industry in San Francisco collapsed. Even today, the market is still recovering from the pandemic. On the other hand, the multifamily markets in Austin, Phoenix, and New York have been doing extremely well.

What’s Your Passion?

The majority of real estate investors are here to gain financial freedom. Most people aren’t waking up every day excited about going to The Home Depot and doing another house flip. This is why we should think about what exactly we’re giving up by getting into real estate. Would you rather spend all your hours doing real estate? Or would you rather find a profession that you’re truly passionate about? Excel in your passion, make enough money to invest in real estate passively and build wealth.

I’m personally very passionate about real estate and obsessed with how co-living can bring people together and revolutionize the multifamily industry. I believe in building communities where everyone can feel like they belong, which is why I’m an active developer and don’t want to be on the sidelines.

I hope you’re also passionate about real estate in your own way, so I want to hear about what brought you to real estate. Please comment below.

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Doug Bauer, CEO at Tri Pointe Homes, joins ‘Squawk on the Street’ to discuss sluggish demand in housing, housing as a recession indicator and adjusting price to payment as costs come down.

David:
This is the BiggerPockets Podcast show 684.

Parker:
The goal is to eventually use our business and then any other source of income that we can to invest in real estate. I’d like to get one to two properties each year for the next five years. Then, long-term goal is eventually to have a portfolio that pays for our lifestyle that we can go full time into.

David:
What’s going on everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast here today with a Seeing Greene episode. If you haven’t seen one of these before or heard them, this is a show where we take questions from listeners just like you that want to know what they can do to be a better investor, improve their wealth, overcome obstacles, fears, concerns, questions, ignorance, whatever it may be. They bring the question, I bring the answers. You get to listen and you get to learn. We call it Seeing Greene because in these episodes, I’m explaining what I think they should do based on my perspective, and my last name is Greene and we’ve got this green light behind us. You know that’s what you’re getting into. Today’s show is a lot of fun. We talk about overcoming interest rate ego. If you’ve ever had that tendency to want to brag about the rate you got, that might be costing you more money than you realize, and we talk about that with one of our callers.
We deal with how to deal with the fear of good debt. Fear is real. It is a part of all of our investing journey. Debt can be scary and I tackle how to overcome that as well as different ways that you can look at debt to change your interaction with it and a different way to look at money. Our relationship with money will have a big impact on the success that we have with it or the lack of success that we have with it. Money is not just a thing, it is a concept, and your relationship with that concept is very important. Several times throughout today’s episode, I challenge conventional thinking and ask you guys to wake up, get out of the matrix and see money for what it really is. We also have a great conversation with a guest who has huge goals and we talk about what can be done to help them achieve it.
All that and more on today’s Seeing Greene episode. Before we start the show, today’s quick tip is we’re approaching the end of the year and I want to help everyone get clarity, focus, and attention. I ask, “What can you do to set yourself up for the new year? Do you have goals? Are you planning them? Do you have actionable steps you can take that are the keys to success as they build on each other?” We will commit to helping you in these areas to see the results you want and change your life trajectory if you commit to doing the work and taking the action to get there. Don’t wait until next year before you start planning for it. Start planning right now. Tell me what you want that year to look like in the comments below and what you’re going to do to make sure that happens. All right. We’re going to start today’s episode with a live call with someone who has questions and I’m going to dig into their scenario and see what I can do to help them. Let’s get into it. Mr. Parker?

Parker:
Yes, sir.

David:
Welcome to Seeing Greene. My man, how are you today?

Parker:
I am doing great, man. I’m excited to be here.

David:
We got a lot of green going on. I’m David Greene. I got a green shirt. We got a green light and we are going to dig into what we can do to making you more green. Tell me what’s your first question here?

Parker:
My wife and I got into real estate the beginning of 2022. We wanted to kind of change our lives and change our situation. We set a goal to get involved in real estate beginning of 2022, and then we found our first property and closed on that in May. That’s what we’re living in right now. We’re house hacking that. It’s actually a single family. We’re living in one bedroom and we’re renting out the other two bedrooms. It’s a play on house hack. It’s not a duplex, but…

David:
No. That’s a house hack. Just a variation.

Parker:
Yeah. Yeah. It’s working out. We’ve enjoyed the process. I guess my question is we’re looking at property number two, but we recently became self-employed after we got our first property.

David:
I’m hearing discouragement in your voice. Are you feeling discouraged?

Parker:
Yes.

David:
Okay. All right. Continue.

Parker:
Yes. I’ll get to that. I really underestimated the difficulty of financing compared from a W2 to being self-employed. I’d like to try Airbnb. I’m actually right now working on going under contract on one that I found. I have found private financing, I think. Private lending for the property. The 20% down payment though is where I get stuck and I’m wondering what strategies people have used or what tips people have used to be able to maybe possibly finance the down payment as well because it’s 20% from what I’m hearing pretty much around the board.

David:
All right. Let’s start with a few things here. Then, I’m going to throw it back to you with some more questions. First off, if you’re going to buy an investment property, it’s almost always going to be minimum of 20%. Now, the one brokerage did have some options of 15% down and those do come back sometimes depending on the appetite for lenders. In general, when there’s a lot of confidence in the economy, we get lenders to give us more favorable loan terms because they want to put their money out into play. They’ll give us 15% down. They’ll give you better interest rates. You’ll get fixed rates instead of adjustable. When there’s nervousness about the economy, lenders pull back and then the lending programs that we offer are worse. You should always assume 20%. A lot of it is 25% and sometimes even 30% because obviously, there’s fear about the economy.
Now, that is good for buying homes. There’s going to be less competition, but the terms you’re going to get are bad. The first lesson I want you to learn here is that you never get at all. There’s a give and a take. Okay? When the defense is giving you an opportunity to run, it’s very hard to pass. You’re not going to get both. You got to take what the market is giving you. The next piece I’m going to say has to do with your concerns with financing because you’re not working a W2 job. You’re self-employed. Right?

Parker:
Yeah.

David:
You probably weren’t anticipating how hard it would be to get financing when you’re self-employed. The reason is the lenders say, “Well, if you don’t have a W2 job, we’re not very confident that you’re going to continue to get paid. We’re not confident you’re going to continue to make your payment to us.” That’s where you’re running into that problem. What motivated you to leave the W2 and to get into the self-employed space?

Parker:
Really, really, really long story short, this same year that we decided to get into real estate investing, I also wanted to become a realtor, so I became a full-time realtor. The company that we were working for, my wife and I actually had the opportunity to work together for the same company. When I stepped away, another really, really important individual stepped away as well and the company actually closed up shop. They actually laid my wife off when that happened, and so we decided to then just open up a business doing the same thing we were doing. It’s dog training, so we’re dog trainers. When I left to become full-time into real estate, we were predicting that she would stay, have our W2 and we could get financed that way. When they laid her off, we opened up our own.

David:
Okay. You had the initial plan correct. One of us keep a W2, one of us venture out. You got one foot in security. You got one foot in adventure. That’s ideal. Then, the security foot fell out so your wife jumped in with you and now you guys are doing this thing together. Okay. First question before we get into real estate, we’re going to talk business. Does your wife’s presence in the company at least double the productivity of said company?

Parker:
100, yes.

David:
Okay. If you took either of you out of it, would there be less than a 50% reduction?

Parker:
No.

David:
Okay. Each of you are so valuable to this company that you both need to be in that position?

Parker:
Mm-hmm.

David:
That’s objectively speaking. There isn’t a level of comfort or fun that you like working together and that’s making your business decision here?

Parker:
Objectively speaking, I could leave. She would be swamped.

David:
Now, if you left and she became swamped and you hired an admin or a virtual assistant or somebody to help, could that business still run?

Parker:
Yes, I think so.

David:
Okay. Is this stuff she’d be swamped by revenue producing activity that she’d be losing leads of people that say, “I want you to train my dog?” Or would it be administrative stuff like making sure dog food is ordered and making sure the kennels are cleaned and… I don’t understand your business, so I’m just saying the stuff that could be leveraged out.

Parker:
She’s very much income producing activities. Yeah. That’s what…

David:
Okay. Who’s handling the majority of the operational stuff, like making sure that you can run the business but not necessarily generating revenue?

Parker:
I guess that’s what I’m doing. I’ll help train and then I’ll also help a lot at the accounting and the numbers and the administrative part of it backend.

David:
Can you do that and have another job?

Parker:
Oh, I think so.

David:
My guess would be you’re a smart dude. You got your license in real estate. You’ve taken action to buy a house. You had a W2 job. You jumped into starting this business. You recognize your wife is better at training and sales and you are better at operations. Those type of people are good at being efficient, meaning you get stuff done faster than the average person who’s doing your same type of work would and I’m that way. I’m very efficient. You give me a job to do. I find a way to get it done better and faster than other people because I just enjoy that. Right? You take your average W2 worker and you give them a job and they’re like, “Okay. How do I stretch this into my eight-hour day?” You give it to me and I’m like, “How do I get the whole thing done in two hours, so I have six hours to help other people at their work or do something else?”
If you’re that way, which it sounds like you are, there’s nothing that would say you can’t do both. Now, you might have to be picky about the type of W2 job you get. Okay? You can’t be driving a truck and doing accounting at the same time, but you could be working at a place where you’re not getting a ton of exposure to customers where your job is to keep the books for somebody else. I’m just making something up, so don’t take any of this direct, but something that you like doing that you could do quickly that will give you time to then also work on this stuff in the business. A lot of the stuff in the dog business can probably be done at night. Right? You don’t want to work 20 hours a day, but there’s certain tasks that have to be done the minute they come in.
There’s other tasks like bookkeeping’s a great one that can be done anytime, right? In my business, if I got to talk to a client, if I got to interview somebody, that has to be done at a certain time of the day. But if I’m writing a book, that’s flexible. I can work that around anything I’m doing. I use that to fill in the gaps. I bet you could approach your situation the same way because somebody needs to be the hero in the situation, Parker. I think it’s you. You need to be able to step up and get that W2 job, which will not only allow you to get loans again, you’re going to make more money. I don’t think your revenue’s going to drop from your business of training dogs and you’re going to start bringing in more revenue from a W2. I always look for the synergy. Okay? What one action can I take that gives me benefits in several ways?
That’s how I came up with this solution. It gets you into buying real estate again, which will make you money. It gets you into making more money for the household, which will make you money. It gives you the opportunity to get the down payments saved up quicker. Right? Everything that you’re trying to accomplish… This is a principle, The ONE Thing. If you’ve ever read that book, what one action could I take that would make everything else easier or unnecessary? If you find the right W2 job, I think that there’s a pretty big opportunity for you there. It’s got to be the right one. You don’t want to just jump into the first opportunity you get. You want to have it being paying well in an industry that has flexibility with you being left alone in a cubicle or something where you’re not being micromanaged and uses your skill set. I think that that’s a big win for you. Now, do you have any questions there before we move on to the actual real estate part of your question?

Parker:
No, but I had not thought about that at all. There’s a lot of thinking I have to do on that because when we moved… Yeah, I could elaborate but for the sake of time, no. No more questions on that.

David:
I irritate people with this type of thinking. If you’re my partner, like my partner Christian and the one brokerage has to deal with this, Kyle Rankie with the David Greene team, I am frequently frustrating them because most humans look at a perspective of like this or that. It’s a binary. I can have a W2 or I can be a full-time investor or I can be a full-time entrepreneur. We hire the person for this reason or that and I will frequently look at it and say, “There is not 40 hours of work for this person to do this thing, but we still need it done.” Right? If we hire them to do this thing, they also have to be able to fill their time in doing other things. Do we have stuff for them to do? You see their brain just go on the fritz like, “Poof. What?” But that’s not their job.
We got to think differently. Their job is to work for the company and help the team win. If that means that you’re our offensive lineman, but you’re also on special teams or you also mentor the younger players, we got to get some value out of these people, so we can pay them what we want. I want to encourage everyone to think that way because this is how entrepreneurs think. This is how problem solvers think. You’re a freaking problem solver, Parker. I could tell right off the bat and I would bet you when we get into your real estate question that that binary kind of thinking, that screwed you up and discouraged you and I’m going to give you some solutions here to break out of that. You’re going to feel better. All right?

Parker:
Okay.

David:
The first thing I wrote down is you bought a house hack with three bedrooms. All right? Before I’ve asked you any other question, do you know what the first thing that went through my mind was when I heard that? It’s okay if you don’t. I’m just curious.

Parker:
No. No. I could guess, but I’ll say no.

David:
Yes. No. Take your guess.

Parker:
Well, why only three bedrooms?

David:
Yes, you’re right. You got it. That’s right off the bat. If you’re going to do rent by the room, then the value is in the rooms.

Parker:
Yeah.

David:
Okay? If you didn’t do it in rent by the room, either you didn’t know or weren’t smart enough to tell that’s the right way to go, which I don’t think is true because you’re intelligent, which means you made the decision based on emotion, meaning maybe your wife or you like this house or like this area or it had the yard that would work for the dog training or something about it that you liked other than the specific business purpose of making money. Am I right so far?

Parker:
Yeah. Yeah.

David:
Okay. I know this is true because when I asked you earlier, is there a way that one of you could leave the company? You’re like, “Absolutely not.” Then, I asked, “Was that objectively true or is that emotional?” You’re like, “No.” Okay. I suppose that I could leave. Right? Emotions factor into your decisions and that does not mean you’re weak. That does not mean you’re bad. It just means you’re being honest. That’s why I asked the question. I’m not shaming you for saying you made an emotional decision, but you are doomed to end up in that state of discouragement where you started if you can’t recognize an emotions weighed into my decision. Like I told you, I frustrate the people that work with me, Kyle, Christian, other people. It’s because I am frequently asking them to do things that are in the best interest of the company that push against emotional comfort.
I’m asking them to become uncomfortable, to look at things a different way, to make a sacrifice they don’t want to make and they don’t like that and our brain will fight us and they’re like, “Nope, I see where he’s going. I don’t want to give up this comfort thing.” Then, we start lying to ourselves and it’s not my bad if you start lying to yourself, it’s your bad if you’re doing that. Right? I just want it to get out of the open, so you realize it’s happening. Because the minute you’re honest about that, solutions will start to make themselves known. Sorry for my coughing, I got sick after BPCON from shaking 2,000 hands or whatever it was when we were there. Now, let’s move into your state of discouragement. That is very expensive. That’s a trait that we have as human beings that will hurt if you get discouraged. If you’d have bought a five-bedroom house instead of a three-bedroom house and you were making more money, you’d probably be a lot more excited about house hacking. Is that fair?

Parker:
Yeah. That’s fair.

David:
Outside of how many bedrooms you got, is there anything else about that deal that you think you screwed up on?

Parker:
It’s a little old. It was built in 1990. Depending on who you ask, it is a little older. There’s some pretty big CapEx expenditures that I’m anticipating in the next, however, so many years like the roof and the HVAC.

David:
That’s normal. Every house you buy is going to have that. Don’t beat yourself up about that either. Here’s what probably happened. After you bought this thing, you’re looking back and seeing what you could have done better. Is that fair?

Parker:
Yeah.

David:
Okay. Have you ever taken a DISC profile assessment?

Parker:
I have. Yes.

David:
Are you a high C?

Parker:
No, I’m actually… I think it’s a D.

David:
D. What was your second trait?

Parker:
Oh, I don’t remember what my second one was.

David:
All right. Ds, I’m also a very high D. We tend to value and evaluate ourself based on where we are in the scoreboard. If you’re looking and saying, “I’m not making enough money on this deal, other people did better. I can’t get a loan.” You start feeling like you’re a failure, right?

Parker:
Yeah.

David:
You’re not a failure. On the first deal, you’re supposed to fail. The first time you try to ride a bike, you fall over. The first time you go snowboarding, it’s miserable. Your first anything, you suck. Okay? That’s the first piece I need you to recognize is you did not screw up. You did everything right. You had way too high of expectations for your first deal, which is why we house hack because you could pay three and a half percent down, which is like putting elbow pads on when you’re riding that bike. It cushions the fall because you’re going to fall. Going into your next deal, what are some things you do different if you bought a house next year?

Parker:
I was going to do the same thing if I was going to rent by the room.

David:
You’re going to house hack?

Parker:
Oh, I’m going to house hack.

David:
Well, would you rent by the room?

Parker:
No, probably not. I think I would try to actually find a multi-unit like a real duplex or triplex.

David:
You find a multi-unit, your numbers are probably going to work out better. You’re probably going to have more comfort. It’s probably not going to be as much stress having strangers in your house. Right off the bat, that’s a better investment than the first one you made. Fair?

Parker:
Yeah.

David:
Okay. If you were going to rent by the room, you’d probably look for something with five bedrooms plus a dining room that could be converted, so you get six bedrooms. You’d probably try to find one that has one bedroom separated from all the other ones, so you guys can be there. Maybe you even add a kitchenette into that part of the house, so you and your wife don’t have to share space. There’s things you could do to improve and that should be encouraging to you. You could only get better. You did not screw up. You just didn’t know as much when you got started. We’ve got a couple things you could take away from this. You need to house hack again.
The worst thing you could ever do is just stick with this one house that you’re not super happy with. The next one’s going to be better than the first one, so you got nowhere to go but up. You have an opportunity to go get a W2 job to make this happen. You don’t need 20% down, 25% down. You could do it again with 5% down or three and a half percent down depending which type of loan you use. If you used FHA in your first house, you could refinance an FHA again or my guess is you got a good rate, so keep that rate. Just put 5% down on the next house and get the W2 job. Okay?
Contact us. We could talk about what it would take to get you approved for this thing and the W2 job is also going to provide more money, which could be the difference in one year of work of the 5% you need to put down. All right? Now, you’ve got another house. Maybe you do this for another couple years, just building the dog business and work in the W2. You get more efficient and your systems get better in time. The next thing you know, you got four or five houses. You’ve got a solid foundation. Then, maybe you have enough income coming in. You can quit the W2. You could go back to work for the dog thing and that business now, training dogs has established enough revenue that you can claim that on your taxes to go get a house. You just have to have at least two years of that income. Is that what you’ve been being told?

Parker:
Yeah.

David:
All right. There is a path here to get out of your problem. All you have to do is take what you were hoping would happen in one shot, quit my job, go start this business and just stretch it out over a couple years, stretch it out over a couple properties. Don’t put so much pressure on you to do it all in one move and all of a sudden, you’re going to be in a good spot.

Parker:
Okay. Man, that is very good advice. I have a lot to think about. Thank you so much. Holy cow.

David:
You do and you should be walking out of here very encouraged, dude. There’s nothing about your situation that I think is discouraging at all. This is why I wanted to bring you back on to talk more.

Parker:
Yeah. No. Thank you for saying that. I needed to hear that. Thank you so much.

David:
All right. If you haven’t already done so, please do me a favor and take a minute to like, share and subscribe this video. If you would be so kind, please head over to your favorite podcast listening app and leave us a review there as well. Those help us out a ton and I really appreciate it. Our first YouTube comment comes from Matthew Van Horn. “David, more analogies than Jim Carrey has faces green. Thank you so much for answering my question about better goal setting. I have listened to your response three times and I am so inspired. It’s exactly what I needed to hear and I will put it into action by becoming the quality of person that can handle the reward of pursuing excellence. I love your mindset and appreciate when you zoom out and have these bigger picture sorts of conversations. In my opinion, these conversations are more valuable than any deal deep dive that you might do because I suspect that you are more successful due to your mindset than because of your raw deal finding talent, though you’re amazing at that too. No doubt. I don’t actually know Dave Van Horn, but I should reach out to him because I’ve never actually met a Van Horn that I’m not related to. Plus, he just sounds like an awesome guy. I look forward to reading your future book that you referenced about goal setting.”
Thank you very much, Matthew. That’s some very kind words that you shared there. Dave Van Horn is an amazing guy and I think you’ll love him. In my opinion, I think you’re right. I think mindset has more to do with the success I’ve had than actual raw talent at any one thing. I tend to look at the world from a different lens than other people do. As a result, I’ve been rewarded from that, so I like to share it with you guys here on these Seeing Greene episodes and hope that you can see some of the same success that I’ve been blessed enough to enjoy.
Our next comment comes from Giselle Morales. “David, I’ve been watching your videos for over a year now. I’ve been investing in real estate for the past 15 years, and almost two years ago, I was able to leave my 9:00 to 5:00 and live off my investments while learning more with people like you who share all their experience. Not only have I found you super knowledgeable in real estate, but now I can see your growth as a person wanting and encouraging others to become better human beings. I loved this episode. We are investors looking for wealth and if we add the ingredients to become better people every single day, then we are successful already as we are now. Thanks for all you do. Really appreciate. I’m 100% with you.”
Wow. I appreciate that as well, Giselle. This is a better response than I was expecting to get from that episode. Thank you for that. I really appreciate the support. Next comment comes from Sylvia Barthel, “Excellent show. Would love to see more of these areas David is in, why you pick them, what drove you to these specific properties, et cetera. Thank you for the fantastic show and education.” Well, I am glad to hear that. It sounds like what you’re saying is you’d like to hear more about what I’m seeing when I look at stuff or how I analyze it, and I will make sure that as we go through the rest of today’s show and future shows, that I continue to make sure I share the why behind the what that I’m teaching.”
Our last comment comes from Charles Holder. “I’ve listened to you guys for years at 1.5 to 2x speed. Your last bit of advice was the single greatest thing I’ve heard. Be the greatest person you can be. I’ve ever played it twice on normal speed.” Well, hey, something tells me if we can get Charles to go from 2x speed to normal speed, we’re doing something right. Maybe that needs to become one of the goals that I have in my life in general is how can I get people to go from two time speed to regular speed without just talking too fast to understand it at 2x speed. Thank you for that, Charles. I hope that this helps you with the goals that you’re trying to set and I hope that everybody listening understands wealth and success is not a result of just following a blueprint. It is a result of pursuing excellence.
It’s being the best person you can be, being the best investor you can be, trying to do your best at everything you do. I talk about this a lot because the people that I see struggle with real estate investing have often taken the wrong approach. They don’t like their job. They don’t like their life. They don’t like the results they’re getting in certain areas of their life and so they look at real estate investing like it’s going to be the magic pill that will fix that like, “Well, if I quit working for someone else and I work for myself, everything’s going to get better.” But that’s not necessarily true because if you’re doing poor work for somebody else, you’re going to do poor work for yourself. That is even worse, because you were at least guaranteed a paycheck when you did poor work for someone else. You’re not guaranteed a paycheck when you do poor work for yourself.
Rather than getting frustrated, let the results you get be a form of a mirror that helps you look deeper into yourself and see things about yourself that maybe you weren’t seeing. When we show up to a W2 job and we don’t give our best, we phone it in, we just go through the motions. We’re not trying. It’s easy to be separated from the results of poor effort because your boss is the one paying the price, not you. But when you start working for yourself and you’re not getting results, you end up being the one that pays the price. Remember, you cannot escape the need to pursue excellence, to work hard to give your best, but it’s a whole lot more fun and rewarding to give your best in real estate investing and for yourself than it is for somebody else where you may not have a clear path to a better life.
Thank you guys for those comments. We love and appreciate this engagement. Please continue to like, comment and subscribe to our YouTube channel as well as leave comments on this episode. Did you like the live coaching call that we had with our first caller? Do you like the additional questions that I’m answering? What did you not like? What do you wish I’d gone into more or what do you want to hear more of? Let us know and we’ll do our best to incorporate that into future shows. All right. Our next question comes from Angela Haddorn in Pittsburgh, Pennsylvania.

Angela:
Hey, David. This is Angela from Pittsburgh, Pennsylvania and my question is how to get over the fear of taking on more good debt. I currently have three properties. I have two long-term rentals and one short-term rental in Utah, Tennessee and Texas. That’s right. I do not own a property in Pennsylvania because I’m currently living with my parents trying to get out of that situation. Anyway, I have a lot of equity in all these houses. The minimum amount I have, I think is probably about $40,000 and although I started investing in 2019, I just wish I was further along in my real estate career at this point. I know I have the equity. I’m just a little bit afraid to use it for the fear of potentially putting myself into more debt if I were to refinance or something like that. Any tips or advice would be greatly appreciated.

David:
Hey, Angela. Thank you. We really appreciate your vulnerability in sharing exactly what you’re worried about and it’s super relevant because many people listening have the exact same concerns, fears, struggles holding them back. You stepped up and you shared that. Not many people are going to benefit. First off, pat yourself on the back because we all benefit from you doing the hard thing. Nobody likes to admit what they’re scared of or what’s holding them back. Second off, the amount of equity you have when you just start investing in 2019 is very impressive. You should feel really good about yourself with what you’re doing. You seem to be a good investor, which means you should be doing more of it. Now, let’s get into the practical advice here. What I hear you saying is that taking on more debt is scary to you, but when you say scary, what I think you’re saying is, “I don’t want to lose everything I have because I got too greedy. I don’t want to refinance these properties, get rid of my equity and then invest into something else and lose the whole thing because I took a bite too big to chew.”
I’ll tell you how I overcome that and it’s because I look at debt differently than what you may be thinking. The first piece that I want to say is equity and capital are essentially the same thing. This is something I only recently started teaching about because it clicked in my head maybe like three months ago at a retreat that I put on in Scottsdale, Arizona. When we have energy in a property, we call it equity. When we have energy in a bank account, we call it capital, but it’s really the same thing. We just have a different name for it depending on where it’s being stored. Is it stored in a property? Is it stored in a bank account? Is it stored in money under my mattress? Money is a storage of energy and energy itself is what we’re talking about. Okay?
My personal philosophy is I would rather keep that energy in my bank account where I can access it and it has more flexibility. I can use money in my bank account for many things, then keep it in a property where it is more difficult to access and I can only use it for certain things. If you want to access the equity in your property, the energy in your property, that is called equity, you’ve got two options. The first is a HELOC, which is sort of like a door into that store of energy where you can go in and then take it out. Once you’ve taken it out, it can go in your bank account and then you pay interest on that money.
The other option is a cash out refinance where you go in and it’s not a door that lets you go back in and out. It’s one trip in where you grab it, you pull it out of the property, you then put it in your bank account and the amount of money that you pay per month to be able to get access to it goes up because your mortgage on your houses went up. Now, I know this might sound like I’m painting a very simplistic picture, but it makes it a lot easier to understand how money works if you can see it like this. The second part of how I’d like you to look at debt a little bit differently is to try and not think about it like a fixed number like I have 200,000 in debt. I have 300,000 in debt. That really isn’t important from the perspective of safety.
If what we’re talking about is wanting to keep your properties, the amount of debt you have, it’s insignificant. Now, it becomes significant for a different purpose if you’re tracking your net worth. If you’re trying to see how much energy do I have access to, the amount of debt you have versus the value of your properties, that is very significant. But right now, we’re only discussing how to make sure you don’t lose them. The amount of debt you have isn’t relevant. What’s relevant in this perspective is the monthly payment of that debt. Okay. When I’m going to borrow money… Now, we’re also assuming this is a fixed rate. For instance, a 30-year fixed rate form of debt is different than a three one arm or something. But if we’re talking about a fixed rate for a long period of time, you need to look at, “I have to pay this much to my lender every single month.”
Okay? It’s $2,000. It’s $3,000. “If I were to refi and access my equity, would it go from 3,000 to 3,500? Would it go to 3,700?” Right? Try to look at it in terms of what your payment’s going to be every month. Now, that is useful because you can’t control the equity of your property. It does what it does, but you can, in some form, control the revenue that it generates because you already know that. You know what your rents are. You know approximately how much you can get on these short term rentals. If you have a fixed number that you have a pretty solid understanding that that property’s going to generate for you every month and you can turn the debt into a fixed number of the same type, meaning they’re both monthly amounts, now you can make a decision if refinancing is risky or not. For instance, if your properties are bringing in $10,000 a month and you have a total of $5,000 a month of debt and you’re going to bump that up to $5,500 a month or $6,500 a month, it’s easy to see that’s not a super risky play.
But if you don’t know how much money you’re making every month, it doesn’t benefit you to convert the debt into a monthly amount. That’s one of the ways that I move forward by taking on larger amounts of debt is I don’t look at it like I just borrowed a million dollars. I look at it like, “I am now on the hook for the next 30 years to pay this much per month. Can the properties support that? Can my lifestyle support that? Can my other business endeavor support that? If for some reason the properties can’t pay that, can I get a job? Can my book royalties cover me there?” What can you do to make money in other ways to keep them afloat? My guess would be if you can turn the daunting idea of, “I am $500,000 in debt,” that sounds terrible into, “I owe four grand every single month,” or whatever the number would be, it won’t feel as scary and you can make an educated, confident decision based on empirical data like numbers that will help you understand if this is a good move or a bad move and only make good moves.
Hope that helps you, Angela. I know that I gave you a long winded response because it had to do with changing the way that you’re looking at something, which takes more words to describe. Let me know what you think about that. Send us another video and let us know what you’ve decided. All right. Our next question comes from Steve Doteri in Fresno, California. “Hi, David. I have five single family homes and a commercial medical office building. My question is how do I determine how much I should have in reserves for repairs and capital expenses such as flooring, HVAC, roofs, et cetera? Is there a formula or a range I can use to gauge where I’m at? I want to ensure that I have enough reserves so I don’t get into a pinch, but not too much that I have excess cash not working for me.”
Steve, that is a very good question to be asking. As investors, we are always balancing this. We don’t want idle cash sitting around, but at the same time, we don’t want to overextend ourselves, so we don’t have cash if we need it. I don’t have a way that I budget this specifically because I just make sure I’m always working so there’s always new money flowing in case I do have something go wrong. But it sounds like that’s not the case with you, right? What I would do if I was in your situation is I would look at my commercial medical office building, for example, which is more than likely a triple net. In that case, you’re probably collecting money from the tenants every single month to repair a roof that needs to be done or an HVAC or if something goes out, maybe you go out and you do a cash call and you say, “Hey, everybody asks to pony up.” Look at your lease or talk to your property manager and have them review your lease to see if you are on the hook for repairs for that specific property or if you’re not, you’re probably not.
Now, these five single family homes. Just to simplify this, if I was in your position, I would look at all of them and I would look and see how long before the air conditioner goes out? How long before the roof goes out? Now, you’re in Fresno, California. Okay? If we’re just being honest with ourselves, it doesn’t rain a whole lot there. You’re probably not going to have to put completely new roofs on most of these houses if you don’t want to. Patches, repair work, you could probably get by with the roof you have for a very long time. Unless you had a situation with a roof that was significantly problematic, I wouldn’t worry too much about that. I would just keep a decent amount of money set aside, so that you could make repairs if were needed.
Another thing you could do is you could get a home warranty on these homes. It might cost you somewhere between four or $500 a year, but if the HVAC goes out, make sure it’s covered by the home warranty and boom, they will be replacing that instead of you. It’s another way that you can have less money set aside for capital expenditures. The last piece I’ll say is you need access to money. You don’t necessarily have to keep in your bank account. Like we just had with our last caller, Angela, you got to learn to look at money as a store of energy. If it’s stored in the property, it’s equity. If it’s stored in your bank account, we call it capital. You don’t have to store it in your bank account. You can put a HELOC on one of these properties, so that in a worst case scenario, if something goes terrible, you can pull money out of the HELOC to make the repair and then slowly pay it back down.
That HELOC is like a portal into the energy that’s stored in one of your properties that if you need, you can go walk that portal. Now, of course, it’s going to come with an interest rate. There’s a cost of travel in this instance or this picture that I’m painting here, but that’s okay. It’s better to do that than to keep the money sitting in your bank account not working for you whatsoever. That’s one thing to keep in mind. The other thing to keep in mind is that if you’re buying properties that you’re adding value to, you’re not being a lazy investor. You’re going after something that you can make worth more, that’s going to appreciate more over time. You’re always in a position where worst case scenario comes. You could sell something and have a lot of capital now that was converted from equity that you can use to cover for your portfolio.
I do expect that the market’s going to get tighter and tighter and tighter every month while we continue to increase interest rates, so it’s going to be harder to sell properties in the near future unless you bought them 10 years ago or 12 years ago or something where you’ve got a ton of equity, but I don’t think it’s going to stay that way forever. I think rates are going to come back down. The market’s going to take off again, and we’re going to look back and talk about this time as one of the great opportunities to buy real estate that we had and wish we’d taken advantage of buying more. Thank you very much for your question there, Steve, and good luck to you. All right. Our next question comes from Greg Seavert in Hawaii. Greg started short-term rental house hacking his primary residence with great success, then took out a HELOC down payment for a second vacation rental in Florida where he’s originally from. Now trying to figure out how to keep buying.
Greg says, “I have a successful vacation rental in Florida with $100,000 in equity and a good fixed rate at less than 3%. As interest rates rise, should I cash out, refi a down payment for the next property at the expense of a higher rate? That would hurt my pride, but do I need to shift my mindset to make the next investment?” All right. I love this. First off, Greg, kudos to you for admitting that it’s about your pride because interest rates always are. It’s like I make a joke that interest rates are the thing that everybody at the cocktail party when they’re sitting around swirling their drink is like, “Oh, what rate did you get? 3.2? That’s not bad, but I got a 2.95,” and it’s how they feel good about themselves, but no wealthy person that I know ever talks about the cost of their debt.
It’s just not a metric that they look at. They don’t sit there and say, “I’ve got this many properties, but this is my interest rate on everyone.” Right? We measure cash flow. We measure equity because that has to do with net worth, but no one talks about rate, so I gave that up a long time ago. When you’re going to get the interest rate, you get the best one you can get, but you don’t let it actually factor into whether it’s a good idea to buy. I’ve told this story before. I will tell it again. I had properties in California, I believe four of them that all had rates below 4%. Right? It ranged between three and a half and 3.75 for these four different properties. I refinanced out of them until like a 5.65. This was several months ago, and it did not feel good.
I did not enjoy it, not one bit. I felt the same thing as everybody else. It felt stupid to go out of a lower rate and into a higher rate. Well, what I did was I pulled over seven figures out of those four properties, and then I reinvested that money. Now, here’s the kicker. I went from say a average of a 3.65 to a 5.65, just to simplify this, about 2%. If I can make more than 2% interest on these houses that I bought, I’ve already improved my cash flow. Furthermore, if those properties go up in value or go up in the return I’m getting, so if I just get a 2% and next year it becomes a three, I win even more. If the houses themselves become worth more, I win even more.
As I pay down this new debt that I took out with my tenant’s money, I continue to win. As I build new resources in new markets, new agents, new contractors, new people that will help me with future deals, I continue to win. If I bought these new properties at less than market value, I continue to win. What’s funny is that I went through a 1031 where I sold properties and I bought new ones, and I added over a million dollars in equity just from the difference in value from what I paid versus what they appraised for on that. Now, I didn’t buy those with the money that came from my refinance, but let’s say that I did. In that scenario, I went to a worse rate, got a million bucks, and then added over a million dollars in equity to my portfolio. I pulled the energy out of the four California houses. I had to pay the price of a higher interest rate.
I put that energy into new properties and doubled it in just right off the bat. Okay? That’s not exactly how it worked out in practical terms, but it does highlight the point of why it’s okay to refinance out of a 2.95. It doesn’t matter. It does not matter. In fact, the higher rates that we’re seeing now are what is leading to the better price of the homes. The cool thing with the interest rates is they function like a ratchet. They only go one direction if you have a fixed rate. If you get a 30-year fixed rate and you have to go out of your 2.95 and you have to get into a 7% or something like that, 7% is the worst case scenario of what you will pay until it’s paid off. There is a high likelihood that over the next 30 years, rates are going to go less than that 7%.
What if they got all the way back down to 3.2 or 3.3 or even 2.95 again? Well, now you took out all the equity. You bought a bunch more real estate. You paid the 7% for a couple years, and then it dropped back down and you refinanced into something close to what you had, but you’ve got five times as much real estate. I think that’s the better way to look at it. Now, don’t go buy dumb stuff. Don’t go buy stuff that costs you money. Make sure you’re buying good solid cashing assets in good areas, getting it at the best price you can, and then let the market dictate what you do. If the market has rates drop, refinance. If rates continue to go up, buy more real estate at better prices. If it hovers, buy better real estate. You’ve got so many options and ways you can build wealth if you can get access to that energy that is currently stored as equity at this 2.95 number.
Don’t let your ego get in the way. Make sure you’re making wise, good long term decisions, and don’t worry about your rate, because at a certain point, they come back down and you can get it back again. All right. Thank you as always to those who submitted questions for us all to learn from. We really appreciate it. We couldn’t do a show like this without you, and I genuinely appreciate you sharing your fears, your questions, and your concerns as well as those of you that are listening, I understand attention is expensive and you could be giving yours to other people in other places, and you’re bringing it here, and I really appreciate that. Please continue to do so. If you’d like to follow me, see more about my mindset, more of what I got going on. I’m online on social media, @davidgreene24. I’m on YouTube at David Greene Real Estate, and I have a free text letter that you can sign up for called Behind the Shine shining on my head, which you can go to davidgreene24.com/textletter and sign up there and check out my website. Let me know what you think of it.
I just had it made and now I’m having another one made, so let me know what you guys think should be in that new one. The last thing I want to leave you with is I strongly urge you to reconsider the way you look at money. Okay? Your relationship with money will have so big of an impact on the decisions you make for things surrounding it. You’re going to work every day. You’re probably working a minimum of eight hours, plus a commute. Money already takes up a huge part of your life and you can’t avoid it. We don’t want to become a slave to money. We don’t want to worship money, but we also don’t want to ignore the impact that it has in the quality of our lives. If you’re spending this much time at work, understand what you’re working for and how to make it work for you because if you can improve the situation of your money life, you can improve the situation of the quality of your life.
I’m going to be talking more about how money is a store of energy and how looking at it differently will change the way that we interact with it. Please consider some of the stuff I said on this show and let me know in the comments what you think, or if it doesn’t make sense to you, tell me what questions you have regarding this concept that money is a store of energy and I will do a good job, as good as I can to explain it in more depth. Thanks a lot, everybody. Check out biggerpockets.com. Forums, books, blogs, everything that you need, we’ve got it to help you build your wealth. I’ll see you on the next one.

Ashley:
This is Real Estate Rookie episode 232.

Zeona:
So actually we compare it mostly to a long term rental. And a lot of the people that are getting into medium term rentals do come from the long term rental side and go, “Ooh, I think I could turn these great rentals that I’ve had for a while into medium term and make them more cash flowing.” So what we say is look at the way that you’re analyzing your long-term rental, but then put in utilities and put in furnishing. So it’s really not that different. The short-term rental, there’s a lot more expenses, and so that complicates it a bit more. And in short term rentals, I don’t account for vacancy, but I do in the medium term rental. So I think long term rental is the easiest way to compare it.

Ashley:
My name is Ashley Kehr and I’m here with my cohost Tony Robinson.

Tony:
And welcome to the Real Estate Rookie Podcast where every week, twice a week, we’re bringing the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And I love to start these real estate rookie podcast episodes by shouting out people from our audience. And today I’m shouting out someone who left a review for us on Apple Podcast. They go by the username, Teohe’s mom, and they said, “This is the go-to podcast for every new investor. This podcast has been so valuable over the last two years for me. Getting to learn from people who are “just like me” and going through similar emotions and situations I’ve been facing has been fascinating.” So Teohe’s mom, we appreciate you. Thanks for leaving us an honest rating and review. And if you haven’t yet, please do leave us a review on whatever platform it is you’re listening to. The more reviews we get, the more folks we can help. And obviously that’s our goal here at the Real Estate Rookie Podcast. So Ashley Kehr, what’s up? How you doing?

Ashley:
Well, I’m super excited about today’s podcast because we just had, on episode 231, we had Jessie on who talked about her house hack and how she is doing a medium term rental in one of the rooms. Well, today we have the co-authors of 30-Day Stay, a new BiggerPockets book where Sarah and Zeona are talking about how to actually analyze, furnish and manage a medium term rental. I almost said short term rental there.

Tony:
As you guys listen to this episode, you’ll hear my excitement building from the beginning towards the end. And by the end, I’m just pretty much convinced that medium term rentals are what we should all be doing. But I mean, Zeona and Sarah, they’re both super experienced. They have multiple properties, both long term, short term, medium term across the United States. And they really give, I think, a great breakdown on how to get started as a rookie in this space. They talk about how medium term rentals give you less risk than a traditional short-term rental, but more cash flow than a traditional long term. They talk about strategies for finding these tenants that stay 30, 60, sometimes 90 plus days at their properties and how they achieve almost 100% occupancy with the medium term rental. So just so many great ideas, tactics, and little tidbits to help you kickstart your medium term investing business as well.

Ashley:
And of course, we never allow anybody to come onto the show unless they have something for you guys. So if you go to biggerpockets.com/pod30 and you pre-order their book, you get all of the bonus content. So you have to pre-order before November 10th, but the bonus content includes a webinar with them, live with them. Then there’s also three interviews that they did talking about how to furnish your rental, how to transition from a short term to a medium term rental. Then they also do… Sorry, my kids just come running in. This is just me recording live if you heard that in the background. But also what they’re giving away too is they’re doing, you are entered to win a one on one with both of them with Sarah and Zeona.
So that is going to be really awesome because you could literally spend time with them learning how to do this strategy. So definitely worth pre-ordering the book before November 10th. Do you want to say hi?

Remington:
Hi.

Ashley:
You got to say it into the microphone.

Remington:
Hi.

Ashley:
That’s the littlest real estate rookie right there, Remington. Okay, so then we got my oldest yelling that he doesn’t have a shirt on. It’s just a chaos over here to finish up the recordings. But anyways, go to biggerpockets.com/pod30 and if you listen all the way through the episode, you will actually get a discount code. So make sure to listen to that so you can get 10% off. Now, Tony, back to you. Take it away.

Tony:
Sarah Weaver and Zeona McIntyre, we are so excited to have both of you join us here on the Real Estate Rookie Podcast. I’ve had the pleasure of meeting both of you in person, following you guys on social, and you guys are here to talk about something really cool that you’re launching for BiggerPockets. But before we get into that, Sarah, we can start with you. Just give us the quick 32nd background and who you are. Zeona will go to you afterwards and if you guys can, just let us know how you came together as partners on this project for BiggerPockets.

Sarah:
Yeah, absolutely. Well, thanks for having us. I’m Sarah Weaver. I’m a real estate investor, coach, speaker, and now author, thanks Zeona for co-authoring this amazing book with me. I met Zeona through a real estate event, which should come as no surprise. And we became fast friends because we realized we loved two things. We loved cash flow from our furnish rentals and traveling. And so you’ll hear a lot about both of those in the book.

Zeona:
And I am Zeona McIntyre. I’ve been doing short-term rentals since 2012. So some of you guys might remember me from the early days of the BiggerPockets Podcast on show 229 if you want to go check it out. But from COVID, I decided that I needed to come up with a new strategy. All of a sudden all of our bookings just fell off the calendar and it was a really scary time for short term rental operators. I imagine, Tony, you can relate. And that was a great pivot for me to realize that wow, this medium term space, there’s actually a lot of demand and it’s easier and I like it more. So it’s been a really great transition for us. And now with just so much expense in the industry, I think it’s nice to have something that still cash flows. So we can talk about that for the rookies.

Ashley:
Well first, can you define what medium term rental is? How is that different from any other investing strategy?

Zeona:
So a medium term rental is over 30 days is the easiest way to put it. So there are short term rentals under 30 days, which are average about three or four nights. And then there’s long term rentals that are unfurnished rentals that are about a year usually. And so the medium term rental is a furnished rental that is month to month and the average stay is about three months.

Ashley:
And then what is the name of your book? Because that’s why we have you guys on here. So tell us a little bit about the book and how it correlates with learning how to do medium term rentals. Is it how to buy the deal? Is it how to manage the deal? Give us a little insight into that.

Sarah:
Yeah, the name of the book is 30-Day Stay: A Real Estate Investor’s Guide to Mastering the Medium-Term Rental. And we love this strategy because it’s applicable to any investor. If you own zero units or 50 units both Zeona and I highlight a lot of incredible investors in the book that own medium term rentals all over the country in rural Iowa to just outside of Seattle to Florida and Georgia. We really love this strategy because it’s possible in so many different markets and as Zeona touched on, it’s really nice right now in beating inflation and fighting higher interest rates.

Zeona:
And just to add to your question, Ashley, we are really thorough in the book, so we do highlight a lot of case studies and we wanted to make it a “how to” first and foremost. So I feel like somebody could pick up that book and go buy a rental because we go deep into analyzing deals. We go deep into finding markets, building your team, furnishing, which is usually the scary point for a lot of people. So there’s a lot of good stuff in it.

Tony:
I don’t have any medium term rentals in my portfolio, but-

Zeona:
Yet.

Tony:
… Yet, right. But leading up to this conversation, and I don’t know if you guys know, Zeona, Sarah, do you know Jessie Dillon? She’s a real estate investor in Massachusetts. So Sarah, I think she connected with you.

Sarah:
Yes, she does permanent makeups for anyone interested in that.

Tony:
Right. Well we just interviewed her earlier today and she’s doing a medium term rental, rents by the room. And after talking with her I was like, “Man, there, there’s so many cool ways to do this.” But after talking with her and leading up to this conversation, I realized that there is this really cool opportunity with the medium term stay because you get almost as much cash flow as a traditional short term rental. But there’s a little less risk associated with it because in most cities or counties or jurisdictions, because the stays are longer than 30 days. And correct me if I’m wrong here, you don’t even need a short term rental permit to do that. So if STR get banned as a medium term rental, you’re still able to make it work. So my mind is spinning. I got a lot of questions for you guys. So on the medium term rental side and Zeona will start with you, if I want to analyze a property as a medium term rental, what does that process look like and is it any different than a short term rental would be?

Zeona:
So actually we compare it mostly to a long term rental and a lot of the people that are getting into medium term rentals do come from the long term rental side and go, “Ooh, I think I could turn these great rentals that I’ve had for a while into medium term and make them more cash flowing.” So what we say is look at the way that you’re analyzing your long-term rental, but then put in utilities and put in furnishing. So it’s really not that different. The short-term rental, there’s a lot more expenses and so that complicates it a bit more. And in short-term rentals, I don’t account for vacancy, but I do in the medium to rental. So I think long term rental is the easiest way to compare it.

Ashley:
What are some of those expenses for a short term rental that are more that you wouldn’t have with a medium term rental? Is it just maybe supplies stocking of toilet paper or what are some examples of those?

Sarah:
Yes, so cleaning fees, which typically you’re going to pass on the tenant anyway, but those are decreased significantly. And then for us, both Zeona and I, we use virtual assistance to help us manage our properties. And there’s significantly less admin cost because you only have a turnover every 90 days rather than every three days. So that’s something to account for, especially if you’re a real estate investor running this like a business, which we highly recommend. And then you’re exactly right, Ashley, the supplies like the toilet paper, paper towels, shampoo, all of those kind of expenses that you have. Every single turnover, you’re only supplying what we call the welcome starter kit for a medium term tenant. And it significantly decreases the cost there.

Tony:
So again, I know when I’m looking at a short term rental, I usually use PriceLabs or AirDNA to do my analysis to understand what my average daily rates, what my occupancies might be for a specific unit. But Zeona, you mentioned earlier that you focus more so on the long term rental approach. So if you can Zeona, breakdown for us, how do I determine what that medium term rent should be for any given unit?

Zeona:
So with medium term rentals, you’re using a site called Furnished Finder. You can still use Airbnb and Vrbo and any other booking platform. But we also use Furnish Finder and on Furnished Finder you can look in their map for whatever town you’re in. And then you can see what all the places are charging around you. So in Airbnb it’s harder to do that because they fluctuate so much, but on Furnished Finder you can see it and so it’s really easy to look through their photos and go, “Oh, my place is so much cuter than that one.” And then it’s around this one and here’s the area. You can figure it out pretty easily from there.

Ashley:
What about as far as the management of it? Is there software for it too that you would use similar to short-term rentals or is that a whole completely different software?

Sarah:
We are using the same software that we use to manage short-term rentals. So we highly recommend using Hospitable, It will tie directly to Airbnb as most people will know. And then for tenants that you find via Furnished Finder, you just manually input them into Hospitable and then they take on the rest.

Ashley:
Awesome. Very cool.

Tony:
I just want to talk a little bit on the tenant screening side. So I know for us on our short term mental portfolio, we don’t do any tenant screening, we don’t do any guest screening. There are also some little boxes you can check, but it’s nothing super in depth. For the medium to rentals and Sarah, I’ll start with you on this one. Do you have a process in place? Are you doing background checks or credit checks or are you just letting the platform decide who can book your place?

Sarah:
Yeah, so one of the most common tenants that we have is a traveling nurse. And the great thing about a traveling nurse is that they are heavily screened both on the federal level and the state level. So when they get a placement in a hospital, they have background checks, fingerprints, criminal background checks, I don’t feel the need to do additional screening on those tenants. Which again, when we’re talking about admin time, if you’re paying $25 for an admin, that saves you a lot of time and money when you can say just send me proof of employment. So I’m asking for three things, I’m asking for their driver’s license, proof of employment and a reference. And I am calling, texting and emailing their landlord reference because you just want to make sure you’re protecting your property. When it’s not a traveling nurse, then I am screening the tenant through an entire background check, eviction check.

Ashley:
What software are you using for that to do the separate screening?

Sarah:
I’m doing it through Avail.

Ashley:
Okay, cool.

Tony:
So if someone wants to book your place Sarah and say it’s on Airbnb and not Furnished Finder, I have Instant Book turned on for all of my properties, which means someone can book without me having to approve them. But it sounds like based on your current process that people can’t instantly book, they can just submit an inquiry and then after that is when you engage and kind of given them the thumbs up or the thumbs down?

Sarah:
Yeah, that’s a great question. I’ve been playing around with it. So actually I got an instant booking yesterday and immediately I panic because I’m like, “Oh no, did they instant book too far out leaving a gap in between medium term tenants?” To my luck, I had already put in parameters, which is the great thing about Airbnb. So they didn’t have the ability to book too far in advance. So what’s great is that I had someone move in, she’s going to be there for 92 days, she moves out on a Thursday and this new tenant moves in on a Saturday and she just booked for 97 days.

Tony:
That’s fantastic. Go Zeona.

Zeona:
Yeah. So just based on the screening, because you were asking about that with Instant Book and there are parameters in Airbnb to say we don’t accept anyone with no reviews and we don’t accept anyone to book that’s not verified. So you have a couple of things that you can put in there for yourself to protect you in that regard. So that’s good. A lot of Sarah’s places you can do short term rental part of the year and then you do medium term if, correct me if I’m wrong, but I have some where you can’t legally short term.
And so that gap is a lot more important to not have, I don’t want to have somebody booked and then have three weeks there that can’t be booked at all. So what I do is I actually only open my calendar five weeks at a time and I don’t have instant book on. So I make people send requests and then I talk to them because a lot of times a traveling nurse is driving to the area and they’ll come out three days ahead or they’ll come a little bit later and so you can massage those dates so that you have less vacancy.

Tony:
Sorry, just one additional question on that piece. Are you guys keeping all of your communication through the platform? Are you picking up the phone and actually talking to them if they’re submitting inquiries through Airbnb? So Zeona, if you want to lead first and Sarah we can go to you after.

Zeona:
Yeah, so if it’s in a platform like Airbnb or Vrbo, I just keep it all in the platform. If it’s something like Furnished Finder, it’s actually not a booking platform in the same way. It’s more of a lead generation. So it actually just gives you a list of tenants and then from there you reach out to them. We do everything on email with them. And the only time I have my assistant call is just to get a feel when we’re doing the tenant screening portion because sometimes I think in short term and medium term, you really want to rely on your sense of somebody. And so if you get a creepy vibe from the way somebody asks you a question, you might just say, “Not worth it, I’m not going to do that.” So I imagine you’ve had that with your short term rentals and then the people you always let through, you’re like, “Dang, that’s the guy who’s going to rip up my carpet or whatever.”

Tony:
And Sarah, what about for you?

Sarah:
Yeah, we have a system where everything’s automated so when someone reaches out, they’re getting an automated email, we’re moving them from Furnished Finder to email and then we are hopping on the phone with them. We do everything through Google Voice. I had at the beginning where they had my phone number and I realized real quickly that that was a mistake.

Tony:
It’s a terrible idea.

Sarah:
It was a terrible idea. So we moved everything to Google Voice.

Tony:
And just one piece on that, I have one follow up question, but we also try and keep the majority of our conversations on platforms. I’m a little bit more like Zeona because we found that if there’s ever any issues with that guest, Airbnb and Vrbo won’t take your word for it if it isn’t in the platform. So we’ve had issues where we had a phone conversation with the guest and we knew that they had done something wrong. But because we didn’t have the proof of it in the platform, Airbnb didn’t have our back. So we try and keep the majority of our communication on platform as well.

Sarah:
That’s a really good point. Regardless of what investing strategy you’re going to use, all of us investors should get used to always sending a follow up email that says, “Per our conversation we have agreed to this and this.” And really ask them please respond and confirm that this is what we agreed to. And then just even having an email correspondence that says, “I agree,” I do that with every tenant I speak to.

Tony:
That’s a great idea, Sarah. So following along with the tenant screening portion. So once you guys have done your work on the front end, do you have these medium term tenants sign any kind of lease agreement as well for the 30, 60, 90 days that they’re staying there? Or is it just what they’ve done through the platform? So Sarah, we can start with you.

Sarah:
When they are going through Airbnb, everything stays in Airbnb. But when they’re coming off of Furnished Finder, I do treat them like a regular tenant and I’m putting them into an actual lease. Having them sign that inside of Avail, telling them the expectations, through Hospitable they’re getting automated messaging. So they’re getting the welcome email and all of these messages are inside of the book. Zeona’s done an incredible job after years of experience with short-term rentals. Really figuring out when’s the best time to send the message, what information to include in it so that you get less communication with the guest. It seems counterintuitive to say you never want to hear from your guest, but it’s incredible once I implemented the messages that Zeona has written, I barely hear from my tenants.

Zeona:
So I have seven emails, I went back and counted them because I have a whole series. So they’re all in the book and I find that to be really helpful. You almost have to think ahead about what they’re going to ask before they ask for it. So we prepare in that way.

Ashley:
Along with the lease agreement. Is there anything that you guys include that would be different from a long-term lease agreement?

Sarah:
The things you want to protect are the items inside of the house. So I’ve even heard of a long-term tenant leaving with the refrigerator because it didn’t have in the lease that the landlord owned the refrigerator. So all of the items that I own are specified in the lease. I think that’s really the biggest difference. Otherwise, I really want to reiterate that this is so similar to a long term rental. So for investors listening, taking the jump from doing long term to medium term aside from furnishing is not that stressful.

Ashley:
So I want to transition us here. We touched in it a little bit, but I want to make sure we walk through this because I think it’s a great starting point as to how do you even decide if you have a desirable market to do a medium term rental to find these nurses? And can you maybe touch on too, who are some other type of workers that you attract to your properties?

Zeona:
Yeah, so I think looking for hospitals is a great place to start and I know you’re saying who else do we rent to? But that is where I go first. And so I was looking around for some clients to see what other markets might be good and I just did a search, 10 largest hospitals in the US and then started looking around those. And so I think that’s a great way to go because you’re always going to have traveling nurses and they’re just really great tenants. But beyond that, we have a lot of digital nomads now, that has been a big thing since COVID that people can work from home anywhere.
And so urban markets in general I think are just going to be really popular because either people are flying in as business travelers to go to that local office or they’re working from home and they want to be able to walk around the city or go explore the sites on their off hours. So we see a lot of that. And then there’s a lot of people now that are actually living full time from Airbnbs. I know Sarah is one of them, even though she’s with a friend right now, she’s mostly in furnished rentals. And that’s actually been a big trend with a lot of retirees and other people that are living abroad, financially independent and such.

Ashley:
Do you see a big correlation with people whose jobs went remote during COVID that are still working remote with traveling around and staying at different places?

Sarah:
Absolutely. One of the things I’m seeing even with my traveling nurses is that they’re bringing their spouse with them because now their spouse has the ability to work remotely. So the spouse, I don’t know how the conversation went, but I always imagine it went, “Hey, you’re a nurse making $35 an hour, why don’t you become a traveling nurse, make $116 an hour and I’ll just follow you around?”

Tony:
It’s not a bad gig. But Zeona, I love what you said about just Googling top 10 biggest hospitals in whatever state you’re in. A lot of times when people ask me what market they should go into for short term rentals, I just say, “Hey, pick any state and Google top things to do in XYZ state. And usually you’ll find some kind of major attractions or things like that.” But to apply that to the medium term rental space, I haven’t thought of that. So I love that approach. Now one other piece along with the market selection, I guess more so property selection. When you guys do your medium term rentals, are you actually going out and purchasing these units or are these more like an arbitrage model that you guys are using?

Zeona:
So I prefer to purchase units. I’m kind of anti arbitrage even though I actually started that way because I didn’t have the money when I got started with Airbnb. But I think that it’s just flipping if you need the cash flow to start, sure arbitrage. But eventually you want to get into something where you’re building wealth and wealth in real estate is built with equity over time appreciation and you just don’t get that. I’m just not that into arbitrage.

Ashley:
And the tax benefits too, you don’t get the tax benefits of not owning the real estate either.

Sarah:
Yeah, I feel the same way. I think it’s a great way to get started, but it’s essentially another way to have a job. I view real estate investing as a way to build wealth. And so I think it’s risky to take on all of the cost of the furniture and a one year lease not knowing if that landlord’s going to renew your lease. I don’t think it’s a very secure business model. With that being said, all of the people out there doing arbitrage and making six figures, more power to you? I think it’s great. However, for a new investor that wouldn’t be the first direction I would point them.

Tony:
Yeah, I’ve always kind of been anti Airbnb or vacation rental in an urban setting because I am afraid of the regulation piece and maybe the predominance of hotels and all these other factors that go into it. But as you guys talk more and more about this, there’s so many hospitals within a 20 mile radius of where I live and I’m like, “Man, I could probably have an Airbnb down the street from my house and do a really good job with it if I rent it out to the right nurse.” So you guys got my gears spinning here a little bit.

Sarah:
And I think what’s so important about what you just said, Tony, is that you can make MTRs work in any market. And I think a lot of people have this preconceived notion that you’re making significantly less than you would as a short term rental. But for those of you that don’t know, I own medium term rentals in Omaha, Nebraska. I like to call it destination hotspot of America. And I make more money when it’s medium term because while the nightly rate is higher as a short term, the vacancies is so high that I actually net more as a medium term rental.

Tony:
Interesting.

Ashley:
Sarah, I just want to ask if maybe you could share the numbers on that just so people can get an idea of how they differ from if this property would’ve been a long term rental or a short term rental and then what it is now as the medium term rental.

Sarah:
Yeah, absolutely. I’ll give the example of a duplex that I own in Des Moines, Iowa. And I do that because one side is long term and one side is medium term. So I purchased the property in April of 2022 and I bought it for 180 500. My PITI, principal interest tax and insurance is 884. My long term tenant pays 850. Market rent is probably a little closer to 975, but she’s an inherited tenant. She’s a great tenant. So she pays 850. My medium term tenant upstairs pays 1900.

Ashley:
Oh My god.

Tony:
Wow.

Ashley:
That’s awesome. What do you expect for vacancy on that? What do you see on average with your units as to what your vacancy rate actually is for a medium term?

Sarah:
So for that particular building, I’m at 97%. And across all of my units I’m at 97% because four of mine are at a hundred percent. So someone moves out at 10:00 AM and someone moves in at 3:00 PM giving me a hundred percent occupancy for the year.

Zeona:
We do still estimate 8% when we’re doing our numbers, just trying to be safe. And then that gives you a month, a year. So you might have a couple days here or there if you end up having a week somewhere. But it’s really rare and we love that because as a long term rental owner, you might have two weeks or a month every turn. Because if they leave often with a long-term rental, they want to repaint the place and change out the carpets and do all these things if you’ve got a property manager and they’re just really slow. So as a short term rental operator, I’m like, “Oh my gosh, they’re the most frustrating properties I have are ones that are long term and operated by someone else.”

Sarah:
And that’s something I learned from Zeona is she is like the queen of asset management. So she treats her rentals like her business. So when she has a vacancy, she’s working her tail off to get someone in there as soon as possible. And sometimes that even means negotiating with them to pay a day early. But what I like is about Zeona’s model is that she doesn’t just sit back and say, “I hope people book.” She’s out there looking for tenants and I definitely learn that from her and I’m happy to say that my occupancy rates are fantastic because I treat it like a business.

Zeona:
I just want to add something to that because when we were at BP CON, I was talking to a lot of people that were starting medium term rentals and they’re like, “Oh I got on Furnished Finder, but actually we haven’t had any requests.” And I’m like, “Oh no, people don’t know how to use Furnished Finder.” Furnished Finder, you can get requests, but that’s not how people reach out to you. They’re just inundated with options and so often they put in their information and then you never hear from them.
So the way that Furnished Finder works is you get a list of tenants and if you are in your period of looking for someone new, you’re not doing this every week, you don’t need to do it more than every three months, but if you’re in that period, you are reaching out to them. And you can have an easy template that you copy paste and then you just blast it to all the people. And if you’ve got multiple units in one town like Sarah does, you can send them links to all the different units. So you don’t have to pay for additional listings on Furnished Finder because you pay for listing, if that’s helpful.

Ashley:
Well Jessie, who we were talking about in the beginning of the episode who was just recently on the podcast, episode 231. She mentioned how her virtual assistant or her assistant actually goes out and goes into Facebook groups and finds her people to place into her medium term rental too. And she’s the same, she doesn’t sit and wait for people to come to her. She has somebody out there actively looking for somebody to come into her unit.

Tony:
I want to touch really quickly on the time in between guests. So for us on the short term rental side, like you said, we have same day turns. Someone checks out at 10:00 AM someone else checks in at 4:00 PM. But what someone who’s been at the property for 30, 60, 90 days have either of you run into a situation where the property maybe was in disrepair and wasn’t ready for that person checking in? So Sarah, we’ll start with you and then Zeona, what will lead to you afterwards.

Sarah:
Oh yeah, my cleaners hate same day turnovers. So while I may brag about the hundred percent occupancy, my cleaner has wanted to quit about five times. And so I highly recommend having at least one day in between because you never know. Especially, I allow pets and I have pets in about 70% of my units that needs to be deep cleaned. The couch cushions need to be completely taken apart. All of the furniture needs to be moved and that takes time. And so I either offer to pay more and have her bring in extra help if it is the same day turnover or I try to have at least one day in between.

Zeona:
Yeah, I would say the same. I just have a day in between generally, you just don’t know what you’re walking into and I don’t allow pets anymore. I used to, but with the nurses, they’re gone all the time and that’s why we love them. But that also means that their pet is left alone a long time and so that leads to problems. And then I have found that the ones that have pets sometimes they won’t clean for an entire six months stay. It just seems like they never moved anything around. So that can be kind of intense with pet hair.

Tony:
But have you guys ever had to cancel on that new person that’s checking in because the last guests did such crazy damage?

Ashley:
That’s just you Tony, I guess. A bear coming up and ripping apart the garbage.

Sarah:
Tony, maybe you should try medium term rental.

Tony:
Yeah, maybe. I think that’s what that’s coming next. So I just want to get some clarity. We probably should ask this earlier in the show, but Zeona, if you can start, what markets are you currently invested in? What cities, what states?

Zeona:
Yeah, so I’m in four states. I am in Florida and I’m in central Florida and in Panama City Beach. So it just depends on what kind of rental it is. The Panama City Beach is a short term rental. The central Florida’s are long term rentals. I’m also in St. Louis, Missouri, and that’s a medium term rental. Then I’ve got Boulder Colorado, Denver Colorado, and Colorado Springs. And those are all medium term. And then I’m in Washington State, on the sound outside of Seattle and that’s a short term rental. So they’re all over the place.

Tony:
How about you Sarah?

Sarah:
I have 19 units in Kansas City, Des Moines and Omaha. And they’re all small multifamily except for one single family. And then all of my medium term rentals are in Omaha and Des Moines. And I would love to own a medium term rental in Kansas City. So if you’re an agent, send me some deals.

Ashley:
Well I want to wrap it up here with asking you guys what is the best piece of advice you can give a rookie listener who’s saying right now, “I want to do this.” Where can they start? So Sarah, let’s start with you.

Sarah:
I think what I see most success with the investors, especially the investors I coach, is you need to pick a market and then just love on that market. I love to use dating analogies like, “It’s okay to date multiple people, but if you’re looking to get married, you should probably pick one person and then wake up every day and love that person.” And it’s the same thing with real estate investing. I see investors all the time looking in nine different markets asking me should I do this? What about this? I read an article here and it’s like, “No, just pick a market and love on that market, growing on the ground team and write some offers and get under contract.”

Zeona:
Yeah, I do strategy sessions with investors all the time and I won’t give them more than two markets. They always ask me for more and I’m like, “No, you go and you do your research and if those really don’t work for you, come back. But I am not giving you more.” My advice is to house hack with this strategy. So that was how Sarah got incredible numbers. She bought a quad in Omaha and just because she was able to have just one vacancy and then slowly turn all of the rest of the units into medium and short term, it’s like her returns are insane on that property.
And so like you’re saying, Tony, where you live you know really well, and so if you can have a basement unit, if you can convert your master bedroom and make a little kitchenette out of it because it has a separate entrance. I mean there’s so many creative ways that where you live you can make another unit out of it. I think that’s the best way to go because you have the low down payment and the low interest rates. There’s just so much advantage to house hacking.

Tony:
Yeah, I love the house hacking idea. I love the idea of the medium term rental in a more urban setting. And I’ve wanted to purchase, I live in California, I’m in the suburbs of Los Angeles. And I’ve wanted to buy something here, but it just almost never makes sense from a cash flow perspective. But now I’m thinking, “Man, if I can go out and find a five or six unit something just above five units or more. Medium term rent every single one of those units, I can take the NOI on that five unit from something abysmally terrible in 510 x that by making it a medium term rental.” Now I’ve doubled the value of that property just by turning to a medium term rental. And if I rent it by the room, imagine if I got a six unit and each unit had two bedrooms, now I’m renting each unit by the room as a medium term rental. Like, “Oh my God,” my mind’s all over the place, before I-

Sarah:
And let me add one thing in there. You could also then buy a vintage trailer or an RV and park it in the driveway. And traveling nurses or medium term tenants will even rent that out. I have a friend and client in Sacramento and that’s exactly what he’s done. He’s house hacked his primary into a duplex and then he even has a cute tiny house parked in his driveway, made a nice little privacy fence. And that is rented as a medium term rental.

Tony:
One of the cool things about being a host for a podcast is that you get to hear so many cool stories and unique strategies. But it’s also like a drug because you hear all these cool things and you just want to go after all of them. So I’ve been telling my wife that we’re going to slow down, but after this episode I feel like that’s a lie now. So I don’t know if my wife’s upset, I’m going to blame Sarah and Zeona. But one last question before we wrap up. Are there any other software that you all use besides Hospitable or Furnished Finder to manage your medium term rentals that some of our rookies should look at? And Zeona we can start with you.

Zeona:
Yeah, so big three, you like to have something like Avail. And Avail is doing leases automatically, which is great. So based on your state, it gives you a template, you just enter in the blanks and then you can do electronic signing, so that’s so great. They also have background checks on there if you needed to go that route. So Avails get a great one stop shop and then they have all the auto payments so you can set people up for monthly payments and their deposit. So that’s really easy. But the thing we didn’t talk about outside of Hospitable, Hospitable is mostly auto messaging. They kind of aggregate stuff altogether. You have a joint calendar, but it’s mostly auto messaging. The last piece is pricing software, which you should be familiar with using short term rentals. And people think they don’t need it. But the thing is that it’s still a seasonal business and if you’re not using pricing software and you’re not changing your prices, you’re missing out on those high season rates. So you definitely want to be using a PriceLabs or Beyond Pricing or at least changing your pricing.

Ashley:
Sarah, did you have anything to add to that or it’s the same for you?

Sarah:
All of those, absolutely. And I’m a huge advocate of a task management software. I don’t know how anyone functions at a high level with a business without some type of fancy to-do list, which is what a task management software is. I personally like Asana. I’ve used Trello, I’ve used Monday, I use Asana and I use it for tenant turnover. I use it for property management repairs. I also use it for furnishing. That’s a big one. Every time you turn a unit there should be a checklist. Every time you furnish a unit, there should be a checklist and all of that lives inside of Asana.

Ashley:
Well thank you guys so much for sharing your wealth of knowledge. And everybody make sure you check out their book. You can get it at the BiggerPockets bookstore at biggerpockets.com/pod30. And if you use any of our names, you guys can actually get 10% off. So we’re doing a contest to see who you guys like the best. So everybody pick Tony’s name because we don’t want his feelings hurt that nobody used his promo code.

Tony:
I have a very soft ego.

Ashley:
Yeah. So Zeona, can you let everyone know where that they can reach out to you and find out some more information about you?

Zeona:
Yeah, so Instagram is the best way I check all my DMs. And so that’s @zeonamcintyre. You’ll have to just check my spelling in the notes.

Sarah:
And I’m @sarahdweaver on Instagram. You can also reach out at sarahdweaver.com.

Ashley:
And you guys, again, that’s biggerpockets.com/pod, P-O-D, 30 to get their new book. And you can use the discount code, use any of our first names to get 10% off. Well thank you guys so much for joining us. And once again, congratulations on your book. What an awesome accomplishment. I’m Ashley @wealthfromrentals. He’s Tony @tonyjrobinson on Instagram and we will see you guys back on Wednesday with a guest.