\n<\/p>\n
You may already be a landlord, or you might still be searching for your first rental property<\/strong>. How should you go about finding a winner? What\u2019s the <\/strong>best real estate market<\/strong><\/a> to invest in and how do you make the most money while having the least amount of stress? Only experienced landlords<\/strong> know how to answer these questions. They\u2019ve bought dozens of houses, dealt with numerous tenants, and been through trial and error, so you don\u2019t have to. And that\u2019s exactly what this episode is all about.<\/p>\n Ashley Kehr<\/strong>, host of the Real Estate Rookie Podcast<\/em><\/a>, and Craig Curelop<\/strong>, author of The <\/em>House Hacking Strategy<\/em><\/a>, are here to answer common landlording FAQs<\/strong>. Both Ashley and Craig have had so much interest in their individual endeavors that they\u2019re now hosting the BiggerPockets Bootcamps<\/strong><\/a>! Ashley\u2019s will teach you about buying (and managing) your first property<\/strong> the right way, while Craig\u2019s house hacking bootcamp will give you everything you need to buy your first house hack property in just ten weeks<\/strong>!<\/p>\n Along with real estate regulars David Greene and Rob Abasolo, Ashley and Craig will be touching on some hot topics<\/strong> in today\u2019s episodes. Topics like when to give rent credits<\/strong> to tenants, pros and cons of renting by the room<\/strong>, the first steps to take after getting a property under contract, how to show your rental units<\/strong>, and where to find the best real estate markets<\/strong> around.<\/p>\n David: Craig: David: Rob: David: Rob: David: Rob: Ashley: Rob: Ashley: Rob: David: Rob: Craig: Rob: Craig: Rob: Ashley: Rob: Ashley: David: Rob: David: Rob: David: Ashley: Rob: Ashley: Rob: David: Rob: David: Rob: David: Rob: David: Rob: Ashley: Rob: Craig: Rob: David: Ashley: Rob: David: Ashley: Rob: Craig: David: Rob: Ashley: Rob: Ashley: Rob: Craig: Rob: Ashley: Rob: Craig: Rob: Ashley: Craig: Rob: David: Rob: David: Rob: Ashley: Rob: Craig: David: Rob: David: Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Check out our\u00a0<\/em>sponsor page<\/em><\/a>!<\/em><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
This is the BiggerPockets Podcast show, 652.<\/p>\n
When you learn anything new or when you\u2019re trying to get into anything new, education always comes first. Right. Education times action equals results. And so, you can keep adding education, adding education, education, but if that action is zero, you\u2019re never going to get anything. But also, the other way around, if you\u2019re all action, all action, and no education, you\u2019re not going to get anything.
So the first step, I always think, is education. If you\u2019re listening to this podcast and you go to one of these boot camps, your education is going to be there. By the time we\u2019re done with the bootcamp, you\u2019re going to be ready to take action. Then all you got to do is worry about that second part, which is action, and then successful [inaudible 00:00:39].<\/p>\n
What\u2019s going on everyone. This is David Greene, your host of the BiggerPockets Real Estate Podcast. Here today with my co-host Rob Abasolo, where we are bringing you a fire edition of the show. We are joined by Craig Curelop and Ashley Kehr, two other BiggerPockets heavy hitters, as we bring our insight, experience and feedback into answering commonly asked questions directly from the BiggerPockets forums.
In today\u2019s episode, we get into stuff about house hacking, avoiding time-showing properties when you are renting them, what\u2019s going on in the market, where we\u2019re buying and more. Rob, what were some of your favorite parts of today\u2019s show?<\/p>\n
I just like the unique perspective of everybody. There\u2019s four of us, we all come from different paths, right, when it comes to real estate, there\u2019s short-term rentals, long-term investing, long-distance investing and house hacking. So it was really nice to get a nice, balanced view from everybody.<\/p>\n
Yes, sir. And it was pretty fun by the way. So if you want to be entertained and learn something, this is a podcast for you. We\u2019re going to get to it in a second, but before we do, today\u2019s quick tip brought to you by Robert Abasolo.<\/p>\n
Ah, yes. Ooh, quick tip you. You put me on the spot here. So if you don\u2019t know, BiggerPockets host boot camps. So if you\u2019re looking to get into real estate, we have a bunch of different boot camps that can help you do that. We have the Rookie Bootcamps to help you get started. We have Rookie Landlord Bootcamp to teach you how to manage your property. Multifamily Bootcamp for your next multifamily investment purchase. Short-term Rental Bootcamp to dive into investing in short-term rentals like Airbnbs and vacation homes. And finally House Hacking Bootcamps, diving into earning income from your primary residents through creative strategies on your property.
And the quick tip here, getting to that, boot camps are only $489, which is already a great deal, but it\u2019s an even better deal if you\u2019re already a pro member, the boot camps at that point are just $199. And if you\u2019re just a listener of the show, you can get 10% off right now when you use promo code, Boot Camp 10.<\/p>\n
All right, let\u2019s bring in Ashley and Craig and get to the good stuff. All right, so today\u2019s format\u2019s going to be a little bit different, but a bit of fun. We\u2019ve got several BiggerPockets personalities all with their own expert analysis on different elements of asset classes in real estate. And we\u2019re going to be taking questions right out of the BiggerPockets forums and giving our two cents on what we would do. We would hope that our answers can help you on your real estate investing journey and keep you entertain while you\u2019re learning. Moderating us today is the moderator Rob Abasolo himself. Rob, take it away.<\/p>\n
Hello. Hello. Yes. You can call me Mod Rob for short. And I think that\u2019s actually a very fitting name. You kind of moderated on my behalf. This is my job, David. I\u2019m taking over from here. Look at me, I am the podcast host now.
So we all come from different backgrounds as you said, so I think we all kind of share a very unique experience here. I\u2019m short-term rentals, we got long-term rentals, we got house hacking, and we got long-distance investing. So we\u2019re pulling a lot of these questions straight from the forums. And we\u2019re looking for everyone\u2019s very spicy or moderate takes here. All right. So don\u2019t hold back everybody. It\u2019s a Friday afternoon. Let\u2019s get into it.
First question, when do you give rent credit to a tenant? And is this something that you\u2019ve encountered often in your rental histories? Oh, let me do the official moderator thing here, we\u2019ll start with Ashley Kehr.<\/p>\n
Well, hello everyone. My name is Ashley Kehr and I\u2019m super excited to be here today to talk about landlording because I\u2019m hosting a landlord bootcamp that is coming up this fall. So I have given credit to tenants before. And one of the biggest reasons I have done that is because I want to get rid of that headache. Sometimes just taking the initiative by listening to the tenant, understanding what the issue is and giving them a little bit of a credit has made a big difference. And instead of me battling with them and it becoming a bigger issue because I\u2019m not giving them the $25 credit they want for that month for something\u2026
And the biggest reason that I have given credits before is if they are having maintenance done and for some reason the maintenance hasn\u2019t been done, maybe their fridge broke down and I cannot get somebody there until the next day. I\u2019ve given people a credit to go and buy ice and buy a cooler to keep their food in until the fridge can go and get repaired. So I definitely am for giving credits just to get rid of that headache.
Another thing I\u2019ve given a credit for besides maintenance is just like any kind of disruption that may have occurred on their property that may even be out of my control. Just maybe they\u2019ve come in and landscapers I hired accidentally chopped up something with the weed whacker that they had outside. So I think it\u2019s great to have a relationship where you can give a little to a tenant when these circumstances happen, instead of just constantly saying, \u201cNope, this is what the rent is\u201d and being strict and firm to it.
But then there\u2019s other times where you shouldn\u2019t give in to a rent credit. So for example, there was a water leak into a unit and it was because of the weather. Ice had dammed up on the roof of the property. Water started seeping in behind the ice and it leaked into some of the units and it damaged some of the contents, the property that the tenants had in there. And we had our insurance cover repairing the drywall, getting in there, making sure there\u2019s no mold forming, taking care of the unit as quickly as possible. The tenant wanted us to cover the contents that were damaged. And that is why a tenant has renter\u2019s insurance. So that was one instance where we didn\u2019t give our rent credit that we had the tenant go to their renter\u2019s insurance to cover their personal property in the unit.<\/p>\n
So that\u2019s interesting. Have you come across that situation often where there\u2019s something that the tenant could have done to sort of prevent it on their end? Like in this example, they don\u2019t have the renter insurance so is that a hard line that you draw all the time with all your properties?<\/p>\n
Well, this one was because it wasn\u2019t like any neglect on our part that something happened to the unit. So it was because of the weather that the ice build up on the roof. There was nothing we could have done to prevent that during that time. And so, that\u2019s why we had them go\u2026 And they actually did have renter\u2019s insurance, they just didn\u2019t want to use it because you make a claim, your premium goes up. So if maybe there was something that was neglected on the property and that did cause damage to the tenant\u2019s property, then yes, I would feel that it would be my responsibility to give them a credit or to give them money towards replacing whatever was damaged on the property.<\/p>\n
Yeah, it\u2019s an interesting distinction because in short-term rentals, it\u2019s the very same thing. If it\u2019s something that\u2019s my fault, I will always offer to try to make it right in some capacity or refund them for the inconvenience. I\u2019ve just had two\u2026 I\u2019ve had actually a lot, over the last week, I would say probably a list of 10, not catastrophic items, but 10 things that have just really taken my time. And so, two examples here, in my Scottsdale house, in David\u2019s Scottsdale house, our water heater went out and it kept going out on the guests. And so, in those instances, that\u2019s on our fault, not really a neglect thing, but obviously, the water heater, you don\u2019t know when it\u2019s going to go out. So we had to refund the guests for that instance.
Fast forward to like two days ago, and my guests actually happened to lock themselves out of my house. Now, we have electronic keypads on both doors, but the guests managed to lock the deadbolt for both doors and they decided to leave through the garage for whatever reason and they closed the garage. And so, when they called us, they\u2019re like, \u201cHey, the code\u2019s not working.\u201d And fast forward to like four hours later, they were really, really, really, really mad. And I\u2019m like, \u201cWell, I mean, you guys locked the deadbolts and locked yourself out. You went past my fail-safes here and you still managed to lock yourself out.\u201d And so, that was an instance where I was really sympathetic and I apologized, but it wasn\u2019t an instance in which I would\u2019ve offered a refund because there\u2019s not really anything I could have done about that. I sent a locksmith out, I helped him out, I adjusted very quickly, but that\u2019s not something that I wanted to take the blame for just because that was such a niche scenario that\u2019s never happened in my 1000 stays, five years of hosting.
David, I know that you have properties across the country, I know you\u2019ve really scaled your operation really from coast to coast here. So what do rent credits really look like for someone at scale like yourself?<\/p>\n
First thing I\u2019ll say about this is that I haven\u2019t given rent credits out before. Doesn\u2019t mean I never would, but like Ashley said, it would have to be something where I messed up. I would also say I\u2019m more likely to voluntarily offer a rent credit than have a tenant try to hold me hostage, which I think is what happens a lot of the time. You work in the restaurant industry for a while and you get those people that complain about everything they can about their food because they\u2019re hoping that you\u2019ll give them something free. That\u2019ll usually cause me to just be more firm than I normally would\u2019ve been.
On the other side though, I will say it\u2019s better to give someone a rent credit than to decrease what their monthly rent is. And that\u2019s because with rent control, that\u2019s starting to pop up in more and more cities and inflation increasing so quickly, if you spend a couple years not increasing your rent, you can get really, really far behind and then be unable to increase it to market rent because of rent control restrictions.
And since a lot of these properties are valued based on the income they bring in, if you have a property that\u2019s renting for below market rent, we see this a lot in San Francisco where there\u2019s a building that comps would say it would be worth $2 million, but the rents are from 10 years ago, they haven\u2019t been able to keep up. So the property, no one wants to buy it if they\u2019re going to be renting out for a thousand dollars a month because they can\u2019t raise the rents to the $5,000 a month number that they should be. So in those scenarios, rather than discounting, someone\u2019s monthly rent, which I think a lot of landlords do when they\u2019re trying to have a good heart and they\u2019re like, \u201cOh, I\u2019ll keep their rent low.\u201d No bump their rent up and give them a credit instead. It\u2019s the same to them, but you don\u2019t fall behind with the laws for rent control.
The other little caveat I\u2019ll add is a lot of times, property managers will ask you as the landlord to pay for something because they\u2019re more likely to get money out of you than the tenant. So I just got a DM from someone that was asking me that the tenant screwed something up, messed up the plumbing in the toilet. And then, the property management company tried to build a landlord and say, \u201cHey, this is what the plumber bill was.\u201d And they were saying, \u201cHey, is this on me or is this on the tenant?\u201d
And I had the exact same scenario, I had a tenant who said the toilet is overflowing. We send out a plumber, the plumber pulls out a little stuffed animal from the pipes of the toilet. And I said, \u201cYeah, send me a picture of that.\u201d And I sent it back to the landlord and said, \u201cI wasn\u2019t in the house to shove this thing down the pipe so I\u2019m not paying for this plumber.\u201d And the tenant put it on to the rent that month. So sometimes you have to pay a little bit of attention, because you just assume that the property management company\u2019s going to bill you as a landlord before they go to the tenant because it\u2019s faster for them and they\u2019re more likely to get the money out of you.<\/p>\n
Sure. I think that\u2019s fair. I hate when that happens, by the way. I tried not to stuff stuffed animals down my toilet as much these days, because those plumbing bills are really expensive.
But I also wanted to ask, are there any creative uses of rent credit that anyone here can speak to? I know for me, I know that I can reimburse a short-term rental guest their nightly rate or part of their nightly rate if I have to. But what I like to do is actually offer them sort of like a dinner, if you will, or sometimes we\u2019ll send like a bottle of wine or something like that because I feel like that\u2019s more personal.
It\u2019s like, \u201cYes, I could reimburse you a hundred dollars and I\u2019m sure you\u2019d be happy with that,\u201d but what I like to do is say, \u201cHey, I\u2019m so sorry about that. What I\u2019d like to do is just buy you and your family dinner. Is that something that you guys would be okay with? Just send me the receipt when you\u2019re done and I\u2019ll send you a reimbursement through Airbnb.\u201d And most people, typically, are very happy with that just because they\u2019re like, \u201cOh, that\u2019s a very nice thing that you\u2019re willing to do. And I think it goes a little bit further than just sending like a blank check in the Airbnb system, if you will.
So Craig, as our resident house hacking king here, can you tell us a little bit about how rent credits work in your space? Because I know when you\u2019re coexisting and living in the same space as someone else, what does that like? Is it tough to have conversations that might require you to either approve or deny a rent credit to your tenant?<\/p>\n
Yeah. Honestly, it\u2019s very similar to what Ashley mentioned. Right. The way I kind of look at it is I\u2019m giving these people a product, right, I\u2019m giving them a place to live for relatively inexpensive and in return, they\u2019re paying me rent. And so, at any time that product is damaged, then I would be willing to hear about a rent credit. And so, kind of like Ashley said, a lot of times, if there\u2019s maintenance or something kind of happens, there was one time recently where our water pump was broken and we didn\u2019t have water for like three days. And I gave the tenant like a hundred bucks discount on rent for her rent convenience. And she was super happy with that. And oftentimes, I\u2019d like to try to get ahead of it versus have them ask for it because then it makes relationship that much better if they don\u2019t have to ask for it and they\u2019re more likely to stay, reduced turnover, and in a rent by the room situation, turnover is actually a pretty big deal so anything you can do to reduce turnover is something I would highly recommend.
In terms of like having the conversation when they ask for it and I don\u2019t want to give it to them, again, I try to bring it to the lease, right, I try to keep things really simple. But again, if they\u2019re like really upfront, if they\u2019re really crazy about it and they\u2019re starting to act emotionally, oftentimes, depending on the amount, I will just give in just to kind of let the problem pass so they feel like they\u2019re having a good place to live. Because at the end of the day, you need to make sure that these people enjoy where they live or they\u2019re going to make your life\u2026<\/p>\n
I mean, that makes sense. I think if you offer it up, it\u2019s usually a delight to people versus if they have to ask for it, then tensions are always going to be a little high, which is obviously something that you probably experience in the house hacking arena. So I actually wanted to get into that a little bit. [inaudible 00:14:35]. Can you run us through some of the pros and cons of renting by the room? And this could be in the capacity of house hacking could also be if you wanted to just have a lease where you were renting all the rooms individually. Give us a little bit of kind of the both sides of this concept.<\/p>\n
Yeah. So the pros are, obviously, you can make a lot more money. Right. For example, I\u2019ve got a house in Denver, it\u2019s a five-bedroom, two-bath. And if I were to rent that as a single-family house, I\u2019d get about 26, $2,700 a year. From a rent by the room perspective, I can get between 37 or $3,900 a month. Sorry. 26 and $27 a month or $3,700 a month. So we\u2019re talking a thousand dollars a month difference just by renting by the room. And so, you really need to take a look at it and see if it\u2019s worth it for you.
The cons, right, is that it\u2019s a lot more work, there\u2019s some tenant conflict, no one really feels like they own the house, they have ownership of the house so, there\u2019s a little leak under the sink, they\u2019re less inclined to fix it like someone in a single-family house might. And so, it\u2019s a little bit more management intensive, but it\u2019s a lot more profitable. And in expensive markets, especially ones like Denver, Seattle, and kind of these tier two type markets where you can rent by the room and make things work, I think it\u2019s a great way to be able to house hack and to be able to cash flow and live rent free in expensive market that you can also get appreciation. It\u2019s a way you can have your cake and eat it too with great cash flow and great appreciation.<\/p>\n
Sure. David and Ash, I\u2019m curious, have y\u2019all ever done the house hacking thing? Any point in your real estate journey, have you ever done just a very simple house hack?<\/p>\n
I have not done one and I wish that I could have, that I would\u2019ve known about it before I built my house, but I actually did it through my sister. So she was fresh out of college and wanted to buy property so I got her to purchase a duplex and I partnered with her on it. We were 50\/50 partners and I gifted her the down payment for the property. She went and got an FHA loan and she lived in one unit, remodeled the whole unit, moved out to the upstairs, rented out the bottom one with increased rent. And now she lives in that unit where she could rent it out for probably $900 a month. She lives there for 50 bucks a month.<\/p>\n
That\u2019s cool. David, what about you?<\/p>\n
I live through her.<\/p>\n
Vicariously house hack through your sister.<\/p>\n
Vicariously is all that matters.<\/p>\n
I was sort of on the other end of house hacking. So I rented a room from someone else until I had maybe eight or nine houses as rentals. And then I bought the house that I live in now and I rented out rooms just to people that needed them. I wasn\u2019t really super serious about them. The problem was parking with that property. It\u2019s this big 2,800 square foot house with four or five bedrooms, but there\u2019s nowhere to put the cars for everyone. It\u2019s an HOA, you can\u2019t park on the street. So that one didn\u2019t work out great.
But over the years, I\u2019ve just rented rooms out to people that needed it. And now, I wanted to get a deal that I was going to split into several smaller units, but the only way I can make it work is if I lived in it as a primary resident. So because I\u2019m not home that much, I\u2019m just having that house turned into several units and I\u2019ll be living in one of them myself and renting out the other ones, and then, I\u2019ll move out of it and rent it out. So I suppose, that would be like my first official house hack, which is kind of funny that this deep into my career I\u2019m doing it.
But the way that I look at it is you sort of conform yourself to make real estate work for you. You don\u2019t try to force real estate to bend to work for what\u2019s convenient for you because that\u2019s where you just get frustrated with it all the time. I think Craig made a really good point, the way that I look at investing in real estate at this point in my career is it\u2019s more about principles than just like, \u201cGive me a formula and I want to follow that exact specific formula forever,\u201d because the market changes too much to have one formula that you can do forever.
The principle is that the more work you\u2019re willing to do, running a by the work room is a little bit more work than just renting out traditionally, the higher your profit will be. So you can have a spectrum and on one end is comfort, on the other end is profit. And the more that you can move yourselves towards profit and away from comfort, the more deals you can make work and the more wealth that you\u2019re going to build. So we all have to kind of ask ourselves where on that spectrum we\u2019re willing to go. But I do think it\u2019s important that you recognize, if you\u2019re sitting at home saying, \u201cI love my primary residence, I just couldn\u2019t house hack,\u201d maybe that\u2019s why you haven\u2019t bought a house in the last four years, maybe that\u2019s why you\u2019re not going to build wealth like somebody else who realizes that that comfort is very, very expensive when you look at what real estate can do for you over a 30-year timeframe,<\/p>\n
Totally. I mean, you have to basically surrender your comfort for a while, right, so that you can get into whatever dream in the real estate space that you want. I\u2019m a very serial, like redfined scourer, and I have been my whole life. And anytime I saw a property I couldn\u2019t afford or that was like just out of reach, I was always like, \u201cHow can I make this work? How can I make this work for me?\u201d
So when my wife and I moved from Kansas City, our house there, I think our mortgage is like 1100 bucks, and we moved to LA, which is smart, right, we were like, \u201cYeah, why don\u2019t we just pay four times more for a house out here? That makes a lot of sense.\u201d We moved out there and we saw this house that was, I think, at that time, $624,000. So it was easily four times more expensive than our Kansas City house. But this house had a 279 square foot studio apartment underneath. And I was just getting into Airbnb and I had calculated, \u201cWell, I think if I rent this little studio out for a hundred to $125 a night, I think I can make like two or $3,000 a month. And that\u2019s exactly what it was.
But I always had to convince my wife on that because she\u2019s like, \u201cI don\u2019t want to deal with having to talk to people. I don\u2019t ever want to go like take them down an extra roll of toilet paper or whatever.\u201d And I was like, \u201cNo, it\u2019s cool. Give it to me. I like meeting my guests. It\u2019s all great.\u201d And so, that was solid. We lived with people from that point on for probably like three or four years after that. And that\u2019s really what accelerated our rental portfolio because I really attribute everything I have to house hacking, because we were able to save, at this point, probably 180 to $200,000 worth of mortgages, we were able to save that up and apply that to different pieces in our portfolio now. So I wouldn\u2019t be where I\u2019m at if it weren\u2019t for house hacking. So I\u2019m very grateful for that.
And just in case anyone at home doesn\u2019t know what that is, that it is renting out a space in your house or a space on the lot of your house and using that rent to subsidize your mortgage. That\u2019s all it is. There\u2019s so many ways you can house hack so get creative with it and figure out how you can get out of your mortgage. Because I think the faster you don\u2019t pay a mortgage, the faster you can really use that money to snowball into the next thing here.
So moving on into the next question here, we have kind of a specific scenario here. So someone asks, \u201cAfter a few months of having a property under contract and waiting for lawyers and title to clear everything, we are finally ready to close on an investment property. This property is a mixed-use commercial retail storefront and two apartments above. The property is occupied with leases in place. My question is what would the next step be after we close? Should I send out updated leases with our new landlord information? I know that the old leases that are being used are still binding until they expire.\u201d Anybody have any insight on this one?<\/p>\n
I think this is right up Ashley\u2019s alley.<\/p>\n
You know what? I am ready for this question, David. So for this one, the first thing I would do, before you even close on the property, is send out a estoppel agreements to the tenants. So get the current owner\u2019s permission to do this. And what they are is basically you\u2019re sending them a piece of paper that asks for them to verify the information that\u2019s on the lease. And you may find out more information about the property. So have their name, their contact information so that you do have all of that when you\u2019re ready to close.
And then you\u2019re going to ask, who are the residents of the property, so that you have everybody that\u2019s currently living there. And then you\u2019re going to go through, \u201cOkay, how much do you pay a month? Do you pay any additional fees? Who pays the utilities? Are there any repairs or maintenance that need to be done in your property? Who handles the landscaping, who handles the snowplowing?\u201d Everything like that and just go through it. \u201cDo you own the appliances? Do the landlord own the appliances?\u201d So as many questions as you can think of, you put onto this form, you\u2019re going to send it to the tenants or go and hand it to them and have them send that information back.
And then, you can go through the lease agreements and kind of compare them. So if there are any differences, you can go ahead and clarify that before you actually go and close on the property. And then, when you do close, that\u2019s the time to make sure they have your information to send you the new rents. You\u2019re going to maybe send them kind of a welcome letter stating as to, \u201cHere is how everything will work now. So your rent will be paid online, electronically through this website. You\u2019ll have your own portal. And this is how maintenance requests are handled.\u201d And you kind of tell them your systems and processes to handle things once they close on the property and it switched to the new management.<\/p>\n
Yeah. Yeah. They also asked, \u201cShould we do a walkthrough and talk to all the tenants?\u201d So it sounds like we should probably talk to the tenants. What are your thoughts on specifically doing a walkthrough of the tenant space if they\u2019re already occupying it?<\/p>\n
Yeah. So usually I would do that before I even get to commitment on the property or get close to closing. That\u2019s something I would do. But if you\u2019re doing it after closing, you just send them a notice. And usually it will state in the lease agreement that they currently have if you have to give them 48 hours notice, 24-hour notice and you would just send them a letter stating that you would be going through the property. They did say they had commercial properties so those will probably be easier to get into than the residential, where you\u2019ll have to kind of coordinate with the tenants, but you can go through with them. And if you want to ask them what needs to be done into the property or let them know they\u2019re going to be making repairs on the property.
And then also, taking pictures because when they go and move out of this property, it will be very easy for them to say, \u201cOh, well, this was like this when I moved in,\u201d if you don\u2019t have any kind of inspection form that\u2019s signed by the previous landlord and the current tenants that are in place. So that would be another thing too is documenting everything and asking them if there were things that were not taken care of when they moved into the property.<\/p>\n
Sure. Yeah. By the way, whoever asked this question, I just want you to know, this has been a dream of mine for a long time to own a place sort of on a main street where there\u2019s a lot of foot traffic and everything like that, the bottom floor is like a coffee shop or some kind of commercial space, and then two apartments above, one that\u2019s a tenant and one that\u2019s me. And then, have it be like one whole, I don\u2019t know, like a cash-flowing machine that pays for the building. So kudos to you for locking that down.
On my next question here, David, I think you probably have some insight here just because you run such a big team that\u2019s doing this every day. This person asks, \u201cAre in-person rental showings a thing of the past or still valuable? In this post-pandemic world where virtual meetings and showings have become much more standard in everyone\u2019s lives, is it possible or is there anyone out there not doing any in-person showings at all?\u201d What\u2019s that shift been like for your team, Dave?<\/p>\n
In-person showings for rental properties?<\/p>\n
I think so. Yeah. Or like selling homes too.<\/p>\n
No, people are still seeing homes, that still happens in-person. There\u2019s not a whole lot of people that are buying stuff site unseen. Maybe an investor might do something like that, but even then, as we\u2019re seeing more and more properties moving into the short-term rental space, it\u2019s moving back into where you need to see the house, the floor plan, how it flows. When we were in, the only way that you rented out properties was a long-term rental, they were going to have a lease for 12 months and they were going to collect rent every single month, it was kind of like apartment complexes but just applied to residential housing. So the tenants were just going to pay whatever the market rate was for a two-bedroom, one bathroom or a two-two or something and the floor plans very rarely ever played a role in the property.
But when you\u2019re renting at a short-term rental, you\u2019re going to be paying more, you have sort of the pick of the litter where you want to go stay, the floor plan does become a lot more important. So I would say I\u2019ve seen just as many showings as we ever had before. The difference would be, people aren\u2019t going to look at a house as their first piece of due diligence. There\u2019s a lot of work that you can do and then you kind of narrow down the amount of houses they actually go see because there\u2019s information available that you can weed some out. Old school, you just had to go look at the house and you were going to learn everything about the house when you were seeing it.<\/p>\n
Yeah. I mean, they seem like they have some pretty strong opinions here because effectively, what they\u2019re asking is, \u201cWhy should we still take them through the unit? This seems like a waste of me and my staff\u2019s team. Gas, at the time of writing this, is crazy high. The type of properties we manage are 50 units and under spaced all over multiple cities. We fill each unit and don\u2019t have a model unit like some large complexes.\u201d So I think they just think that because of the technology available, it\u2019s not really a necessary thing, but you feel like it is pretty necessary at this time still?<\/p>\n
You don\u2019t know what a house smells like when you\u2019re looking at a video. I can\u2019t tell you how many times good realtors can make a house look much better than it really is. Catfishing is real in real estate investing, it happens all the time. So it\u2019s very easy for you to-<\/p>\n
The original.<\/p>\n
Yeah. Wide angle lenses and show flattering angles. And then you go look at the property and you\u2019re like, \u201cWhat I thought was a dining room is half of a breakfast nook. I\u2019m half impressed they made it look that good and half angry that it\u2019s that bad.\u201d So if you\u2019re smart, you\u2019re still going to go look at a property before you sign a 12-month lease. My advice to this person, if you don\u2019t want to meet them there, is put a code on the door, put a SimpliSafe camera, who sponsors BiggerPockets, up on the entryway so you can see who\u2019s going in there. Take anything out of the house that they could steal and just let them go in there themselves and go check it out and then go back out rather than you drive all the way. I don\u2019t think they need you there to go see the unit, they just need to be able to see it.<\/p>\n
Ashley, what about you? What do you think? For your portfolio, how are you handling showings?<\/p>\n
Yeah. Well, I\u2019m using a third-party property management company right now, but I was going to kind of touch on what David said about doing the keypad lock. If you\u2019re using property management software, a lot of them actually have this integrated now where you don\u2019t even have to talk to a person to do a showing or to lease an apartment so you put all the information online. Some of the software actually has like AI intelligence, artificial intelligence that will respond. So you give this robot all the information about the unit. People look at the listing online, they can send a message to ask a question about the unit and then the AI will respond to it.
If you are going to do in-person showings, you can actually put your schedule online as to when you\u2019re available. Someone can go ahead and click to sign up for it, sign up for that showing. You get a text message that there\u2019s a showing at this time. Or like David said, you go ahead and you put the lockbox code. So to get the actual code, they have to scan their license, a copy of their license into the software. And then, they will get an access code that\u2019s valid for a certain window of time, maybe it\u2019s a half hour window of time, they get to go into the property. And then, when they leave, the code changes to something else. So instead of just doing virtual videos, like the property management company I was using, they were doing YouTube videos to do virtual showings, but there\u2019s so much technology out there where you can get people into the unit without ever having to talk to them or without ever having to go and take the time to show them the unit too.<\/p>\n
Yeah. Awesome. Craig, what about you? Any final words of wisdom here on whether or not the age of showing your homes is over?<\/p>\n
Yeah. I think what David and Ashley said are pretty on point. One thing I would add is something that we do is we kind of do like an open house approach. And so, like Ashley, I\u2019ve got most of all my stuff on property management now, but back when I was doing the house hacking thing more vigilantly, we would just do a\u2026 Nice, David. We would do like an open house. Right. And so, I would just say, \u201cHey, we\u2019re going to be showing this house on Tuesdays and Thursdays from five to 7:00 PM.\u201d We\u2019d have someone show up there with their computer. They can go on there, so it really wouldn\u2019t be a big waste of their time if no one showed up. And so, then you\u2019re kind of limited to, \u201cOkay, I know I\u2019m looking to be there two days a week.\u201d It promotes some competition if there are people there at the same time. And I found that you can usually send them applications right on site as well. And its helped us a lot. I love the open house approach if you need to do it in-person.<\/p>\n
Yeah. Yeah. I mean, there\u2019s no right or wrong here, right, guys? There\u2019s just what\u2019s right for you. That\u2019s what I always say. Moving on to kind of the next question here. Someone asked, \u201cHow do you stay informed on your local markets or markets that you invest in?\u201d David, you just put in 15 offers on homes and I think you just close on them. So tell us about that. How did you come across these markets? How do you find yourself even locating any of the markets that you\u2019re investing right now?<\/p>\n
Well, this should be an entire podcast episode. I\u2019ll see if I can keep this relatively short to give my co-guests here an opportunity to talk. The first thing I look for is where people are moving to. So my philosophy, everyone has their own, I feel like most investors, especially those that start off, they don\u2019t value location as much as someone in my position does. So my philosophy is, the only thing I cannot change about a house is the location. I can literally change everything else. So rather than saying, \u201cAll right, where can I get cash flow?\u201d And just going for what looks to be the strongest cash-flowing house they can find, and then talking themselves into why they should buy that property, which often leads you into buying in these like D-minus areas that everything in your gut is screaming at you avoid it, but the spreadsheet magic is just so tempting. Right. It\u2019s like that little hypnotizing thing saying, \u201cBuy me,\u201d and you start coming with all these excuses about how you\u2019re going to make this deal work.
I start with the best areas that I think are going to have the most growth. It\u2019s not speculation, it\u2019s delayed gratification. I don\u2019t really look at where rents are going to be, or I should say, the ROI is going to be incredibly strong in year one, I\u2019m looking at it in years five through 10. Where am I going to see the most growth? And right now, this is areas where Californians and New Yorkers are moving to, they\u2019re bringing a lot of money, they\u2019re bringing the best jobs. So I looked for areas that have warm weather, because Californians need that. Like someone like me that grew up there, we\u2019re not going to go live in North Dakota. There\u2019s just no Californian that\u2019s going to do that. Low or no state income taxes, because right now we\u2019re paying 13 and a half and every year we hear them trying to push another bill forward that\u2019s going to bump our state\u2019s income taxes to 18%. So you throw that on top of almost like 45% federal taxes and you are over 50% of your income is getting paid in taxes at the high tax brackets.
And then, right now, I think the trend where we see the most growth happening would be the sort of like conservative minded political environments. I think the last five to 10 years, the liberal minded political environments were crushing it. We saw huge growth in San Francisco, in Seattle and Austin, Texas. And now, the people that are moving tend to be the more conservative minded ones and they\u2019re the ones bringing money with them. So I\u2019m looking in Tennessee, I\u2019m looking in South Florida, I\u2019m looking in Texas, and then I\u2019m looking in some of the areas like Idaho, Arizona, Nevada, because I\u2019m just seeing that\u2019s where I think that the money\u2019s going to be going to.
The next thing I look for is where is there a constraint of supply? I don\u2019t want to go buy in an area like Kansas that has so much land that they could just build a million houses and their value\u2019s never really going to go up. Part of the reason why Austin and Seattle did so well, and San Francisco, is there\u2019s not really anywhere to build in any of those cities. The supply is constrained and when the supply is constrained and the demand goes up when people move there, you\u2019re going to get, not only rising prices, but rising rents. A lot of people say, \u201cDon\u2019t buy real estate and bet on appreciation.\u201d Well, appreciation happens in more ways than just prices going up, rents go up too. And it\u2019s much more profitable when you buy in a place where rents go up significantly and consistently every single year.
And then, once I\u2019m there, I say, where is the soft spot in this market? So my strategy has been to target the properties that other people are either afraid of buying or the buyer pool is thin. Think about climbing Mount Everest, when you get to the top, the air is very thin, there\u2019s not as much oxygen. When you\u2019re competing with the lion share of the buyer pool, they all want that same starter house at the really low price point that makes you feel really safe. Even when we\u2019re having a correction in the market like we are right now, you don\u2019t see that very much in the starter homes because 80% of the buyers are all competing over those properties.
So I\u2019ve stepped into the luxury space and every market has its own luxury space. Some places, a $500,000 home is luxury, some places, a $2 million home is luxury. You have to figure out where that is in the market, but I\u2019m looking for that. And then when I hit all three of those and I get the high day on markets, I\u2019m then looking for properties with terrible marketing, really bad realtors that are selling them. I pay attention to the news and I look to see like when is the fear porn going out and everyone\u2019s freaking out. That\u2019s when I write the most aggressive offer.
So as odd as it sounds, I always feel like the investors are asking the wrong questions, they\u2019re saying, \u201cWhat\u2019s the software that I can use that will do all the work for me and bring me the best deal and all by that one?\u201d And I\u2019m looking at it more from a psychological perspective, where do I find the seller that\u2019s having the most fear that just wants to get that property off their hands and they\u2019re going to be the most motivated.<\/p>\n
David, even just with market analysis, since we\u2019re kind of covering landlording, not only is it important to kind of study your market, what\u2019s going on with purchasing there, but also what\u2019s going on with landlord laws too and staying on top of that because those can also change just like short-term rental laws and regulations are changing in cities too. So I do have a resource for everyone to find out state specific landlord laws in your area. So you can go to avail.co\/education\/laws. And they actually have a breakdown of every single state and showing what the landlord tenant laws are in that state.
And then if you go to your local housing authority, so in Buffalo, New York, where I\u2019m from, for example, there is Section 8. And the Section 8 housing authority that gives out the vouchers is called Belmont Housing. And on their website, you can actually sign up for free or low-cost houses to kind of learn about being a landlord. They actually train you because they want the landlords to obviously provide fair and safe housing for the people with the Section 8 vouchers.
And then, there\u2019s also another one called homeny.org. And this is another housing authority in Buffalo and they give out free classes or low-cost classes too to landlords. And they also create books. Every couple years, they\u2019ll go through and create just like a landlord guide to being a landlord in New York state. So using resources like that to stay on top of the laws.
And then, also having an attorney, having an attorney review your documents. If you have a question like one of the biggest controversial issues that I see across the country are therapy dogs and, \u201cDo I have to allow a dog because it\u2019s a therapy dog? What are the rules for that?\u201d So just having an attorney that is real estate specific and knows these laws and regulations can really help you on issues that may be case by case basis and not as clear cut too.<\/p>\n
So what haven\u2019t we asked about landlord? Are there any final words here before we kind of start wrapping up?<\/p>\n
Well, we could talk about the fact that you don\u2019t have to do it. People like me don\u2019t really landlord for ourselves, we have property managers that handle that. And I like that element just because I don\u2019t want to have the tenant saying, \u201cHey, landlord\/owner\/neighbor, this thing\u2019s broken. Can you come fix it for me?\u201d And now you got to say, \u201cWell, that\u2019s kind of on you.\u201d And then they\u2019re mad at you and now this is also your neighbor who\u2019s upset with you. So I prefer to just have a buffer in between us and let a professional handle it. And it also, in my opinion, gives me an opportunity to bring a job, a wage, a career into the real estate field for someone that wouldn\u2019t have had it. I\u2019d much rather let someone else kind of learn the business, doing the work for me and then I can focus on making a better process, a better system, getting more properties, whatever the case may be.<\/p>\n
I think if someone\u2019s trying to decide which way to go, there\u2019s no wrong answer, but if you are going to self-manage and that\u2019s how I started out, I self-manage, is make sure you take advantage of software, make it easier on yourself, but also make sure you understand fair housing laws and what the rules and regulations are, that you educate yourself on that.
And as far as going into using a property management company, just realize, it may not be as passive as you think it is. You may still need to act as an asset manager, as in, every month when you get the owner reports going through, what the charges are, making sure that when your unit is becoming vacant, that they are listing it and that it is getting rented out.
So that was a mistake I made when I hired property management. It ended up being the month before COVID started and I was like, \u201cOh my gosh, this was perfect timing. This is great. I feel like a weight is off my shoulder. I have all this free time, I can do whatever.\u201d And then, a couple months went by and I was like, \u201cWhoa, wait a minute. What is going on with these charges? What\u2019s happening with this?\u201d So now every month I have an asset manager who goes through the owner reports. He is the contact person for the property management company if they have any requests or approvals they need made and he just makes sure things are getting done. So just make sure you are seeing the whole picture before you decide to either self-manage or to hire a property management company.<\/p>\n
Right. And scale up accordingly. Right. A lot of people try to jump in and they\u2019re like, \u201cI\u2019m ready to do this, go full-time. I want to buy 10 units.\u201d I\u2019m like, \u201cJust do one, do your first one, make sure you like this because what if you don\u2019t, then you have 10 properties, you got to figure out what to do.\u201d And I\u2019m a really big proponent of self-managing for as long as possible just to learn the business and understand the business. That way, when you do delegate it out, you understand if your property is doing a great job or not.
Craig, what about you? Any final words before we hit it into the final question here?<\/p>\n
Yeah, one thing I kind of want to touch on is a little bit about kind of like what market to choose. And I think a lot of people get held up on when they\u2019re trying to pick a market for their first deal or going out of state. And really, you just got to pick one. Right. You are going to find cases for and cases against every market in the United States. I don\u2019t think anyone is perfect and I don\u2019t think anyone is horrible, there\u2019s deals in every market.
Personally, when I look to find deals outside of where I live, I go to places where I know other people have invested, I know they have a team and I know that I can ask them for like, \u201cHey, who do you use for a property manager? Who do you use for a realtor? Who do you use for a contractor?\u201d And that just alleviates so much time, stress and energy from me. I don\u2019t even care if it\u2019s like the best market or the most appreciating market, but if I can hit that easy button and get my team just like that, I think that\u2019s invaluable.<\/p>\n
Yeah. Landlording can drive you crazy.<\/p>\n
As we can see in your eyes here. If you\u2019re on the podcast, be sure to watch this on YouTube so you can get the full visual presentation here. Final question before we head out, why is education important across the board?<\/p>\n
I think I kind of touched on this a little bit with becoming a landlord, is just knowing what the laws and regulations are because you can get in trouble for not being compliant. But I think another part of it is that you can save money by just knowing what you have to do upfront. So even like with doing a rehab on a property is knowing what permits to get or what needs to be done, can save you a lot of money when the building inspector comes and is like, \u201cOh no, you need to have a permit for this. This needs to be inspected. And you need to rip out all this plumbing.\u201d So being educated and doing your research or having people on your team that know these things will just save you money, but also, so you don\u2019t get sued.<\/p>\n
Right. Right. And ultimately, I guess what you\u2019re saying here is that education, well, A, is a lot less expensive than a lawsuit, but also a lot less expensive than mistakes in general. Right?<\/p>\n
Mm-hmm.<\/p>\n
What about you, Craig? Why do you think education is so important across the board?<\/p>\n
When you learn anything new or when you\u2019re trying to get into anything new, education always comes first. Right. Education times action equals results. And so, you can keep adding education, adding education, education, but if that action is zero, you\u2019re never going to get anything. But also the other way around, if you\u2019re all action, all action and no education, you\u2019re not going to get anything. So the first step I always think is education. If you\u2019re listening to this podcast and you go to one of these boot camps, your education is going to be there. By the time we\u2019re done with the bootcamp, you\u2019re going to be ready to take action. Then all you got to do is worry about that second part, which is action, and then successful [inaudible 00:43:08].<\/p>\n
Awesome. Well, speaking of education, Ashley, I know that you\u2019re hosting a boot camp here so do you think you could maybe tell us a little bit about it?<\/p>\n
Sure. Yeah. I\u2019ve hosted for the past year Real Estate Rookie Bootcamp, where we actually did a live event. And then, we did about four virtual sessions where we just went through how to basically get your first deal in 90 days, how to feel comfortable and confident with making offers. And what does that process actually look like? And now, I\u2019m launching a new one where it is all about landlording. So whether you want to self-manage your property or you just want to know how to be a landlord so you can oversee your property management company, this bootcamp goes through everything you need to know from the day you purchase your property and you\u2019re ready to lease it out to handling the daily operations of doing property management such as the maintenance, the communication, like collecting your rent, everything like that.<\/p>\n
And Craig, what about you? You\u2019re also hosting a bootcamp, right?<\/p>\n
Yeah, so we\u2019re hosting the BiggerPockets House Hacking Bootcamp. And so, in this 10-week course, we\u2019re basing going to teach you everything. If you knew next to nothing about house hacking, you\u2019ll be ready, willing, and able to buy a house hack after these 10 weeks. We\u2019re going to go into how to find a house hack, how to analyze them, how to market your listing, how to get tenants, how to pick an area, how to build your team. Anything you need to know is there. And then, of course, we\u2019ve got the Q&A for anything that we may have missed. So definitely come check it out. Hope to see all you guys there.<\/p>\n
Awesome. Well, if you want to learn more and get signed up for the different boot camps, you can go to biggerpockets.com\/enroll. And if you go to that URL I just listed, biggerpockets.com\/enroll, you actually get 10% off starting when you enroll in boot camp using the code, Boot Camp 10. Okay, so with that, that concludes the panel. How did I do? How did I do as the moderator, guys? I do okay?<\/p>\n
Very moderate.<\/p>\n
Yeah.<\/p>\n
Yeah. Very moderate. I moderately did okay. That\u2019s all I aim to do.<\/p>\n
You are the okayest.<\/p>\n
Well, you know what? My sister actually bought me a shirt one time that says, \u201cWorld\u2019s okayest brother,\u201d and I really embrace that role. So people want to learn more about you, David, where can people find out about you on the interwebs?<\/p>\n
You can find me on every social media, @davidgreene24, and then YouTube, at David Greene Real Estate.<\/p>\n
Ashley, what about you?<\/p>\n
You can find me on the Real Estate Rookie Podcast, which I co-host with Tony Robinson. You can find me mostly on Instagram at Wealth Firm Rentals, and then also, on the Real Estate Rookie YouTube channel.<\/p>\n
That\u2019s awesome. Craig, what about you? Do you have any seek any Finstas out there that you want to tell us about?<\/p>\n
Yes, sir. So yeah, you can find us, we have a podcast called Invest2Fi and also, I\u2019m on Instagram, I\u2019m at The Fi Guy, and TikTok and all those good things, so The Fi Guy.<\/p>\n
And Rob, if people want more moderately valuable content, where can they find it? How about you?<\/p>\n
Well, you can find my moderately entertaining and comedic videos over on YouTube at Robuilt. You can find me on Instagram at Robuilt as well. And on TikTok, if you want even more moderately comedic stuff, you can find me over at RobuiltO, just add the O.<\/p>\n
And if you didn\u2019t know, BiggerPockets has an entire YouTube channel where you can get more content just like this. I just had a video released today with Christian, where we\u2019re talking about the market, loan products, interest rates, what\u2019s working, what\u2019s not working, lots of stuff that will help make you money. So after you\u2019re done listening to this podcast, go check out the BiggerPockets YouTube channel and listen to some more.
Ashley, Craig and you yourself too, Rob, great job everybody. This has been a lot of fun. Hopefully, we can do more of this in the future. I\u2019ll let you guys get out of here. This is David Greene for Rob, the Moderator, Abasolo, signing out.<\/p>\n<\/div>\n