1307: Q&A "Ask Jennifer"
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Welcome to episode 7 of season 13 of the Growing Empire Show. Today is our question and answer segment. So make sure you stay tuned.
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Welcome to Growing Empires. Hosted by real estate entrepreneur and trusted investment advisor, Jennifer de Jesus. Growing Empires provides insight to building wealth through passive income producing real estate investments for those who want to build and manage a more profitable real estate portfolio.
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We've got some really great questions today. So we're gonna jump right in. Question number one, I want to invest but prices are still too high. Should I keep waiting, or are there alternative investment methods I should consider? Great question. And I definitely suggest other alternative methods at this time. I expect the prices are going to stay relatively stable for quite a period of time. It's going to take a while for the economic changes to take effect and for us to really see a huge reduction in the cost of properties and the price per door that we're currently seeing. If you have money set aside to do investing, or if you've got equity built up in a property that it makes sense for you to take out, I highly suggest that you do that sooner than later. Letting money sit around is no different than letting money sit in a savings account, it's really not doing anything for you, that money is not working for you, and if there are other alternative methods that make sense for you financially, I would definitely suggest that you take advantage of them. Because you never really want to wait till the perfect moment to invest. If you have the money, the investment makes sense, it's always the perfect time to invest. So some of the other methods that I would consider, at this time, is I would look at different types of syndications and hedge funds and look at how they're acquiring properties to date. So although the market is a little volatile, in a sense that prices are still a little high and we haven't really seen such a dramatic impact on the economic changes, we really haven't seen the foreclosures hit the market, yet, we really haven't seen the prices drop, they've been maintaining this steady flow, I would suggest that you look at those different types of investment strategies. For example, the hedge fund that Empire Capital Fund owns and operates, the one that we run, that fund is buying strictly off market deals. As a matter of fact, we just closed on a 11 unit property that we bought for $42,000 a door. Now think about this. I mean, right now, the average price is about 110,000 a door in our local market. And this was recorded January of 2023. So to give some comparison sake, the average price per door is $110,000, current today. We just bought this property four days ago, for 42,000 a door. That's a significant significant below market purchase. And we were able to acquire that direct to bank as an off market deal. And the way that we're able to do that is very different than the way that a typical investor or an investor that's working with another real estate broker can do. We've been sourcing these opportunities and sourcing these deals for quite some time. And we've been able to do this over the course of the last year. So now those deals are starting to take effect and the investors that are in our capital fund are able to really reap the rewards of all that work. Previous to that purchase, we bought a property from an estate sale. Previous to that we helped a very distressed seller that was really going broke on his investment property get out of the bad situation. And again, these are all off market deals. So if you know buying on market doesn't make sense because the cost of the property is just too high or too inflated or the cost of even money. At this point the cost of financing is too high. And you have other alternative methods like hedge funds syndications, the stock market, DST funds, any of those things, I would definitely suggest that you consider investing in those versus just holding out and letting your money do absolutely nothing for you during that time period.
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Next question. I know you own a property management company and are an advocate for property management services. But do you think that a new investor should manage their first property and learn the nuances of managing? That's a very interesting question. And I'm going to try to stay very impartial when I say this. Absolutely, unequivocably, no. Absolutely not. I've been in this business for 12 years, started going on 13 And I have never once actually witnessed any investor be successful at self managing. I mean, think about it, you go to a doctor for their expertise, you go to an attorney for their expertise, you go to your accountant for their expertise. And you never once probably thought of, oh, I'll get a medical degree or all get up my law degree, or I will get my CPA license, right? You never thought to do that. This is literally no different. It's just an expert in a different field that has licensing requirements, has to earn their stripes. You know, there's, there's so many reasons why you would not want to do this, even what your time is worth. We actually did a whole episode about what is your time worth. And we went into detail about exactly what it takes to manage a property effectively. And I can honestly say that it is not a part time job, even with one property, it is not a part time job. Property management companies are on call 24/7, for all different types of issues that arise in properties. And it's not just maintenance, it's all types of things that pertain to your tenant. So I do not suggest that you try to master something outside of your comfort zone or outside of your education. You definitely want to find the right management company and they're definitely not all created equal. But I do not suggest that you go at it alone. Every single time we've picked up a property from somebody that is self managed, the financial damages that have occurred, were so excessive, that in some cases, we can turn it around. But it's really painful. And in some cases, we can't turn it around at all, because it's just too bad. No landlord that is self managing is going to have the market knowledge, the experience, the name, the relationships with the vendors and maintenance people that, you know, you're just not going to have the same that a management company that does it every day would have. So I definitely do not suggest that you do that. And I also suggest that you've never buy properties that can't afford professional property management. Because if you are you are just buying bad deals from the start. And that's never going to work. Now, I am not suggesting that we're the one and only option for management services. And the reality is we're very full service. We are so full service that we are one of the only options that allow you to have truly passive income. So that's just something that you want to take into consideration, if it's the right type of services for you. But I definitely suggest that you get help and guidance from a professional that has experience that you would not have to manage your properties effectively if you are expecting them to cashflow. And if you are looking for passive income. Great question.
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Next question is how do you self educate yourself? And that's also a great question. So personally, I do a lot of listening to audiobooks. And I am a podcast junkie. And I listened to anything that has to do with money, finance, investing, construction, you know, local real estate news. Those are the things that just are intrigue me and what I use to educate myself. I definitely created a networking opportunity for investors that I'm also a big advocate of whether it's ours or anybody else's, I think being a part of forums and being a part of different networking events where you can learn from other people that have been in your shoes and have done different things, I think is really critical. You know, my mom told me one time, you always want to surround yourself with people that are smarter and better than you so that you always have something to learn from. You never want to be the best at anything and only have people around you that are less than. And I've kind of taken that mindset and that methodology to everything I've done. I've always tried to surround myself with people that are smarter, better and more educated than I am in any one respective environment. And I have found that to be very valuable, especially from a networking perspective. Because as I learn from those people, I can apply those learnings to my everyday life, my everyday financial status and my everyday investment goals. But podcasts, networking events, investment clubs, like the Empire Investment Club, you know, and just self help books and whether you read or listen to Audible, those are going to be very helpful and you growing your mindset and growing your personal growth.
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The episode will continue in just a moment
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As an investor, we know it's important to stay on top of market trends and real estate opportunities that add value to your portfolio. We also know that having a trusted source of reliable information to help you stay a step ahead of other investors is critical to your success. If you're interested in having these types of resources, as well as access to me and my team, I invite you to join the Empire Investment Club. A free service that gives you an easier way to make sense of today's and tomorrow's real estate opportunities. As a member of the Empire Investment Club, you'll get access to relevant resources and investment focused experiences such as live interactive webinars, market trend presentations, and investor socials designed to equip you with what you need to succeed. So whether you're an active investor, passive investor, a combination of both or just starting out, the club is where you'll get what you need to build a portfolio you love. To join, just head over to JenniferdeJesus.com, sign up, and we'll see you in the club, where everyone's on a journey to becoming a better investor.
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Next question, what's the worst mistake that you've seen an investor make? Oh, man, that's, that's a tough one. I've seen investors make a lot of mistakes. But I think probably the one that would be up there at the top
would be just being blinded by the dollar. And what I mean by that is, you can never be so concerned as a landlord about your cash flow, that you fail to make improvements to your properties. Because those things that you decided to put a bandaid on turn into much bigger problems that cannot be
bandaided in the future. So you know, if you're the type of landlord that every time you get a call from your property management company, or your resident, and says that there's a problem, you're kind of rolling your eyes and just like, you know, looking for ways to spend the least amount of money, you're probably not going to be successful in investment properties. Unless you are buying Class A, fully improved, fully stabilized investments. Because everything's going to need some work. Whether it be capital improvements, or just general repairs and maintenance, you will have to spend money. And if you got into investing, thinking that you wouldn't, you were misguided, and I'm sorry for that. The reality is, is that you have to spend money to make money. That is a really true thing. And it goes a long way, when you're talking about investment properties. What you do need to do is really focus on the long term effect of your short term decision. So whether it's maintenance, or whether it's deciding on a lease renewal term, or a lease increase for your resident, you've got to think about not only the short term, but the long term effect. We give the analogy in one of our podcasts about, you know, looking at your cash flow and knowing what your decisions have as an impact on your bottom line. And, you know, I was just having this conversation recently with an investor that was really resistant to reducing the price on their rental property. And I was only suggesting $50 as a reduction, just to get it into a price bracket, that would be a little bit more attractive. And the investor didn't want to make that $50 adjustment. And what I was explaining to him is that that $50 Difference spread over the course of an entire year is less
money than one more month of vacancy. So while you're holding on fighting for that extra $50, because you think that it's what you've got to do to make money, you're not looking at the full picture. Which means that it's going to take me even longer to rent the property at this high price that nobody's willing to pay. So it would make more sense for you to reduce the price and get a resident in now than to wait another month and lose an entire another month of rent. So I think that that's probably one of the worst mistakes that I've seen investors make is just being blinded by the dollar and not being able to look at the whole picture and making decisions based on a tiny microscopic view of the cashflow.
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Next question. The most successful landlords that you've experienced are involved in their properties, day to day operations, how much? Wow, that is a great question and a really difficult one to answer. Because it really depends. I mean, obviously, if you're self managing, you're going to be involved a lot. But if you have hired a property management company, the the mindset is that you're, you're involved less. But not all property management companies are created equal. So you know, it depends on what you've hired the property management company to do. Have you hired them to just handle tasks like collect rent and market your units and, you know, collect maintenance requests and deal with your tenants? And if that's the case, they likely are still calling you for approvals for everything. So I would say that you'd be committing a couple of hours a week to talking to your property manager about your the things that are going on with your property, because unless you've enabled them to act on your behalf, they're going to need your approval for everything that happens. They're going to need your approval for a lease renewal and marketing price and a maintenance request and a tenant complaint. And you know, the list just goes on. So, you know, we could be talking a couple hours a day or a week to, you know, a full time job, just depending on how much leeway you've given your property management company. On the other hand, there are management companies that are set up to be the vehicle to provide investors with extremely passive income. That's, for example, the way that we're set up. So I talked to most of our longer term owners that have learned how we work and trust us, maybe once a month, for a half hour maybe. And there's a lot of things that I would not even talk to them about. Maybe I'll shoot them an email as an update. But there are plenty of owners that we've talked to maybe once a month for a half hour at a time. So it just really depends on you know, what your choices are, and how you have allowed your property management company to be involved. But whether or not
you're successful doesn't necessarily mean what type of property management company you've been. Because if you chose a property management company that offers more ala carte type of services, and
they're not fully making decisions on your behalf, but you are highly involved, you can be successful that way too. So I would not say that the success and the time involvement are the one in the same thing. Because if you've empowered somebody else to do it on your behalf, you're going to be just as
successful as if you would have done it on your own. The difference would be the amount of time that you're spending. So I hope that answers your question.
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What should I do to start 2023 off rates? Well, my answer to that is very simple. Look at your cash flow. I hope that by now you have your profit and
loss statements, or your cash flow statements, where you can identify what worked well, and what didn't work well with your investment property. And this is relative to whether you're self managing, or you have a management company. You want to look at your cash flow, you want to make sure that you
know where you made money, and if you didn't make money in a month, what was the cause of that? Was it a vacancy? Was it, you know, a rent collection issue? And I want you to look at your expenses, and look at how much you paid for those expenses. So for example, how much did you pay for your water bills, your heating bills, your maintenance and go back to your actual proforma for the property. Does it match? Does it align up or were there categories that you were just spending a lot of extra money or losing money that you weren't projecting? If so, what caused that and you're going to want to make adjustments to your processes moving forward. So no different than any business reviews at the end of the year, their profit and loss statements and put some goals together for what they intend to do in the future, you're going to need to do the exact same thing for your investment property. And that's exactly what you do to start 2023 off, right. In addition to reviewing your financials and having a plan for what the new year is going to be a part of, you want to meet with your financial advisor and make sure that they see it the way that you do. You also want to meet with your insurance provider and make sure that you've got the best policy in place in the event of an emergency. And you probably want to talk to legal counsel to make sure that you are totally protected. And all of the investments that you purchase in this previous year.
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Last question is Will I be able to find deals in 2023? And the answer to that question is absolutely yes. Like any wave of real estate, you have to always be searching for the best deal. And whether the market is in a buyer's market or a seller's market, the reality is, is that investment properties and good investment properties can be found at all times. It just depends on how hard you have to look. But yes, you're going to be able to find deals in 2023. If you're looking to invest right now, and you can't find the deals on market, start building relationships with other brokers in the area, or get into a relationship with an exclusive relationship with a broker that you trust so that they can help you also find deals. But ultimately, I do expect that toward the later half of 2023, we're going to see a lot more foreclosures and short sales and things hit the market. So the prices will start to come down deals will start to make sense again. But if you're looking to invest between now and then, perhaps you're going to want to look to invest in like a syndication or a hedge fund or another alternative investment method at this time. Well that is it for our question and answer segment. I hope you enjoyed it. And until next time, take care.
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For more information about how Jennifer can help you plan, develop and manage a strong real estate investment portfolio visit growingempires.com