00:01

Welcome to Episode Six of Season 15 of the Growing Empires Show. Today I am here with my special guest, Maria Zondervan. And she is the founder of blue Viking capital. And we’re going to talk all about how she got started in real estate investing, and how she’s utilized general partnerships, limited partnerships, and all different types of partners to really scale her real estate investing. So make sure you stay tuned.

00:27

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.

00:48

So welcome, Maria, to the Growing Empires show. I’m so glad that you’re here.

00:52

Thank you so much for having me.

00:54

Well, I’m very excited to get to talk to you today. And I really like to start off this episode, though, with you telling me a little bit about your background. How did you get started? Where did you come from? And how did you get started investing in real estate?

01:06

Well, I’ve actually been investing since I was in college. I just saw an info program on TV one night while I was studying, and said, You know, I should do that. So I can pursue my passion, which at the time was actually wildlife biology, very different from real estate. But, you know, something I was passionate about, but I knew I’d never make good money doing it. So I started investing in real estate on the side. So I’ve been doing it for quite a while. You know, it’s been, I used to say over 25 years, but now when I count, it’s getting closer to 30 years, which is kind of scary. Yeah, yeah. And then I started to go full time later in life, I had autistic son. And that’s when I realized, Okay, I’m gonna need to provide for him potentially, for all of the rest of my life, as well as his beyond my life. So I need to scale it, you know, scale it bigger and faster. And I can’t do that while doing my other career as well. So I went full time in 2019.

02:00

Oh, wonderful. Well, today, we’re going to talk about how to maximize your returns as a passive investor, and how you can use real estate to pursue your passions. So I’ve asked Maria to join me to share her wealth of knowledge she’s gained throughout the years on the subjects. So we’re gonna jump right in here with some questions. So when did you actually start investing? So you were working a nine to five, right? You were working a job? You’re working a career, you saw this infomercial? And you said, let me let me do this. When was that? That was 1996. Okay. It’s been a while. Okay. So what was it that was like, you know, what was that aha moment where you’re like, I not only do I have to do this, but I’m going to do this, I’m going to do whatever this was that I saw on this infomercial,

02:45

right? Well, that particular infomercial was all about how to buy real estate with no money down. And no money is exactly what I had at the time. So that part was appealing. And just the fact that once it’s up and running, it becomes more passive. Now, for anybody who’s been a landlord, you find out pretty quickly, that is not nearly as passive as they lead you to believe. So, you know, there is a max capacity of what you can do when you’re playing the landlord role, if you’re also working a nine to five, and I found that out. And that’s why, you know, eventually, I saw the light and went over into multifamily. I’m sure we’ll get into all of that. But you know, and learning to be truly passive as a limited partner instead of somebody being the landlord. But yeah, I mean, the appeal, was that right? You set it up and forget it as kind of what I hoped and love the tax benefits were also very appealing. You know, eventually I got married, my husband’s got his income coming in, I have gotten my income, we’ve got taxes to pay. And here’s something that helps you not pay so much in Texas. So that was very appealing as well, sir.

03:50

So what was that first property that you bought? Was it a single family,

03:53

It was a single family. And there we bought a lease option, you know, these lease options were fairly rare back then. So you really had to talk to a lot of sellers and make them understand what that was. Now, I think most people understand what they were. But that was our way of getting in because we didn’t qualify for a loan at the time or anything like that. So that worked well. And then we also, we did a live in one where it was basically a house hack, or it was a house that was split in such a way that you could rent out half of it, and live in the other half. And so back then, of course, no one was talking about House hacking. That wasn’t a terminology that existed back then. Now that’s becoming more commonplace as well, but that was sort of the start of it. And then once we realized, you know, here’s two methods to make ends meet. Let’s rinse and repeat to do this more. Okay,

04:42

wonderful. And how did you even come up with the idea of like, you know, lease the lease option, or even the house hack when it wasn’t something that was like widely talked about at the time?

04:52

Yeah, I mean, the house like that was just sort of our idea. Like this is a big place. We don’t need all of this but we found a willing seller, you know, And that was kind of the key back then I was just trying to find someone who’s willing to, to talk terms because it was less common, it was more just go out get your traditional mortgage, which we did not qualify. And how I got the idea of the lease option was simply through that course, that was what it was teaching, you know, Okay,

05:16

wonderful. So you use that to start your real estate career? And then how did you propel it? Where did you go from there?

05:22

Well, being fresh out of college, you know, two people with two new careers, it pulls you in all sorts of different directions. And so we ended up moving a lot. And we just decided, every time we move, we’re going to buy a house, and we’re not going to sell that house when we move again. So we’re just going to collect houses as we go. So that was sort of how we started. And we know a lot of other families that sort of done that, right, just add on, because then you get that nice financing in place, eventually, would that owner financing instead of investor financing, which is usually higher, but you can leave that in place as you turn it into an investment property. So that worked well for us. Later on in life, we just started picking up properties specifically for investment properties. And of course, we did take advantage in the 2007-2008 era, where you know, they were basically letting you buy anything with no money down, right? They would, they would fund you your first mortgage at 80 to 90%. And then give you a HELOC line of credit of some sort for the remainder. And so you had nothing down which, you know, a lot of people did that and flipping and got caught with their pants down so to speak. But we’re long term hold people and the cashflow is still there, we’re still renting walls, we made it through the big bubble, as they say, despite doing that, but that was that was a time when you really could pick up a lot of properties without any money down.

06:42

Okay. It sounds like that was kind of your, your model, like you did a lot of stuff with no money down because you started out without having real money to put down. So you’ve you’ve creatively found ways to invest using other people’s money essentially?

06:56

Yes, yeah. So of course, it does get easier as you have that income coming in. And now you do have some extra padding and you’re able to put some money down, that opens up the possibilities for a lot of different deals. So we’ve certainly done that, since then, and then eventually used some of the credit that real estate offers you to be able to purchase businesses. You know, we bought two Massage Envy clinics, we built them from the ground up. And that was all due to real estate, you know, primarily, businesses are started with bank loans. But banks don’t want to lend you anything unless you already have the collateral for the loan, right? They only give you money if you need it really. So a real estate afford us to do that we had this real estate, and we allowed them to put liens on that in order to give us the business loans, then the businesses produced income greater than what we were accustomed to. So we were able to buy more real estate with that income. So it was a nice little cycle back and forth. And again, that real estate helped offset some of the taxes from those businesses as well. So

08:00

okay, so how many properties do you have? Now? How many do?

08:05

Well, it’s not so much number of properties as number units at this point, because we’ve moved into the apartment complex world. And I’ve got something closing probably before this airs. So that’s gonna add another 94 units, but somewhere in the neighborhood of I guess, about three 400 units, probably by the time this airs, and I say three to 400, because I’m a limited partner, and lots of them and general partners and some, so it’s, I don’t always know how to count it. Because even on the general partners side, I invest on both sides, both as your partner and as a general partner. So the whole unit count is funny, right? Because $1 million mansion can be one unit, and one one apartment might be worth 25,000 That’s a unit and those are not the same things, right? Yeah, quite sure.

08:58

So let’s talk about that, that path, right you started out by yourself doing your leaseback and you’re just creative ways to find investment properties. And now your GP LP, you know, and many deals right? How did you how did you navigate that? How did you find your network of people? How did you how did you get from one to hundreds?

09:21

Well, you said the key word you said network. Okay, that’s exactly it. So for a long time I was playing lone wolf, I had just done this class and went out started doing this. I didn’t realize how many other people were out there doing these kinds of things, and how valuable it can be to get in the room with those people and learn from them. And they learn from you and you share ideas. That was a foreign concept to me for the longest time. And then I don’t know, I talk to somebody and they says your net worth equals your network, or your network equals your net worth whatever it is that now now I hear it all the time, but I didn’t understand that real estate really could be a team ort and I was trying to shoulder all this by myself. So I started going to the local RIA meeting. And then I found a group that was specializing in multifamily. And as I had read up on that started listening to podcasts like this, you know, and you start opening your mind to all the other possibilities. And eventually I joined, you know, high end real estate mastermind groups, which is really a great way to scale. So the best room you can be in is where everybody is more advanced than you right? And they’ll kind of pull you up with them. So that was it. It was the is the networking and and when I went to my first multifamily meetup, somebody said, Well, are you interested in? Are you wanting to be passive active? And I didn’t even know, there were paths for both. What do you mean? And so someone had to explain to me that you really could just invest money and still get these amazing returns, which were way higher than I was waiting, making my single family homes without all that work. And I was like, really. And at this point, I did have some money coming in from the businesses and the other properties that I could do that. So I thought we should give this a try. And it turns out, it’s not magic, it really does work.

11:13

So would you say that you focus more on the passive investing now?

11:17

No, I probably do both. I own two apartment complexes outright. That’s just me and my husband as as the owners, and then I’m in for where I’m the partner, you know, general partner in the deal. And I’m on the limited partner side on all of those as well. And then I probably have another four. So we’re looking to get into a bunch more right now limited partnerships. So I use my retirement funds primarily for limited partner ship type of deals, because you’re not allowed to invest with yourself with your general partner with your retirement funds. And then with our active income, I’m putting most of that into the general partnership areas. Okay.

11:59

And where were in the is it in the US? Is it outside of the country? Where do you actually have that

12:04

it is in the US. So the properties we own and manage ourselves are all in Florida, because that’s where we live, I won’t have hands on and eyes on. But for the things where I have partners involved there primarily throughout the Sunbelt southeast parts of the United States, that’s where a lot of the population is growing. But also, there are some other really hot areas out there that are not in the Sunbelt that I really like we’ve got one in Columbus, Ohio right now. And that area is really growing a lot of tech coming in there. So like that area as well. But we look for growing markets.

12:37

Okay. Is there anything else specific to those markets that other than this the grind? I assume? You mean population growth,

12:43

right? Population growth, yes. And job growth,

12:46

population growth and job growth? Is there anything else that you look for when you’re targeting a new area to invest in?

12:52

We look for dangers, you know, like government, Florida, we get lots of hurricanes smack in us, right? I don’t like to buy things along the coast, like to come inland. It’s also less expensive from an insurance perspective, less chance of flooding risks and wind damage and all of that kind of stuff. So I look for potential risk factors. But population growth. And job growth is definitely high on the list. And then very strong partners in the deal, you know, strong sponsors that know what they’re doing have taken things full cycle, and do very conservative underwriting. I’m a numbers person, I probably look at 100 deals for every one that I invest in. Because I don’t bring in my investors. Anything I’m not investing in, I want to make sure we’re taking good care of everybody’s money. Okay. What is blue Viking capital? Well, that is the That’s my business. Okay, tell me more about it. Yeah. So I mean, blue Viking. The name comes from the fact that I’m Swedish originally. So I was born and raised somewhat in Sweden. I moved here when I was nine. And so that’s the land of the Vikings. So that’s where the name came from. But it is basically the holding company and the working legs behind the whole business of finding locating and operating and bringing in investors into these multifamily groups.

14:15

Okay. And are you strictly investing just in multifamily are there because you had mentioned that you you personally had built some businesses with your real estate investing? So is it just multifamily that you’re investing in now? Or are there other things?

14:30

We’re always looking at other opportunities? So we are looking at some other businesses right now that I don’t want to say too much about,

14:38

of course. Do you do any investing in commercial real estate?

14:42

Yeah, I mean, multifamily is all commercial real estate. Do you mean more like retail kind of commercial? Yeah,

14:47

I’m sorry. Yes. Retail, like medical complexes, retail strip centers, any of that kind of stuff, or is it strictly just housing?

14:55

Yeah, pretty much just housing. Yeah. You know, we see a lot of changes in the retail All from as we have more online stuff, so that makes me a little weary. But people don’t run out of places to live. So I really like anything residential. I have my eyes on some mobile home parks coming up, you know, that’s a very strong industry. I know a lot of people in the self storage space, they’re doing very well. Those are areas we would look at as well. Used to look at Hotel 10s of conversions hotel to multifamily conversions. That’s not as hot in market now, because hotels are doing better. So they’re more expensive to purchase. But during COVID, that was really good strategy. But the primary focus is staying with residential.

15:39

Okay, so as blue Viking really, more of like syndications. So are you raising money, and then you’re syndicating these deals using the tried and trued methods that you’ve created over the last 2030 years? Exactly. And now you’re helping investors do the same thing, which allows them to essentially be passive if if choosing to do so. Okay. Wonderful. And tell me how you go about finding and locating deals.

16:08

A lot of it is back to that networking, right? So it’s networking with brokers and networking with other apartment complex owners, you know, at some point they’re looking to sell most of them are selling between five to 10 years of ownership, right? So it’s finding them at the right time. And it’s not always me that has to find the deal, right? Maybe there’s others are finding great deals, but they need help operating that deal that need help with investors need help getting their reports done. So if you can bring value to other people, a lot of times you can get in on the things that they find. So it’s networking with other investors just like yourself,

16:44

okay. And how do you determine whether or not a deal is good enough to invest in?

16:50

Well, we look, we already talked about market and market is one of the big ones I look at. So I’m looking at the market, I’m looking at the sponsorship team, and who’s going to be boots on the ground running it, who’s your property manager, and looking at the asset itself, and how they have performed in that area in the long term. So you know, looking at class, I generally don’t invest in Class D properties, as See, you would have to be if it was an A B, area, B properties are really strong. A assets can do well, depending on what kind of investors you have and what kind of strategy they’re looking to do. But a lot of times that’s more about appreciation and cash flow when you’re going in. So it just depends. But so we look at the asset types in general. And I think those are kind of the main areas that the population growth is the primary factor that I look at. Okay.

17:43

And then I assume that it comes down to the numbers at some point, right that it does the deal makes sense? Lots of underwriting? Yes, lots of lots of underwriting. And of course, everybody needs

17:55

three monitors surrounding me at all times.

17:57

Right, so so everybody has their own way to do their, you know, to identify whether or not the deal makes sense or not. But what are some of your key factors in you know, the deal? Are you looking strictly for cash flow? Are you looking for appreciation you’re looking for both? Are you looking for do you invest in mostly like,

18:14

You did say that it

18:15

was like C, B C Class potentially. So I assume that you’re doing some distressed assets as well, where you’re doing some renovations fixing them up. So tell me how you how you navigate those waters? And how you identify financially, that something makes sense?

18:32

Sure, sure. So the value add component, of course, is huge. But that is like the key word for every broker out there. They’re gonna call everything a value add opportunity. And so you have to determine if there really is true value that you can add to this property, and how much risk is involved in adding that value. Because as construction prices are forever increasing, and material costs have skyrocketed, sometimes getting into the ones where you have to strip down to the studs and start over kind of thing. It can be very risky, right? Yes, if it pays off, the returns could be huge. And I’ve seen some amazing returns from people do that. But I’ve also seen people severely underestimate what the cost of those rehabs are. So personally, I prefer a lighter rehab, if it’s going to be like a renovation, or you’re going to continue to cash flow throughout that process where you can do sort of when the natural turns come around, and where you have a proof of concept already in place. Maybe the person that’s selling has renovated a few units and you can see the difference in rent that they’re getting. And you can look at what the costs were to them of doing those renovations. So you kind of already have the proof in the pudding. And you just have to take that and go with it. Also really like we had a couple of properties this year where the property was in affordable housing, like tech program or something like that. And it was going to be exiting out of that program. So you have the opportunity to still keep things fairly affordable for the market, but not have to do renovations to get that rental lifts because it’s simply coming out of being capped at a particular rent and being well behind the regular market, so you don’t have to come in and do huge renovation to get that you just have to purchase it before it exits.

20:25

The episode will continue in just a moment.

20:28

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 Jennifer to hastings.com, sign up, and we’ll see you in the club, where everyone’s on a journey to becoming a better investor. So how would you say one can maximize the returns with passive income,

21:35

what you maximize by one reducing your risk, and one of the ways to do that is to go into multiple different markets. So for example, I had a friend who loves Houston area, and invested enormous amounts of money there. And then they had that huge hurricane impact. And a lot of those properties stuck cashflow for a long time, right. So you have to be careful maybe not to put all your eggs in one basket if there are lots of gray areas. So you can also diversify by being with lots of different sponsors in case that one sponsor doesn’t do. Something happens you never know. Right? So diversify and protecting yourself through different asset classes, different areas, different sponsors, I’d say, you can also maximize your investments by knowing how to choose the good one. So I actually have a guide that’s completely free to people that are giveaway for how to do that, I focus a lot on IRR, internal rate of returns. Because it’s kind of the number that takes into account the value of money over time, the whole idea is to try to double your money every five to seven years, if you can do that, you’re gonna scale your wealth really, really quickly. And so focusing on that IRR and making sure that at least 12%, let’s say sort of the magic number, that’s really going to help to assure that you can do that. So that’s a matter of how fast you’re turning that money, how fast you’re getting your capital back and reinvesting it. And then you know, it’s ultimately not what you make, but what you keep. So taking advantage of all the tax advantages that are out there. And so I have a whole section on tax advantages in there. But you know, we still have bonus depreciation out there that people can take advantage of this year. So if you have other passive income that you want write off in addition to the passive income of these rental properties, that can be extremely helpful. So then look for those, those properties where you can get that depreciation. Now, if you’re investing in your retirement account, that may not matter to you. So there may be other things you want to look for instead. And so I always go through with my investors, like what is important to you? Are you investing for retirement? Are you trying to exit your job early, because you’re just sick of the nine to five, like, what do we look for, and then we pick assets that are going to jive with what they want. But those are all parts of maximizing that investment. And then how you layer them really matters. Because as one property exits and frees up more cash flow, you need to reposition it somewhere. So if you have everything exiting at the same time, that could be very difficult for finding good deals, you don’t want to be forced to pick whatever deal comes along, because you can find that really good fit, because you have too much money freeing up sort of at the same time. So how you layer them to for when they come out. And also again, from that tax strategy standpoint, it could be harder to write off the income if all of it comes at once. So we talk a lot about layering your investments.

24:30

Okay. What would you say that you buy every asset with an exit strategy or timeline in place?

24:38

Always? Yes, yes.

24:40

How important is that in the in the scheme of investing?

24:43

Yeah, it’s, it’s critical to really understand that piece, especially when we’re talking about that layering you need to know when things are going to exit. And you can’t really calculate an accurate internal rate of return if you don’t know when your exit timeline is because that’s going to factor into that dramatically. Right. So Um, yeah, it definitely matters. And that’s one of the first things you’d look at.

25:04

Let’s break down the internal rate of return a little bit. So how do we calculate that?

25:09

Oh, my goodness, that’s a spreadsheet question. Yeah, I’m gonna leave that to your listeners to look up, it’s really not as easy as your average rate of return or, or your average annual returns. That’s a pretty straightforward calculation, where you look at you basically add up your annual cash flow, and what you’re going to make at the end, right, so all your proceeds, and you divide that by the whole time. So let’s say that was five years. So you take the total of what you made, you divide it by five, that gives you an average of your annual, you know, your annual income. IRR is different in that it looks at when you got that money back. So your average could be you made nothing for four years, and then you got a huge payout at the end, right. And then you average over five years, you say, Oh, I got 14% average annual return. But if all of that came at the end, that’s not the same as if you got half of that money back in say, year three or year four through a refinance event or something. When your money comes back to you sooner, that’s a time when you can start reinvesting that while you’re still making cash flow on the property that you own, right, so your money is working for you twice. So things like that are very important to look at. And that’s what IRR does, it takes into account the time value of money. Because if I give you the if I if I give you $1 Today, and you give me back $2 Tomorrow, I’m pretty happy with that return, right? But if I give you $1 Today, and you give me $2, back 20 years from now, those $2 are worth the dollar I gave you originally. So that’s why that’s important. But the actual calculation is fairly complicated. And so you know, you just have to use an IRR calculator or it’s built into any Excel spreadsheet.

26:52

Okay, wonderful. So you had mentioned some tax benefits or tax breaks that you’ve utilized to continue to invest. So let’s talk about some of those.

27:03

Okay. Well, I mean, generally speaking, real estate already is full of tax benefits. Most of it is, you know, you’re being taxed at that passive income level, instead of active income levels already, that’s far reduced. money that you make from capital gains is less than your average income. So we know who is is the most expensive thing, you can have lots, lots of taxes on active income like that. But then in addition to that, you have the depreciation factor. So I’m sure most of your listeners know what depreciation is. But in terms of, say, an apartment complex, the IRS will say that that building is going to last 27 and a half years. So you can write off a portion of that every year for 27 and a half years. So you take the whole value of the building, divided by 27 half, and they say this is how much you can write off every year. Well, with these big commercial properties, you can actually go in and do a cost segregation analysis, where we say, well, not everything in this building is gonna last 27 and a half years, these doors are only gonna last me seven years is there a condition is going to last 15 years, you know, and you put them into shorter categories. And so you get to write them off faster. And these appear as a loss on your K ones, which is basically the document you use to do your taxes. They appear as losses against any income that the property is made. So most of the time we show a loss, but of course, it’s a paper loss. In reality, you’re bringing home money, those are just depreciate depreciation losses. And then we tack on top of that the bonus depreciation that the jobs act 2017 threw in there, right? So we were able to take all those costs that are not going to be 27, half years, all that everything that is laid out in that cost segregation study, and it says you can now depreciate this particular year 80% of that in year one. So that’s a huge part of the money you’re getting back. So this, this one deal I’m working on right now, we’re looking at getting 765 to 70% of your investment back in depreciation in the very first year. So you put in $100,000, you could get back 65,000 $70,000 off your taxes and depreciation, so it’s just it’s just a huge, huge bonus.

29:26

Okay, what about 1031 exchanges? Yes, those

29:30

are a blessing and a curse, right? Yeah, 1031 exchanges, we see a lot of that. I’ve done them myself. Of course, there’s the time stress of that. You have to identify your property that you’re going to exchange. Okay, I should back up for any listeners who maybe don’t know what a 1031 exchanges. So basically, this is when you have an investment property and you sell it and you don’t want to pay the tax. So you want to push those taxes on to the next property you buy. So basically, the IRS says you can do it Like kind exchange. So you can buy something else in the same classification. So it’s an investment property for an investment property, right, it can go do this with your personal home or something like that. And then you can take the basis of what you owed in taxes on that first property, and roll it over to the next property. And the idea is that you just keep rolling it to where you never pay it. A lot of people say, well, doesn’t that mean that my heirs then have to pay all these taxes, we’ll know the way the tax code is written. It, the basis is reset, when they take over the ownership. So you can keep rolling properties until you pass basically, never pay the taxes on it. So that’s the awesome part of it, the less awesome part is you have a very short timeframe for doing this exchange. So and I may not have all the timeframes straight in my head. So you may have to help me out now. But I think you have 45 days to identify, maybe that’s correct. Yeah. And then I think it’s 90 days to actually lock it in. Is that, is that correct? as well? Is that what you recall, but anyway, put you on a time time crunch. And so it’s great if you already have something in mind, and you line something up. But you don’t want to buy a bad deal, just because you’re under the gun to do so quickly, right. So you want to make sure that you get that in. Now you can do a 1031 exchange into limited position in an apartment complex. But it depends on how much you’re bringing over into that deal. Because there is a cost associated with doing that. Because you have to become a tenant in common, it gets a little complicated when you want to be a limited partner in a syndication, doing that kind of stuff. But it can be done. But there’s a cost for setting up a tenant in common. And so the sponsor is going to need to recoup that. So it’s going to matter on how much you’re bringing into the deal. Or if somebody else had a huge 1031 exchange that they already brought into the deal. And so that 10 common structure has already been set up. And you could piggyback onto that. The other option is if you’ve been rolling stuff, and you have this big tax burden, if you want to get out of that tax burden, you could potentially find one of these deals, that’s doing a good bonus depreciation. And you could go ahead and take the tax hit and then immediately write it off with that bonus depreciation. I’ve seen people do that as well.

32:20

Okay. So what types of creative financing are you using today? With with the new the new wave of financing?

32:32

Right, right. So by new wave, you mean expensive? Yes, yeah. 100%? Yeah, so we have seen interest rates go up, obviously, a lot. We’re still ahead of the curve. And I think people don’t realize this. But you know, we got very spoiled by what I would call almost free money for a while there, right, the interest rates were so incredibly low. But the fact is, our interest rates are still below inflation. So you know, inflation’s, depending on where you are in the country in which numbers you believe are somewhere in the 8% range. And loans are coming in about 6%. So we’re still about 2%, in our favor, that we’re borrowing below inflation, so that part is good. But if you can assume financing from somebody who’s locked in a rate at 4%, or 3%, that’s wonderful. So we do see that as a very popular strategy. A lot of Fannie Mae loans, for example, can be assumable. And they’ll let you get a supplemental to make up the difference, or at least part of the difference between the new selling price and what the loan is, I mean, you’re always going to have to bring some money to table on these deals, but you can often get a supplemental tour, okay, that supplemental might cost you five and a half 6% or something like that, but at least it’s not for the full purchase part. And then of course, all owner financing is always King, if you can get that. And now that the market is not quite as hot as it was, we’re seeing a lot more owners willing to talk owner financing. Okay.

34:01

So are there any current emerging trends or opportunities in real estate investing that are particularly beneficial for passive investors right now, other than some of the things that we’ve talked about?

34:11

By trends? What do you mean, just anything

34:15

new that’s happening like you, you know, we talked about how, you know, a seller financing right, you know, because of the interest rate hikes, obviously, people are looking to assumable mortgages and seller held financing. Is there anything else that is happening in the real estate world that you’re watching that you feel is like an area of opportunity where people can kind of capitalize on

34:37

it? Yes, yes, we’re seeing less people take due bridge loans, because they, you just don’t know where the rates are gonna go on those. So we see kind of a trend away from bridge loans, to where you’re bringing more capital to the table or just not doing the heavy renovations quite so much, or trying to get the seller to finance those renovations for you. So we see that happening. And then we see a lot of people paying down the points that’s happening a lot. And there’s something else that popped into my mind and then popped out. That’s become very popular online, but maybe I’ll pop back in.

35:18

So what type of due diligence do you do on properties that you’re intending to invest on besides the the preliminary, you know, the numbers have to work and you’re looking at the market and making sure it’s a place that you want to be? So, you know, congrats, you’re under contract. Now, what are you doing as far as due diligence?

35:36

Well, you’re, of course, confirming the rent roll, we see a lot of people take that for granted, you know, the previous seller, or the brokers are handing you rent roll, but actually confirming that by sending notices to the tenants, and making them sign that this is indeed, what I’m paying for rent, because unfortunately, there are some unscrupulous people out there. So that’s very important. Walking every single unit, not just the ones, a broker might show you or seller might show you, but actually insisting on walking every single one. So I’ve heard some horror stories of people who haven’t done that. So that’s, I think those are very important. If there’s a sewer septic system actually getting those scoped, that’s expensive, but it’s far more expensive to have to replace those systems. So I think that’s a very important due diligence item that some people overlook. And then everything else is what everybody does, you know, your roof, your condition, all that kind of stuff. Sure.

36:36

So what do you think, are some of the most common mistakes that investors make either starting out? Or, you know, as they’re trying to grow? What are some of the mistakes that they make? And how can they be avoided? Yeah,

36:48

under estimating the difficulties of property management, a lot of people think, well, you know, the difficult part is finding the property and putting that in place, and then they just think property management is gonna be this, I’m just gonna go hire a company, and they’re gonna do the property management. So I’ll go and be super simple. And that’s just not the case, you have to manage that property manager, and you have to select a really good property manager to begin with. And I made mistakes myself, when I first bought an apartment complex, I definitely got the wrong property manager in place, I just got a bunch of bids. And I chose the lowest bidder, as we all, you know, have a tendency to do. And there’s reason they’re the lowest bidder sometimes. And I also did not follow up with them and have regular scheduled meetings, you know, now I have meetings with property managers, once a week, we go over all our KPIs and putting those KPIs in place at the very beginning. So they know what you are expecting and what they are to have to live up to. Right. So putting that in place and holding their feet to the fire for that. So a lot of people ask why there’s an asset management fee, when we have a property manager that’s managing the property, and there’s also property management fee. They’re like, why why are there two fees? Well, that’s because you have to manage that property manager. Yes, we’re not dealing with leases, we’re not screening the tenants individually, that is what the property manager does. But we have to make sure that they are increasing the rents when they should be that they’re not letting people get away with things. They shouldn’t be that they’re maintaining the property, right, that they’re holding everything to the standards and meeting the objectives that we’ve set for them. And sometimes our property manager is also the person that’s dealing with any renovations and turns, and you need to make sure they’re doing those on a timely basis and staying within budget.

38:30

All very good points. So how do you find a good property manager?

38:35

Whew, that’s a tough one. For me, it’s asking everybody who’s local to that area. And that’s asking your property inspectors, they know a lot of people in this world, right, that’s literally what they do. They talk to a lot of people, they’ll know a lot of good property managers, your lender can often be a great tool, especially if you’re using a local lender. One of our properties, we’re using a local bank in a rather small town that’s growing by leaps and bounds, but it’s, it still has a little bit of that small town field. And that banker knows every, every property manager in that in that area. Right. So world, just great thing. So what I had done in the past was do the old Google search, you know, property manager in Sarasota, Florida, for example, right? That’s not the way to go. You got to you got to get out there and talk to them. And attending all those networking events and talking to the people there who own properties locally. So who are you using? Are you happy with them? Who have you used in the past that you’re very unhappy with? I should absolutely not consider sometimes that’s the best question. Okay.

39:40

So what do you know now that you wish you knew 20 or 30 years ago when you started?

39:45

Oh, that it didn’t have to be a landlord to make money. So many landlord horror stories and I wish I could just skip that because when I looked back at more portfolio of single family homes, I worked so hard on So many of those properties. I mean, there are some, they’re super simple, the tenant I put in there originally still there, and doing wonderful. And then there are others that, gosh, I was turning them like every four to six months and couldn’t figure out why they’re in great areas. And just, you know, I felt like those properties were cursed. And I had my life threatened and, you know, just horrible, horrible things, right? So, and then when I look at them, I made less money with those than I did even some of my limited partner investments, you know, as just my money was not working hard enough for me there. So I wish I would have just known that I could have gone limited partner from the get go and and try to put my money there.

40:39

And how did you get into that limited partner role? Like, how did you? How did you go from being the landlord to that limited partner?

40:47

Once I knew it existed? I had to try it. So just showing up at that multifamily meetup? Or someone goes, Hey, do you do are you looking do this as a, as passive or active? And I didn’t know what that was. So I asked what that was. And then they quickly, you know, said, Hey, well, here’s how you can be a limited partner. And they showed me a deal they had, and I ended up not going into that particular deal. But now I knew those deals were out there. And I was like, Oh, I gotta find out more about this one. So yeah, that was that was it. And then, after I tried one, and saw that it was real, and those returns were real, and compare them with the single family home. And that’s something I often ask people who have single family homes, like what are your annual returns on those 100? Home? Don’t know, you have to measure this stuff? Or you don’t know, like, How much money did you put in? How much are you getting out? What is that on an annual return? And when you look at how, you know how hard your money is, or isn’t working, it might be an eye opener for you.

41:41

Very true. How often are you analyzing your properties? Monthly? Quarterly? I do.

41:47

Yeah, quarterly. Yeah, yeah, do quarterly, I’m doing sort of the broad view of it, looking at my cash flow primarily. And then once a year, I tried to maybe not get a formal appraisal, but get a good feeling of what those properties are trading for in that area, and try to get a full analysis of where I am with those properties. Sometimes you might be surprised at how fast something’s grown a value might be time to sell.

42:11

I was just going to ask you that. So are there opportunities where you have? You know, maybe initially you projected that this was going to be a five year hold, but it’s your two, and you’re going to sell

42:22

it? Yes, yes. You know, we saw a lot of people doing that in 2020 2122, when the market got so hot, they had turned to expecting hold five years and then turning them in 18 months. I mean, that was not unusual to meet your projections that fast. I think those days are behind us. I don’t know if we’ll ever see times like that again. But you won’t know if you don’t check the market. And I will say I missed one that I should have sold, I wasn’t prepared for how hot the market was, I had the wrong property manager in place at the time. So I’m giving you all the ugly stories, because that’s what we learned the most from all the mistakes. Sure. And so I wasn’t prepared to sell it because I didn’t have my occupancy high enough. Because I let him slack off and turn units too slow. So I missed an opportunity to double what I had in that property in about Yeah, would have been roughly 24 months. I wasn’t able to take advantage of it because I hadn’t stayed on them so much. But yeah, you but I would have never known that the opportunity was there at all, had I not been staying on top of the market. So that’s super, super important. Sure.

43:29

And how has real estate allowed you to pursue your personal passions? Oh, well,

43:36

my biggest wires is my son, my autistic son that I told you about and it has freed up my time to spend more time with him. It has allowed me to set up a nonprofit. It’s called Valhalla villas.org, if anybody wants to check that out. So we are going to be creating housing for adults who have autism. So a lot of them long to live independently, but they need some services, they need some assistance. And so we’re going to be there to provide that a lot of those parents really worry about what’s next for my kid, how can they be independent? And what happens if something happens to me because 75% of these kids live with their parents forever. So we’re going to solve that problem for them. So both ground up developments are coming as well as we’re going to be purchasing some properties very soon. Now. We’re actually already taking soft commitments for those where we’re going to buy existing apartment complexes and convert them over at least partially to have an integrated model. And we’ll have investment opportunities in those as well for people who are looking for forever homes that they don’t have to worry about turning over every five to 10 years. Something they can leave for their kids and have forever cash flow for those kids. Yeah,

44:46

that’s really awesome. Well, Maria, you are such an inspiration. Your your whole journey in real estate is just very inspiring. And I just I have a soft spot for your autism awareness and And the things that you’re doing as well. I have an autistic son. And so I definitely understand and respect what you’re doing there. I think that’s, that’s wonderful. And the fact that real estate’s allowed you to pursue that passion and give back to your community and to, you know, children and adults that are that are struggling is just phenomenal. Thank you. So I really appreciate your time today. And I hope that we can have you back in the future, because I’d love to hear more about where your journey takes you.

45:31

I would love that. Thank you so much for having me.

45:33

You got it. Thank you for listening to my episode with Maria Zondervan. I hope you enjoy this episode and until next time, take care.

45:45

For more information about how Jennifer can help you plan, develop and manage a strong real estate investment portfolio visit growingempires.com