00:01

Welcome to Episode Four of Season 16 of the Growing Empires Show. Today I’m here with my special guest and colleague Justino Arroyo, local broker from the Lehigh Valley area. And I think you’re gonna get a kick out of his story. He went from being a police officer to a full time investor. And his journey I think is definitely one for the record books. So stay tuned.

00:26

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.

00:46

Welcome Justino to the Growing Empires show, I’m so glad that you’re here.

00:50

Awesome. Thank you for having me. I’m proud to be here.

00:52

Let’s kick off this episode with you’re sharing a little bit about your background and the work that you’re doing now.

00:58

My background is pretty dynamic. I spent about almost 10 years as a police officer locally in the Lehigh Valley, five years in Fountain Hill, and almost five years in South white oak Township, and then kind of traverse roughly around 2015 into real estate. I did both careers for about three, almost four years, which is pretty tough. Yeah, for sure. And transition into real estate, it was a, it happened by accident, to be honest with you. I started looking into real estate had a few dollars saved up from working overtime as a police officer. Being active on the SWAT team, we have a lot of opportunity for call outs, and you know, DUI checkpoints and things that I sorts. There are which I was with a buddy of mine one day, and I was like, Hey, I have some money saved up. I don’t know what to do with it. And he was a local investor. And he was like, buy rental property. I’m like, I don’t know, I can’t buy How do I buy a rental property I just bought my first house. He’s like, Well look for a property that’s distressed and needs work and you know, fix it up and make it work. I’m like, okay, so I came home that night presented to my wife and I was like, Hey, I’m gonna buy a rental property. Now, mind you, I didn’t know how to cut grass. City boy, I literally need its father to this day will make fun of me. Because I didn’t know how to cut grass. And then we went back and forth. And you know, she’s like, give it a shot. See, if you find something, we’ll make it work. Fast forward. Like six days, I was on Craigslist, I saw a wholesaler posted about a property just outside of my jurisdiction. When my shift was over at work, I drove over, check the property out, we kind of went back and forth and landed on the price that makes sense. And then that kind of evolved the whole trying to find out what to do with the property. And I kind of just went you know, I didn’t tippy toe, I kind of just jumped to full fledge in and next, you know, four weeks later on the property. Wow. And that kind of started that dynamic to where we’re at now.

02:45

Wow, that’s awesome. Well, today, we’re going to talk about your best advice as a local real estate broker and investor. And I’ve asked Justino to join me to share his wealth of knowledge that he’s gained throughout the years on the subject. So we’re gonna jump right into, you know, some questions here. So you shared a little bit about your journey into real estate, but what led you to actually then start your brokerage? So it sounds like you got your hands wet with investing first. And then the brokerage kind of came later, is that correct? 100%.

03:18

So early on, as I was trying to, you know, I had a tough schedule, you know, I was I was on the traditional swing shift, where I was working six days, one shift, two days off, six days, next shift two days off, six days, the next shift, and that was days nights middle, so we rotated every single week, to try and find an agent that was fit into my schedule was tough. So I ended up getting my real estate license to be able to just show properties. And then that kind of evolved into people understanding what we’re doing now. So I was buying investment properties to sort of represent ourselves. And then that kind of tied into me getting into the sales aspect, because I now learned what the business was, where before I was, I don’t know if they call it rose colored goggles, or whatever the term is. But I was looking from the outside in and I didn’t really understand the whole real estate market and what exactly it was. So when I saw the business opportunity, I decided to go, you know, full fledged towards it.

04:08

So when you left the force, what made you actually say, you know, what, today’s the day I’m closing that chapter, I’m opening the chapter in real estate. And how hard was that decision? Because I feel like that in itself is one of the reasons why people don’t ever get off the fence. Right? They think that they have to go full bore into real estate, when maybe you can just tiptoe initially like you did in you know, buy a property, learn how to, you know, manage it, learn how to renovate it, or whatever it is, and then, you know, you can go further as you get down the road. But at some point you had a commitment to I’m no longer going to be a part of the force. And I’m going to go into this real estate game full time. So what was that dynamic? And how did that change actually come about?

04:50

So early on, I knew that. It’s not that I didn’t want to do law enforcement. I enjoyed being a police officer. I enjoyed serving people and help people at a high level. I just knew that in order to me make the transition to provide for my family to the level that I want to provide for them and give the opportunities that I want them to do that it was going to take a little bit more than what I was bringing in currently. So I didn’t have a grand master plan, I just knew that I had to keep doing more every day than I did the day before. So every single day, I would engage in looking for more properties. And I got to the point that I became, quote, unquote, financially free, you know, where our passive income started to cover some of our basic expenses. You know, we’re not going to Hawaii every night. But you know, our mortgage was paid, you know, our carnosa paid, we have a little bit of money saved up from what we were generating on our passive income. At that point that started opening my eyes on the possibilities. I don’t know if I was there yet, because I still worked almost two years after that as a police officer, but it at least opened up our eyes to say, Okay, this may be an option, if we just keep doing what we’re doing. So I mean, so many people try to overcomplicate this and try to make it fancy, and then try to buy deals, it’ll make sense. Ultimately, one of the things that we just said, Well, what makes sense, we buy right. And then we make sure that we manage the best we can. Those two equations combined allowed me to make the transition, and then falling through it real estate as far as the sales aspect. So I didn’t make the transition, I want to say until 2018. And it came at a time where my youngest was born, when he was born. Because I was a government employee and an employee under w two, I was entitled to FMLA. So when he was born, I took the three months off that I was entitled to. And I was just like, God, give me a sign. Let’s see what happens. Because even though, you know, I was making good money as a law enforcement officer, I was making really good money at that time in real estate. I still felt like I needed that paycheck. I mean, it was, I don’t want to insignificant, but it was a fraction of what we were bringing in at the time. I just kept going back and forth. And I’m like, I need it, I need it. And I was like, alright, the baby’s gonna be born, this is the first time I have an opportunity to spend time with him. You know, on my schedule on my terms, I took the three months off, and I was like, during this time, I’ll get a sign. And that following month, I think I made more that month than I did the previous year as a law enforcement officer. Oh, wow. That was a sign that was within double down on yourself. And, you know, keep moving forward.

07:13

Okay. So tell me what you invest in. What did you originally start buying? And what are you investing in today? And has that changed over the years, it

07:23

honestly hasn’t changed. I kept it simple. And I kept it simple, because there’s a lot of heavy capital going into our market, there’s a lot of people that are buying, you know, and compressing what we can actually pay for because they have, you know, whether it’s hedge fund or big money going into it, that, you know, a small time it doesn’t like me, I can’t really compete. I mean, they’re they’re making money on basis points, that they’re making money on spreads, you know, where I need to make the cash flow, I can wait on speculation. So I just buy single family, you know, typically one to five, one to six unit complexes that I can do that you add, I buy him renovate the entire property, as best we can within the budget, and then we turn in and rent it. So we keep it simple. We have relationships with a couple of local banks that allow us to kind of keep turning our money as fast as possible. I would say the biggest thing that has been our success is the efficiency of us being able to get the projects done. Because we don’t make our money while it’s in there. You know, on the renovations, we don’t make the money lawsuit in there at the you know, we want to take our capital continue to turn it over and over again. How

08:21

did you build your team that is doing the renovations because I’m sure you’re not necessarily in there swinging every hammer and hate pounding every nail. I

08:31

was I wanted to be in the first five or six projects I did majority of it myself. Oh, wow. I did not know anything. All I knew is that I had a credit card that I could max out and I failed. And I was like, Okay, let’s go. Let’s go to town. Okay, I’d pick up you know, shopping carts of blows at nine o’clock at night, they’d be pushing out the store, like hey, we had to close up and they literally close the gate behind me. I’ll have five shopping carts in the parking lot making runs to the house and dropping it off at midnight.

08:57

Okay, so did you have other people helping you then or were you solely doing I

09:02

was doing I mean, I would call on stuff that I couldn’t do myself like you know, service panels and things that are beyond that but you know, swapping out some outlets and you know, painting and some drywall, some flooring, trim windows, things that I could do or I could kind of teach myself I managed to navigate twofold one because I didn’t have the resources to get it done. And to because I want them to know what I didn’t know. I wanted to make sure that I understood and that can talk the talk when I’m dealing with contractors and other investors and people that like so how did you you know

09:32

coming from a different background obviously I don’t think all this was like second nature to you. So how did you how did you learn how to do some of the stuff in the house was it was it YouTube later

09:42

on with YouTube university or early on was just buying the books. I mean, there’s so many different books online that I would Amazon and have them sent to me that allowed me to just read the codebook and understand you know, the way certain frames needs to be needs to be done the way doors need to be taught and the way you know to maintain things plumb and squared and you know, get things done. Do you need to, you know, glue and screw and drywall? Right now that was the thing that, you know, most people didn’t even do I do it on all my properties, you know, and maintain its integrity and prove certain things. These are things that I would just find on top of that, you know, I would call a friend, find a contractor find a car carpenter. And if I couldn’t afford to hire them, I at least pay them to pick their brain. Okay,

10:18

good enough. So do you still do the renovations on the properties that you buy? Now?

10:22

We do. I personally don’t. I thought that about probably about, I lied, because everyone’s would all tell us the kitchen. And if we’re short on staff, but for the most part, we tried to just outsource a lot of that. We have a network of sub sub sub contractors that we utilize. And we have one or two typically employees in house that kind of help us manage what we’re doing. Because we constantly always have between two to probably five projects going on at any given time. Okay, so

10:47

tell me a little bit about the people that you have in house what what is their role in this whole game. So

10:53

I have one gentleman by the name of Mason, who’s kind of, I want to say is my GC, he bounces from project to project and then I have you know, another employee who kind of helps with our rental turns. So I used to try to outsource everything at one point, I built a massive team up. And for me, I didn’t have that many units that needed to have 20 employees. Through a number of conversations and networks, I’ve kind of come to the equation, that typically one employee can handle probably 40 to 50 units, as they train them, without the flips and things of that nature. So we ended up just Mason ends up being my GC, he’s like my right hand guy, when it comes to our properties and he bounces around, he makes sure the material gets on site, because that’s one of the things that we found to save some money is that we get good deals on material we make sure we source out we’ll make sure we put the best stuff that we can put in by our budget, and not just buying the bottom of the barrel that we have to swap out four or five times. You know, when we do our rehabs, we try to make sure that we replace certain things that we know are going to be problematic in the future. You know, if we have a property that’s vacant, and we’re pulling permits anyway, why not just replace a PECS now says I mean, I run the pecs is relatively inexpensive. So we’re not dealing with some of the older properties. I mean, in Pennsylvania, we deal with a lot of old inventory. We do a lot of cast iron, a lot of terracotta pipes, and if we’re there doing the work, and we can access it, we definitely try to swap it out from the beginning to avoid recurring calls for no reason.

12:12

Okay, are you self managing everything that you own? Now? We are. Okay. And do you have a team of people that help you with that? Or is it just the same employees that we’re talking about? It’s

12:22

just the same employees for now? I mean, we don’t have I mean, we have a little over 50 units right now that we maintain. Over the US, we probably bought and sold probably about 130, maybe 140.

12:32

Okay, how many of your deals in the past were flips versus buy and hold?

12:38

I would say out of the 150, we’ve probably done I would say 40 of them may have been intentional flips. Okay. Some of them were opportunistically as we turned them, the market, you know, provided some resources to take or they were areas that we just didn’t want to cluster ourselves. So our, our portfolios, pretty much within 45 minutes of the Lehigh Valley. Okay. And there were some that were outlined properties that we kind of picked up little by little. And we just decided just to cluster a little bit better. So we have a bunch of the centers of the Allentown, we have a bunch of Slatington, we have a bunch of Penn argil, we have a bunch of Bethlehem. So at one point, we had a couple of outliers that were just bouncing all over. So he kind of sold some of those opportunistically just to keep the cluster. So when we’re doing our quarterly inspection report, so you can drive in there to a cluster and kind of make it and make it as efficient as possible.

13:23

Okay, fair enough. So you’d mentioned that you are using subs for a lot of the renovations and you’ve got your GC guy kind of monitoring that? How important was that the building of those relationships? Because it sounds like you’re using the same group of people over and over again. So how, how hard was it to build that relationship? And how important was it to build those relationships?

13:47

It was extremely, it was extremely difficult, but also extremely fruitful. The difficult part was, you know, there’s contractors that will try to burn you this contractors that are going to try to get you know, quick buck and get out. And not that it’s some people may be the intention, I don’t want to believe that there was their intention. But other people have motives and things that occur in their life that you know, cause them to do certain things. I will tell you the relationships that we had, you know, I would just, you know, call a friend of a friend, typically the people that operate in trades, they have friends, they have cousins, if you know family members that are within the trades. And I would just kind of go down that, that aisle and just keep asking for referrals. They know someone like my roofer that I have these great roofers based out of Easton. And I found them through the guy that was doing my gutters one day, and I’ve been using for almost four years now. So that was like, Hey, who do you know that does, you know, roofing and even if I don’t need them at that time, I’ll get two or three names. And then next time I go to do a bid, ask them how they see the process, invite them out to the project, or even if I’m in a project that invite two or three people and say hey, would you mind giving me a price quickly? I’ll buy you lunch. I’ll get your coffee. Just get him in there so we can meet face, shake hands and you know, I believe wholeheartedly this still a belly to belly business that you have to get in front of people and be able to engage with them. Sure.

15:03

And those same subs are now as are still working for you, a lot of them are the

15:07

majority of the ones that all you have one or two that will kind of peel off because, you know the site, they want to go, you know, traditional commercial route, or they want to do more consumer facing and investor facing. Because as you know, I mean, we’re different animal. We can’t pay what consumers can pay on certain things. I mean, we try to pay the best we can, but we have our own margins and balances that we have to make.

15:27

So was there anything else besides the actual referral from other people that are references that you use to find and locate contractors or tradesmen in the past, I

15:38

mean, real early on, I used to go to a lot of network meetups. So I went to them as well, I would go to different contractors and different investor meetups because you’ll have investors there you have wholesalers, you have contractors that’ll show up at some of these meetings. And it’s a great mix and mingle to get in front of people. It’s consolidated, you know, when I had the time and the availability, because you can go that you’re meeting other like-minded people, and typically contractors that are investor geared, but they understand some of the compression on costs, and some of the time sensitive nature of it because of how we’re trying to turn everything. So I mean that the meetups will be huge when they’re targeted correctly. Okay, I

16:14

want to talk a little bit about current market trends and what you’re seeing now. So what would you say are the current trends in the real estate market today as as they relate to investments, specifically in the Lehigh Valley?

16:28

It’s terrific. Overall, I mean, the market has definitely changed significantly. But I think the market is always changing, always going to continue to change. If I can make a side note, one of the things I will caution people, because I see it a lot online, is I saw a post yesterday, actually, somebody, somebody made the quote, that if you pay cash, everything will cash flow, which to me is just mind boggling. As an investor, it’s just empathy. These are the gurus that people are looking up to. I mean, this person probably has I think she has 100,000 followers. So quite quite a following. But her comment was that I mean, I get that as an investor’s, you know? Yes. Is there some truth in that language? Absolutely. But what about cash and cash? What about that service? What about the leverage capabilities? And we can go on for days about this. I’m not a tax advisor. So I can’t give all the information about that. But there’s so many potential and benefits to leveraging correctly and utilizing that, that I don’t know if everybody has a million dollars in their cash account right now to go buy one property, sure, and lose the potential on why we invest in real estate and the benefits we get out of it. Yeah. But going back to the marketing in the market is still it’s still very strong. I mean, I think we’ve always had a very strong market because of the healthcare and the infrastructure we have. And we have great workforce housing, we have great manufacturing jobs. I mean, this is the reason why we thrive even during COVID. I mean, I think we’re an isolated pocket with everything we have. And that’s why we’ve had to attract so many investors from outside of the market. So I don’t see that changing anytime soon. Do I think the rates are making it tougher to make deals work on your spreadsheet? Absolutely. But I still think it’s a market that’s going to continue to thrive. Okay.

18:12

How would you say that recent economic changes have shifted the way that you should look at your investments? Or Or has it has it shifted the way that you look at your investments that you’re looking to buy?

18:26

It hasn’t shifted mind because I always focusing on acquired, I think it’s going to shift a lot of people’s lenses on it, because I think a lot of people were, were making foolish investments to an extent, because they were like, all the work is going to continue to go up. It’s always going to go up and it is always going to go up until that certain point. So I think so many people were saved by the market. I mean, I’ll be honest, I was foolish at one point to when I was I bought a property almost Island scene that didn’t pay attention to and it was supposed to be a flip. I did some quick preliminary searches online. Everything came out to be perfect. They said it was a single family ranch in Salisbury Township. Turns out it was a double wide trailer that was never deeded correctly. And I bought this at auction. Yeah. Oh my god. You know, when the markets real frothy, I think some people make silly mistakes like that they don’t pay attention. Fortunately, the market did save me I was able to break even on I think I lost like five grand in the grand scheme of it, but I love what the house and built a new construction in place. Been able to do that, you know, if it wasn’t such a good market, I probably would have lost my lost it all on that, you know, I could have lost considerable amount of resources into that project. So I think the the, the current trend that where we’re heading now is going to cause people to kind of clean their lenses up and pay attention to what we really should be focusing on and not just buy to buy because a percentage change the way your property performs.

19:47

Sure. So, you know, I think that one of the things that prevents people from investing ever, and being able to realize a life of financial freedom is Fear, fear of failing. But yet every person I think I’ve ever talked to that is successful in real estate now has failed somewhere, and has learned from that. How much do you think your experiences your success and your failures have shaped the way that you do things today?

20:20

I think I mean it mentally, I realized that all the failures, I mean, to equate the one I just spoke about, I won’t ever buy a property without going to see it again. At one point, I was getting foolish, and I was just buying to buy to keep the guys busy. So I will say that, you know, your failures are going to be your biggest attribute, in my opinion, whether it’s personal ones, or you know, even if you take to account you know, your personal finances, if you realize you have no money in the bank, and you can connect the dots backwards, you can realize why that occurred, you can always connect the dots backwards, you know, you can always look at your failures and say, This is why this happened. But it’s C, analyzed in the taking the time to look at why it occurred, to realize what the key, you know, what the key shift is going to be and what the key part of that that allows you not to make that again, now having that failure two and three and four times because you’re making the same things as borderline the definition of insanity, right? It will be done the same thing over and over again, trying to get a different result. But I think those things will be huge. So allow you to make the shift to, you know, get into where you want to get to, I think none of us in this room where none of us are going to be listened to this are people that have failed. I think we’ve all failed that, that we’ve all realized, okay, this doesn’t work. And that’s where we pivot and shift. Sure,

21:33

I definitely agree.

21:36

The episode will continue in just a moment.

21:39

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. How would you say technology has helped or hindered your ability to invest in invest smartly.

22:46

While technology has been paramount, I mean, early on when I started this in 2013 14, I mean, I think podcast was about the only thing that was out there, YouTube was just starting out. Now, I mean, honestly, as I’m speaking to you, right now, I’m in my house in Florida, some bounces between locations between Pennsylvania, Florida, and this gives me the ability to engage in conversations like this still have some that work to meet up with local investors, it also gives me the ability to when my maintenance crews out there checking on properties, you know, I send them with a Matterport, the Matterport property, I can analyze and kind of build the scope off of Matterport. If I’m in Pennsylvania, or from Florida, or from Pennsylvania, looking at a Florida job, I have a Matterport down here as well. So the ability to be able to be kind of present in kind of 3d with almost any transaction allows us to talk to people as if we were there with them view properties as we were there with them. I mean, I can take measurements at the Matterport. Now, obviously, I won’t take trim out and you know, I went to a full quarter of a Matterport. But I can get a good idea of you know what I’m working with. So I think the technology has been, I mean, I can’t imagine those back in the day where we had to go and get keys from properties, you know, from the MLS back in the day, and where, you know, you didn’t have the ability of getting pictures, you know, high quality pictures within a moment’s notice. And that’s just the base level. I mean, we’re talking about the ability to do contracts and signed documents in just a matter of moments. I mean, think about that. I mean, we literally with the click of a button, you could probably send me a contract for a property. And I could have a fully executed into my title office within 10 minutes. Right?

24:14

Yeah, it definitely it’s just it shifted for sure. So for people that don’t I obviously know what Matterport is. But for people that don’t know what Matterport is, what are you talking about?

24:24

So Matterport is 128 pixel camera. And it has like six different lenses on it that allows you to scan a room entirely to include Lidar and Lidar is a it’s a metrics that allows the camera to be able to with a relatively tight level of precision scan and be able to say okay, this wall, how big is it are this walls 13 feet by 15 feet, you can create 3d renderings, you can create a blueprint off the property to see you know what it looks like. So this allows me to essentially get a high level view of the project we’re working on, and what we’re going to do and build this scope of work out and build my entire, you know, workflow of this. And I can transpose what I want on each one of the rooms inside each one of the rooms. So it makes it, I can paint a really clear, concise picture for the contractors in the team moving forward.

25:12

Very cool. How long have you been, you’ve been using that technology. I

25:16

bought it probably about five years ago, I bought a pair about four years ago, I bought it for the real estate sales side, and then found the dual benefit of being able to use it. And so one of the other ways I use it is for my rentals. So I have an archival buy properties. If I ever had to evict somebody, I can go to court and show the judge exactly what the property will look like. And he can walk through with a date, you know, with everything on it, there’s no question that this was here, this wasn’t there. I have a full archive of all my properties, year after year. So every time we turn them, I go and do another archive on

25:45

them. Awesome. That’s a very unique way to use technology. That’s awesome. So what advice would you give investors looking to enter the market today.

25:57

Don’t make it fancy. Don’t make it too complicated. Buy within your buy within your comfort zone. Too often, I see people trying to go crazy. And I see all this multifamily, this multi element where all multifamily is great. But everyone can’t afford to go buy a 15 unit or a 50 unit. And everyone doesn’t understand the complex the complexities and the intricacies of syndications and funding together, take baby steps, it doesn’t have to be you know, it’s a marathon, it’s not a sprint, you know, nothing you’re gonna do tomorrow is gonna make you a multimillionaire, and you’re going to retire unless you’re Jeff Bezos or something of that sort and find a way to do it. But most of us that are in this space, you know, we need base hits, everyone wants to tower everyone wants to make it seem like you know, you need a home run right off the first, you know, the first hit, and it’s not necessary. You know, I’m living proof that you know, just one after another, just get up every day and focus on what you want to focus on, on the sandwich or buy boxes. And when I refer to buy box, for those that don’t know is, you know, what you’re comfortable by, and what your criteria is, you just have it on one spreadsheet, you know, have have one sheet that just says, Okay, I’m comfortable on this, I’m comfortable buying single family houses within this area that will rent for about this, because it allows you to either add things to your potential property or remove them very, very quickly. Whereas you know, a bit, it can become overwhelming when you’re looking at 100 properties a problem on the MLS or 100 properties that come up. But if you know, okay, I only want to buy in cat Asako, for example, that’s your criteria. Or if you take it one step further back and say, I know that I can only afford based on my numbers to buy homes that are under 180. So now you can remove all the additional stuff above 180. Or, you know, if you know that you can only afford based on your cash available 100,000 You could kind of break your criteria on that. And just taking baby steps and taking this more straight.

27:43

Okay. For investors slash sellers that are looking to sell something in this current market, what would you tell them? What would be your best advice?

27:53

Give me in general? I like it, I like it. I would say the biggest thing I would say so make sure that you know you’re maximizing your value for your property by make presenting as best as you can. I mean, there’s minimal things that you can do. I mean, there’s still buyers out there, there’s still people that have to because of 1030 ones, which are like kind exchanges or other reasons that have to transact, I think the transactions will change. I will say Don’t be unreasonable because the market has shifted. I mean, cost of money has changed that we’ll be combining significantly for those that are using leverage. And not that misnomer that somebody spoke about i I’m sorry, that term that she said, drives me crazy. You can cash everything, oh, cash flow, but keeping real estate expectations, I think the frothy market of 234 5% It’s gone to an extent. And I think that will I think that will change significantly. I mean, you put that in your spreadsheet and adjust for it. I mean, you’re talking about some things or get in touch with us and our slashes just because it doesn’t perform. Right, the banks don’t lend money. So there’s not many people that have millions and millions of dollars in their pocket ready to just pile cash.

29:00

Would it also be fair to say that if you’re going to sell you probably should do it now?

29:03

100%? I mean, I don’t see it get any better. I would say that making doing the transaction, as you know, as soon as possible is going to make sense because there are still people that have to transact because of decisions they made before. You know, whether there were two year three year five year arms, there are people that were in hard money positions that have to transact because they have to transfer the funds over. So I would say, you know, given a call right away to one of, you know, to Jennifer, my will take will be taken care of now.

29:31

Yeah, absolutely. I actually was just having a conversation with a colleague, slash client of mine. And we were talking about, you know, a few years ago when the market was so hot and people were buying up stuff left and right, because it wasn’t artificially inflated yet and the cost of money was drastically low. You know, all these people bought, you know, you know, we’re using commercial loans and doing five year arms, right. Well guess what’s happening in Next year, they’re all resetting, or hey, so there’s going to be inventory, it’s going to come back because some people are going to be forced out of their properties, right? Because it doesn’t make sense for whatever reason today, and then some will just refinance or something like that. And things will be good. But but there’s going to be an adjustment, and it’s going to come full circle, because, you know, that was several years ago. So within the next year or two, I suspect that we see a lot more inventory.

30:24

Oh, 100%. I mean, my wife and I are currently doing that. Now we’re going through our entire spreadsheet, I was like, hey, I want highlighted in red, all of our, all of our rate locks. You know, fortunately, most of ours, we were able to lock in seven or 10 years at the time they were offering it. So we have a couple more years before that comes due. But I want that on my radar, you know, because that changes your cash flow drastically. Sure. I mean, some of these are going from 399 to, you know, 7.9 or 7.5. That’ll wipe out quite a bit of cash flow. And that goes back to our initial statement of you know, make sure you buy right, don’t don’t, don’t just buy to buy, right, because it should cashflow. I mean, there’s so many people that will tell you buy for appreciation. I’m not a speculative investor. I’m not a fan of that. There’s a lot of people that you know, buying speculation. It can go south real quick. I mean, and yes, there are failures that you want to learn from this, not one that I want to learn from Sure.

31:19

I think, you know, looking at your adjustable rate mortgages now, before you’re in the year that they actually adjust, I think is a really smart and critical function because you know, rates are going to drop, it’s only a matter of time. And they might just get over the next couple of months into the year, they might get low enough where it makes sense to refinance prematurely, you know, versus waiting till now you forced to make a decision, because now maybe your decision is now I’ve got to sell the property. And then you’ve got to think of capital gains and things like that. So I think that your advice on looking at things and you know, from a holistic perspective, and knowing what is coming down the pipeline for all of your investments is is a great tool. It’s not just about tunnel vision, I’ve got cash flow, and everything’s great, because tomorrow things could change if you’re not looking at all the factors. So I think that’s wonderful.

32:12

A lot of that comes back from my background in law enforcement. And we I mean, in law enforcement, we always play the what if scenario? Sure, you know, every situation we went into was always okay, what if the lady comes out with a gun? What if you know, you’re arresting the husband from a domestic or the wife from a domestic, and then the husband or the significant spouse gets pissed off, and I’ve had that happen? You know, I’m a wrestling one person that just got into an altercation with the spouse. And as I’m bringing them outside, the other spouse gets pissed off, because they’re in handcuffs, and now they’re attacking me. So it’s, you know, playing the what if a puts you in a position that you at least can be proactive. And you can be offensive versus being reactive. I mean, the last thing you want to do is get caught by not paying attention. And then now you’re stuck there having to do what we spoke about, you know, how Matala you know, fire solid property, because you can make cash flow and you don’t have the funds and the resources saved up? Sure.

32:58

So what do you predict in the real estate market, as well as the financial markets over the next, say, six months? A year, two years, three years? What do you what do you think is going to happen?

33:09

I think it’s gonna get slow. I think a lot of people that are typically I don’t want to say word shouldn’t be in this industry, because I think everyone should have been in this industry that wants to be in it. But I think the people that just got me thinking they were going to make a quick buck are going to go, you know, southing go away. I think there’s going to be a lot of transactions still transacting. I mean, transactions have to occur, people have to sell properties, whether it’s a distress sale fire sale, I think the people that are doing the work are going to see that the fruits of that. I don’t think that’s going to change at all, I think you have to make sure you buy correctly. But I do you know, I follow a lot of the same trends that are saying, you know, q3 q4 2025 is where we’re gonna see rate to get better. I think if it makes sense to buy still buy, I mean, if you can, if your property can perform on today’s numbers, they’re gonna performing better in q3 or q4, 2025 numbers, when you can adjust your interest rates, don’t lock yourself into a prepayment penalty, if possible, knowing that you can adjust that. So I think navigating with the kind of those lenses will put you in a good position. Okay.

34:13

Do you still think today that real estate is still the most stable type of investment in comparison to like stocks, bonds, crypto, all the different types of things that you can get in? Do you think real estate still has that? That metric of sustainability? And of

34:28

course, I mean, is there a is there a 1,000%, or somebody that can like triple like this? The reason why I say that is because there’s, you know, real estate’s the one place that you get paid for times, you’re gonna get paid by appreciation, the asset and let’s take out the the madness that occurred when we were gaining 20 30% per year, and let’s just talk about two to 3% per year. I mean, you’re you’re controlling an asset on a leveraged basis, that allows you to get two or 3% on that. So even if you have 20% It’s at a property but you’re getting 2% of the entire value of the property. I mean, I don’t have a spreadsheet in front of me, I’m not that good at math. But I mean, those numbers are significant for what you’re gonna get on your rate of return on just that one component, share the data that the tenant is going to help you pay. Now, you have the cash flow, which are generating income, which, if leveraged correctly, and I’m not a tax advisor, but much of that becomes, you know, tax free because of the appreciation. So between those four components between the debt paid on the appreciation, the cash flow basis, I mean, it’s, you’re winning on every avenue that I, I’m not big into stocks, so I can’t compare apples to apples, but I can tell you that, you know, I haven’t seen or have had anyone mentioned, an investment that can perform on those levels, not

35:39

without a whole lot of risk. And a whole lot of money invested, I think that’s the other unique thing about real estate is that, you know, sometimes you could just get in for much lower cost of entry than I think in a lot of other areas of of investing, right. 100%, you know, but again, it has to be done. Right? Right. And that’s any investments just got to be done, right. And

36:02

I think that’s the key thing. So many people get lost, because there’s the word investment. So many people see this, and they, they reach out to me, and I’m sure they reach out to you. And they’re like, Okay, well, I want to invest and I have this much money. When am I going to be rich, it’s not happening overnight. Just because you own a property doesn’t make you an investor just because you sold one property, you’re not an investor. It’s understand how to navigate the ups and the downs on the standing how to make the acquisitions and dispositions when necessary. Understanding how to find the value add in the properties on the standard, you know, those are the investment components in the criteria. And knowing how to identify that is is super super when it comes to the projects. Sure.

36:42

So how do you foresee the real estate industry, the real estate market evolving in the coming years? And what should real estate professionals be prepared for? Or what should clients be prepared for investors be prepared for?

36:56

I think technology is going to continue to get in our way. But I think we can’t just turn the blind, I think we have to realize that technology is going to be there to stay. I mean, if going back to my statement earlier, I mean, in 2000, and I was an agent, they’re putting my block one of the agents on our markets been around quite a while. And I’ve had stories with him. And we’ve been Cajun, he’s done another book consistent actions since like day one, I think everybody loves him. But at the same time, Tim also remembers back in the day, we used to have to drive across town to get a key to show a property. Yeah, that’s, but now you literally with the click of an app, you get the access code, you enter the property, typically and everything, put the key sometimes, because there’s Wi Fi hookups, you get into the property, show the property and leave. So technology has evolved. I mean, even the scheduling component, we don’t even have to call salads anymore, because we schedule online, if we take a second to connect those dots backwards, and how technology has helped us get to here now, I don’t know technology’s always going to be a bad thing. I think it’s going to adjust some of the ways we operate. But I think we have to learn to navigate. I mean, think about and I don’t know how long you’ve been doing this, Jennifer. But I can’t imagine a day where I had to drive to somebody’s house to go sign a contract. You know, everything’s done digitally. I mean, we have a couple clients that don’t work on computers. So we still do it. But overall, I mean, look how technology has helped us with that. I mean, a click of a button somebody sign in their house away? Sure.

38:24

Yeah, I 15 years, that’s how long I’ve been in the business. So I do remember driving across town to get keys. And I do remember hand signing contracts. So technology is certainly expert hated the amount of deals and amount of, you know, investments that you can find and you know, a couple clicks of the button. But you did say something really, really critical earlier, or at least alluded to it. And it’s you got to be careful what you find. So because technology is so easy and is at everybody’s fingertips, there’s also a lot of people that talk about things that they don’t actually have any experience in, right just because they talk and because they got a platform to do so. So you got to be very careful very cautious that the people that you’re listening to that are advising you actually are in a place that you want to be in if not you shouldn’t be taking their advice. 100%

39:13

I mean, you have you want to learn for somebody who’s in the trenches. I mean, it’s it’s like going to see a skinny chef and I know that’s an OCO. legitimately, if he’s not eating his food and know what he’s doing. I mean, it’s it’s so tough. And I know that has changed a lot, because there’s a lot of chefs that are phenomenal that you know, I’ve six packs, nonetheless, I mean, that’s you have to make sure that the person is in there doing it. And don’t get me wrong. There are people that have done it, and I’ve stopped doing it for one reason or another. But the ability to understand that they’re looking and not just because not that they did it 20 years ago, because everything was different 20 years ago, you have to speak someone who’s in the trenches now who are analyzing deals. Sure. And I know many times we feel like we can’t talk to other people because their competition, but I will tell you most people and I’m sure my Jennifer will agree. If it ever comes a day that Jennifer and I are across a table, we’re bidding for the same house, may the best person win. Right? Up until then I think we achieve more by working together and sharing ideas and ways to navigate this, because I don’t know anyone that’s smart enough to navigate this entire industry themselves.

40:16

Right?

40:17

I think the combination of us working together will make each one of us better. And like I said, If there ever comes a day that Jennifer and I across the table, and we’re going to get seller for that made the purchase of someone.

40:28

Yeah, for sure. So what is your best advice for investors that have not made the move yet to start investing?

40:40

Take a second analyze what what’s the worst case scenario? And that’s what I tell everyone provided that you have a good advocate such as Jennifer or myself or somebody that can guide you through this process. What is the worst case scenario that can happen? If you’re comfortable with the worst case scenario, go for it. There’s nothing that you can lose at that point. You know, and this goes back to my law enforcement, I prepared for unfortunately, for active shooter drills I prepared for, you know, potentially being outgunned or outnumbered in this situation, and I knew what by elsewhere, if you take that same approach, and take that same lens and look at a scenario where, alright, if I buy this property, I know I’m buying it for 125,000, or whatever the number is, and I put x amount into it. But let’s say everything goes wrong, and I have to double my budget, who will I be bankrupt? Will I be broke? Will I be able to sell the property? Even if I had to sell the property? What’s my potential loss? If you can analyze and you’re comfortable with everything there? What do you have to lose? All you have to lose the opportunity for your life to be changed. Because if that’s the worst case scenario, imagine if everything went great. Imagine if you bought the property, it turns key is cash flowing. And now you’re moving forward. Now you just have put yourself in position to buy the next property. And the next property. And I’m sure Jennifer can attest to this, that once you start making that momentum, it becomes a snowball effect. Sure, because instead of you taking your money from your you know, active income, that passive income source providing the downpayment, that resource to buy the next property, sure, and then it just becomes something that either you grow to wherever you want it to grow, everybody doesn’t have to want 5080 102,000 units, you can be happy, just find that or provide a lifestyle or legacy or even, you know, just pay for college kids in the future when they go to, you know, you can keep it early on. Right in 15 years, 17 years when the kids go to college, pay off the property, sell it, and then use those funds to pay off their college debt. You know, everyone’s goal is going to be a little bit different there. Sure.

42:32

I’ll just you know, that was amazing advice. I really appreciate the time that you took to talk to me today and answer some questions and give some insight on your experiences and things that have worked and not worked for you and help us guide investors and provide education that will be beneficial for them. So thank you so much for your time today.

42:50

No, thank you for the opportunity. I’m really I was proud and humbled when you sent the invite. So thank you so much for having me.

42:58

Thank you for listening to this episode with my special guest just you know over oil. I hope you enjoyed this episode and until next time, take care.

43:07

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