207: Season Two’s Mythbusters Episode
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Episode Transcript
Welcome to Episode Seven of Season Two of the Growing Empires Show. Today I'm here with my husband and business partner Emmanuel de Jesus. And he's going to help me out on our mythbuster segment, so stay tuned.
00:13
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.
00:32
Jennifer: So welcome Manny to the Growing Empires Show. So glad that you're here.
00:35
Manny: Thanks for having me.
00:36
Jennifer: Let's kick off our Mythbusters episode with you talking a little bit about the work that you're doing now and how you got into real estate.
0:42
Manny: So the work that I'm doing right now is helping investors buy and sell investment properties. I help them locate the properties. We go out, we take a look at them. I give them my honest opinion on what I feel the property is going to be worth for them after they purchase it, give them my insight on repairs and maintenance, then obviously help them through the contract, making sure we have the proper terms in place to get them what they're looking for. Now as far as getting into real estate, I saw real estate as a means to an end in regards to my future with money and potential retirement. I was at a dead end job previously, and real estate has shown me that I can work the business as well as working my own business within the business- using my real estate license and everything that I've learned to help me be a better investor.
Jennifer: So did you ever wonder how real the stories are that you hear on real estate related blogs and forums? Well, today we're going to put some of those myths to the test, and I've asked my husband to provide his expertise and insight on this topic. The four things that we're going to review today are: whether self managing allows you to make more money or not, flipping homes is a lucrative business, owning multi-family homes is better than owning single family homes, and last but not least, the ongoing war between buyer and seller. So let's get started. Let's talk a little bit about self managing. Most investors believe that managing properties themselves allows them to retain more income, more profit - fact or fiction?
Manny: I believe that that is fiction. The reason I believe is fiction is yes, it may look like on the surface that self managing, you keep all the money, you don't have to pay out any money to a manager and you get to save on that whatever percentage it is that you think you're saving on. But when you really get to it, and now you have to rent this property out, now you're doing showings, that's you physically going out to do it. And when are you doing it if you have a full time job? Who are you sending on your behalf that you feel like can speak as eloquently as you can in regards to that property? So now you're forced to go out there and meet with tenants. I'm sure that took a large part of your Saturday, maybe a large part of your Sunday, and you've been doing that for the last few weekends just trying to make it happen. Is it really working out to your benefit only being able to go out on the weekends or after hours when you're done with your job? Probably not. So you're right there already right off the bat missing something. You're not getting the attention you deserve, and you're trying to do it yourself to save $1. But are you really saving $1? Probably not. I'm sure your value is worth way more than what you're setting out to do on the weekends to be that plumber to fix the trap or that plumber to mess with the toilet or that electrician to fix what's going on with that light switch that your tenants bugging you about that it wasn't there last week, but now it's a problem this week. So I believe that it's a myth. I believe you can self manage if you want to, but you should be aligning yourself with a management company or somebody who has expertise in that type of business just to help you kind of get started. So yeah, it's a myth.
03:56
Jennifer: Let's talk a little bit about the repairs that you were referring to that sometimes creep up and maybe could be in the middle of the night. How important do you think vendor relations are? And generally do you think that as a consumer managing your own properties, could you have the same vendor relations that a larger property management company might have?
04:16
Manny: I think having a good vendor relationship is extremely important in dealing with multi-unit or even single family home investments. For example, if you don't have many connections, and it's your first property or two and your tenants are still calling you for help, maybe you've only experienced one or two major items in that first couple of years. But if you needed a major item - let's say the hot water heater went in the middle of the night in the middle of winter, and it's kind of urgent - young kids in the home. You really want to try to make it happen. You calling a regular plumbing company. You're just going to be another number on the list for their long list of items to get to so you may end up getting delayed but if you have a relationship with this plumbing company that you drive tons of business in their direction, and they are able to move and shuffle things around for you knowing that maintaining their relationship with you is also going to continue to benefit them, then yes, I believe that sometimes having that relationship already at hand, will get you things a little bit quicker, a little bit faster, maybe a little bit unorthodox and make it work for you and your your tenants and your clients. So yes, I believe having that investor relationship is extremely important, and trying to build one is also very important.
05:35
Jennifer: Flipping homes is lucrative - fact or fiction?
05:39
Manny: Flipping homes can definitely be lucrative.
Jennifer: So what would one need to do to make sure that it is lucrative, and that can be a fact?
Manny: Well, in order to make that a lucrative business, you have to know what you're doing. I don't think anybody can just kind of jump in with some money and say, “I'm going to flip a property, and I'm going to make money.” In order to make the money, first of all is inventory. You have to be able to find the properties and find them quickly. At the market we're dealing with right now things are flying off the shelf. It's a very good market for people who are looking to sell flip properties. But in order to sell for property, you have to buy a flip property. So to make it lucrative, you have to have the right team in place. And by that I mean, an agent that knows what you're looking for specifically, an agent that can help you get into the property quick, like today quick, tomorrow quick, within 24-hours quick. And if you can't do it, somebody who can be there on your site that you trust to go on your behalf, take a look, and then report back to you with the good, the bad and the ugly. So that's just speed to action stuff. The next thing would be alright, we've got out to the property, we ran some numbers, we've made a decision. What's the next step? Now we got to get the offer in. When you're buying these flip properties, most of the time, they're being purchased from a bank, it's a bank owned property, or maybe it's a short sale, or some type of estate deal. But you have to be able to act quick, put the right type of terms in your contracts so that they can be acceptable to the seller, and get that in as soon as possible. Speed to action again. Once you've gotten that far, great, you've settled on the property, you're now the owner of this property that's got tons of problems that you were thinking would be such a good idea. And now we're standing in filth trying to figure out what the next step is. By that time, if you're working with the right team, all the other things have been put into motion - you have the contract of bids, you got the estimates, you're well aware of where you're going to be within the numbers. And when settlement date comes, and now you have keys, everything should have already been scheduled: plumbers, sewer, septic inspectors, whatever it is nice to start rolling immediately to make sure that you can get the work started, get the work completed with good craftsmanship and then get the property on the market so that it can now start to be sold and then that you start that process all over again. But yes, it can be lucrative, but you're going to need the right team in place to do it. So that's kind of a 50/50 on my end. It's definitely not going to be lucrative if you don't have the right team.
08:06
The episode will continue in just a moment.
08:11
As a real estate investor, understanding the nuances of the market is critical to sourcing the right property for your portfolio. Knowing what the market will support in terms of lease-ability and potential rental income is a vital part of that equation. You want your property to be in good condition and in a location that's attractive to high quality tenants. If you wish to acquire a property that becomes the gem of your portfolio, you're going to need help to do it right. The good news is you have a great resource who can help you slice through the challenges of finding your ideal property. And that's me. So whether you're just getting started and are unsure of which market to start with, or whether you know the market but can't find the right property, I can help visit GrowingEmpires.com and schedule a call with me today. One simple conversation can help you avoid wasted hours, days and weeks and also help you avoid costly mistakes that will weaken your portfolio. Schedule that call with me today at growingempires.com. That's g-r-o-w-i-n-g-e-m-p-i-r-e-s.com and I'll make sure that I help you find that home-run property to add to your portfolio.
Jennifer: Next topic, owning multi families is better than owning single family homes - fact or fiction?
Manny: I know this is arguable, but in my honest opinion, owning multi-family homes is better than only single family homes. One of the reasons that I think about is a multi-family unit. Let's just take a two unit for instance: unit number one is moving out. So at least you still have income from unit number two still coming in to help you cover whatever expenses are yours with this property. It could be a mortgage, it could be just making sure the insurance and taxes and water sewer and trash is handled in that in that two unit. But at least there's still some income coming in. To me that's one of the most important factors there may be people who like to argue that single family homes are the better route. But when that one person moves out, you are getting zero dollars coming in for that property. Another benefit would be, I like to think about roofs on properties, a single family home a bunch of single family homes, it's a bunch of roofs that you're going to need to maintain. On a multi unit building, you have multiple units under one roof, it's a little bit easier to maintain that. So the benefits of single family homes, as I mentioned before, would be a longer tenancy, and you can charge higher rent.
Jennifer: Why is it a longer tenancy?
Manny: To me, it's a longer tenancy in a single family home because people who get into that there is room for their family and room for their family to be there for a few years. Usually, somebody's getting into a one bedroom apartment, at that point, they're just a single or a couple, but at some point, they're going to want more room, they're going to want a yard, they're going to want more parking.
10:50
Jennifer: Okay, so really not fact or fiction, more preference, one over the other. But single families, the benefits would be likely a longer term tenancy, higher rent per square foot, likely. And the benefits to owning multi families are cash flows coming in, even if you have a vacancy. So you're still paying your debt, you're still paying your taxes insurance versus taking cash out of your pocket.
11:19
Manny: Right. Yeah, I agree with that.
Jennifer: And like you mentioned before, you know, one roof for five or 10 units is better than five or 10 roofs. So as far as maintenance is concerned.
Manny: Right.
Jennifer: Last but not least, let's talk about the war between buyer and seller. Everybody believes that real estate, or at least I think this is my experience, I feel like everybody goes into a real estate negotiation thinking that it's war, and there has to be a winner. And you know, you've got to be a tough negotiator and draw your line in the sand for you to get a good deal. Do you think that's fact or fiction? What's your experience?
Manny: I believe that, yes, there needs to be very good, strong negotiating skills. I also believe that you should have a goal in mind of what you're trying to attain as far as what purchase parameters and details are in the contract. But I also feel it's extremely important to have some flexibility. A lot of people go into it with the thought, “This is my number. If I don't get my number, I'm going to walk away from the deal.” That may have worked on some other deals, but it's not always gonna work. And if that's a way you like to go about it, I wish you the best of luck. But it's always best to have some flexibility. It's good to negotiate. But it's more about problem solving on our end. We want to make sure that we can get people to come together and not just have this one sided approach of ‘it's all or nothing,’ which can be extremely frustrating to deal with. And for a lot of times a lot of people - it puts the other party off when they take that sort of stance. So if you're trying to get something and you're going with that hard attitude, it really is a 50/50 shot. They may take the bait, or they may just be turned off completely. So it's a questionable approach. But some people use it, I don't recommend it.
13:06
Jennifer: So do you believe that there's a situation where everybody wins?
13:10
Manny: Yes, I believe that that can be made. It's a lot of it is perspective also. You know, if people feel like they've lost because of one thing, or or they had to give something up that they didn't want to, there's got to be something in there, that is going to be a positive for them. And to me, the ultimate positive is you sold the property, or you bought the property, you got what you needed. And now it's time to move on to fixing that or whatever the next project is.
13:35
Jennifer: So have you found that people bring past experiences into the future? When they're negotiating?
13:42
Manny: I do I see that a lot. And sometimes I'll ask people, and they'll say, “Yeah, well, those there was this one time, you know, something happened.”
Jennifer: “This one time, 50 years ago,
Manny: “I'll never let it happen!”
Jennifer: It doesn't apply doesn't to today. But we're gonna use that.
Yeah. And it's hard to get those people out of that thought process. Because they have, that's just the way they've lived their lives. And I get it. You know, when you're negotiating, and you're in the investor and you're buying it, and it's your money on the line, you want to do it your way, that's perfectly fine. But please understand that the agents that you're working with, also have some expertise, also have some good, how to like the (Jennifer: insight) without some fires, they have some good insight onto what you might potentially be dealing with. So it's good to listen, you know, it's your stance, however hard, you want to take it, but it's good to kind of like, soften up a little bit, take some information from other people that are around you in regards to that specific situation. If the only other person is your agent, then it's good to take advice from the agent when they're trying to tell you something that they think it's either going to help you. They're only working there to help you. So take the advice if you can.
14:46
So the war between buyer and seller truly is a myth then. Would you say -
Manny: Oh, no, there's definitely a war between a buyer and the seller - always a war between the buyer and the seller. But I think that more deals will get put together if people didn't such a strong stance on ‘all or nothing’ or ‘my way or the highway’ thought process.
Jennifer: Understood.
Manny: It doesn't have to be a war.
15:09
Jennifer: Well, thank you very much, Manny, for being a part of this episode. I'm sure that my listeners really appreciated your insight and expertise. And until next time, take care.
Manny: Thanks for having me.
Jennifer: Thank you.
15:26
For more information about how Jennifer can help you plan, develop and manage a strong real estate investment portfolio, visit growingempires.com