Welcome back to an all-new edition of Ask The Guys!
Today, we’ll be answering listener questions. So listen in for our best real estate tips and tricks!
A disclaimer … we are not tax advisors or legal professionals. In our Ask The Guys series, we give ideas and information … NOT advice.
In this episode of The Real Estate Guys™ show you’ll hear from:
- Your tipster host, Robert Helms
- His tricky co-host, Russell Gray
Broadcasting since 1997 with over 300 episodes on iTunes!
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How do I find a property management company?
This question comes from Lee, in Bay City, Michigan. He wants to know whether we have any advice for finding—and vetting—management companies.
He says he’s investing in his area, but the only management companies he can find are run by real estate agents on the side. He has a day job, and doesn’t have time to manage on his own … so he wants to find a reputable company that’s up for the task.
He also asks whether he should move out of his local area, since there aren’t many management companies.
We always say you should invest where the numbers make sense … but you also need to invest in places where you can find a great team.
In the long term, your property manager is the most important person on your team. So if there aren’t any great property management solutions where you live … perhaps it’s time to expand your geographic investing boundaries.
Start by refining your personal investment philosophy, then look for a market that both matches your goals and has the management companies to fill your needs.
You don’t want single-point failure. Make sure the company you choose aligns with your philosophy. Ask them, “Who supports you, and how?”
You want to make sure their compensation model is aligned with your best interests. In other words, when you earn money, they do too.
And choose your property management company BEFORE you buy your properties. They can be an excellent resource for finding properties and asset class types that will work well for both of you.
Remember, you can’t scale up without putting the right team in place. Getting a great property manager on your team helps you find the professional distance you need to run your business properly.
How do Section 8 rentals work?
Laura, from Naples, Florida, wants to know how Section 8 rentals work and how she can acquire affordable housing in her investment market.
First, a few things about Section 8. Section 8 is housing subsidized by the Department of Housing and Urban Development (HUD). But it’s administered by local public housing agencies, so it’s not always available and differs across the country.
Section 8 can be great because a portion of the rent is paid by the government. You basically have a guarantee you’ll get most of your rent on time, regularly.
But tenants in this housing can be a tough crowd … sometimes they don’t blend well with other, non-Section 8 tenants. For that reason, we like a property to be all Section 8 or none.
A great resource for learning about Section 8 is Mike McLean, who has published a book called the Section 8 Bible and has some great online resources, too.
Affordable housing can be a good place to be because of stagnant purchasing power … but make sure you’re playing close attention to the program from which funding comes.
And keep in mind … the devil is in the details. If you’re not managing the property yourself, make sure your property manager is well acquainted with Section 8.
Should I invest now, or later?
Casey, in Lehi, Utah, has been listening to the podcast, and now he has a pressing question.
Casey has saved up $100,000 to invest, but he wants to know whether he should invest now or wait until the market takes a dive. He mentions worries such as rising interest rates, an unstable dollar, and inflation.
Let’s start with a premise … markets will either do well or poorly in the future. We know that. We also know that when the market hits the bottom, you can only go up.
Real estate is a long-term, buy-and-hold business. But it is interest-rate sensitive, so you want to make sure you lock in long-term financing if you invest now.
It’s also good to keep some liquidity for if and when the market does go downhill.
Something we like to say is, “Opportunities are like busses. Another one will always come along … but you have to get on the bus at some point.”
The way we see it, Casey has a few options …
- Invest in things that are likely to do well, even when the market is bad, particularly mid-level rentals and below. There will always be demand for housing, especially mid-range housing.
- Invest in a forced equity situation … a neighborhood or property that has room for improvement, which you can force upward in value. This will help you mitigate downward pressure to the dollar.
- Invest in a bigger market … this provides stability, as these markets have more ballast during tough times.
- Step in on the debt side of the market by lending money to other investors.
- Work with an experienced syndicator who is more likely to get investments right, even when times are more precarious.
Remember, when you’re in property for the long haul, most of the time you’ll be fine. The key is to structure deals so you can weather the ups and downs.
Another thing to consider … the price only matters when you buy and when you sell. In between, it’s all about cashflow.
Real estate is one of the best inflation hedges if you structure the financing properly relative to cashflow … but you can’t fledge against inflation if you don’t do anything at all!
How do I create residual income with little savings?
Jeff, in Fountain Hills, Arizona, says he is in an interesting situation.
He doesn’t have any income, but he has enough cash to live on for 24 months. In the meantime, he wants to figure out how to create residual income that will pay for his living expenses going forward.
Jeff is looking at building a balance sheet of passive income sources.
But right now, he has time, labor, and energy he can put to work. And since he’s not holding on to a chunk of cash, the active investor route is a good one.
Some options …
- Force equity by fixing and flipping.
- Earn cashflow by fixing, holding, and renting.
- Become a syndicator and use other people’s money to make great investments. It’s our favorite way to go full-time, fast.
- Try wholesaling.
Basically, what Jeff needs to do right now is to build up his investment capital so he can start getting some cashflow.
But before he does that, we suggest he invest in education and build relationships. Get the right tools in your toolbox and the right advisors at your back before you go big.
Can you recommend turnkey management companies?
Keith hails from East Sandwich, Massachusetts. He recently bought a home through Mid South Homebuyers and is ready to buy another.
The problem? He’s on the waitlist at Mid South. In the meantime, he’s looking for another turnkey company that manages the houses it sells.
One disclaimer … we don’t know anybody quite like Terry Kerr at Mid South.
But we do know lots of other great folks.
The idea of a turnkey provider is that they do the whole thing … find the properties, get them in great shape, put tenants in, and manage the rentals.
But before you look for a provider, think about the type of property, market, and team you want.
Then go ahead and search our provider network for someone who can help fill your needs. We don’t guarantee anyone on the list, but we do promise we’ve spent a lot of time with them on the ground and have seen enough to trust them.
Should I attend Secrets of Successful Syndication now, or later?
Gene, in Boston, Massachusetts, is an investor who owns two duplexes. He wonders whether he should attend our signature Secrets of Successful Syndication conference now, or later in the year when he has more experience.
We’ve gotta say, we really think the key is for investors to come early and often.
This conference is designed for investors who already have a portfolio and are ready to take the next step.
But even if you’re just starting out, it’s a great way to get around what we call “evidence of success” and learn the power of networking.
Experience is something you can accumulate through other people. And syndication is all about having the experience to make good investment decisions.
So, for those who want to move forward, we recommend you start as soon as you can.
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