Ep #447 – Jacob Blackett – Multifamily Serial Entrepreneur
From Fix & Flips to Over $200 Million in Multifamily Real Estate with Jacob Blackett
Holdfolio Featured in Best Real Estate Crowdfunding Sites
Entrepreneurs hope to build residential real estate empire through crowdfunding – IBJ
Aug 23, 2017
Foreclosures continue to be one of the hottest items in the world of real estate. How do they work. What is the appeal for investors? What ways are there to participate? Foreclosures 101 A foreclosure is a legal proceeding which seizes real estate from an owner and liquidates it through a sale to compensate creditors. The most common reason for foreclosure is when a homeowner fails to pay their mortgage payments. Once a loan payment becomes 30 days late, it goes into default. Depending on where the property is, it may move into the legal foreclosure process once that payment is 90 days late. Although some lenders have dragged their feet on foreclosing when there are a lot of them, in order to preserve their own balance sheets. There are other reasons for foreclosure too. This includes past due property taxes, HOA liens, federal tax liens, and condemnation due to property condition or eminent domain, or other breaches of contract with a mortgage lender. Sometimes the owner is genuinely at fault for failing to keep their end of the deal. In many other cases lenders have fraudulently foreclosed to seize assets, or it is the result of paperwork glitches. Once a foreclosure is granted, properties are generally offered at auctions. If no winning bids are received, the creditor gains control of the property. What Foreclosures Mean for Real Estate Investors In one word – it means ‘opportunity’. Foreclosed properties need to be sold, and are typically offered by motivated sellers who are in need of selling that asset fast. This normally means they can be purchased at a discount. As of August 2017, Realtytrac reports there were 626,631 properties in the US in some stage of foreclosure. Discounts mean that real estate investors can buy these properties, and acquire them in a good equity position. They can sometimes be immediately resold for a profit. Though many may require significant repairs and updating before they are fit for renting or resale. How to Buy Foreclosure Homes There are a variety of ways to acquire foreclosure properties. In pre-foreclosure directly from the owner Via the MLS At foreclosure auctions Buying non-performing loan notes and foreclosing Via real estate wholesalers Participating in a fund or partnership which buys, rehabs, and rents them Foreclosures continue to be a popular topic in real estate investing. They can still offer value to investors. There are many reasons homes get foreclosed on. There are several ways to participate in these opportunities for all levels of investors from brand new to highly experienced.
Aug 9, 2017
If you talk to experienced investors today, you’ll find a few common threads in what they would do differently if they could go back and start over. Learning from their mistakes now can certainly help in making the most of your investment opportunities. Invest Earlier One of the biggest and most common regrets of experienced investors is that they didn’t begin investing earlier. How soon you start investing makes a massive difference. Even a small amount invested now can grow into the millions by the time you retire. Whereas if you put it off, you’ll have to work harder, and give up a far larger percentage of your earned income, and take more risks in order to try and catch up. The earlier you invest, the more time you give yourself to make mistakes and learn. Hold, Hold, Hold Another frequent regret is not having sold properties. Eventually real estate assets increase in value and have more income producing potential. At times, it is wise to exit to get the most cash out of a home, but that may pale in comparison to the potential gains of long term hold properties. Buy Less Junk, Invest More Whether it was putting off investing to buy junk that ‘promised’ instant gratification, or blowing all the gains from flipping houses on car leases and partying, most would go back and splurge less on items that just rust or accumulate dust, and reinvest it instead. Invest in Learning In investing it is what you don’t know that gets you. And you never know it all. Every moment spent learning can pay vast ongoing returns. No matter what the market and weather does, no one can ever take that from you. Make Bolder Moves There is probably nothing worse than getting old and realizing all those ‘safe’ plays you made, all the years spent watching TV in comfort, and times you didn’t go somewhere because it was too adventurous, was all a waste. Decades were wasted, often without any rewards for it, and with little real financial security gained. Make bold moves while you are young, and while you can enjoy it. Even if they don’t work out you’ll have plenty of time to catch up. Think Longer Term A five year plan simply isn’t long enough. To really be able to enjoy the fruits of your investing and to hold onto them you’ve got to think and plan a lot longer than that. The most successful think 100 years or more ahead. Diversify No single thing, strategy or asset will perform amazingly all the time, forever. Not house flipping, not your favorite rental, not the stock market, not your business. The key is diversifying. Diversify into different assets, strategies, and locations. There is a lot of benefit to be found in learning from the mistakes and regrets of others. Learn from these clues, so you don’t make the same mistakes, so you can enjoy the journey more, and be pleased with the end result.
Jul 20, 2017
Want to be successful in your investing? Focus on these 3 keys... There are a lot of factors that we look at when digging into investments. Yet, we often get distracted from some of the most important elements. Here are three critical keys to truly profiting from investments, and creating sustainable results that will last. Minimize Fees In his recent book ‘Money – Mastering the Game’, Tony Robbins reveals that one of the biggest threats to our financial futures and profitable investments are fees. In the world of real estate, individuals could face a barrage of multiple layers of fees with mortgages, brokerage, and banking: Many of which don't make sense or are confusing. This can be what depletes potential double digit gross returns, down to what may actually be negative yields once you count inflation. It is important to differentiate junk fees from legitimate fees in your investments and obtain quality, professional advice. You usually get what you pay for. However, by investing smarter we can strip away many of these layers, and get good returns, with good management. Minimize Taxes Smart investors prioritize taxes when investing. They take them head on, instead of just burying their heads in the sand. Taxes can take a 30-40% chunk right off the top of your returns. That dramatically changes what you thought you were going to get from an investment. Fortunately, there are some investments which offer tax breaks, and vehicles for investing which the IRS has established to allow investors to enjoy tax deferred or tax-free investments. Use these and you will not only stay in the black when others fall into the red, but you can generate out-sized returns, and build wealth and income much faster. Imagine being able to invest 40% more each year? Diversify No matter how carefully you select investments things can happen. Markets can change, corrections can happen or even natural disasters can come along. If you have all your money in one type of investment, or one asset, you are facing risks every day. Even within the same sector or asset class, you want to hold multiple units. When you are in multiple locations you’ll most always be able to generate income and have a cushion, no matter what happens externally. Summary We can use all types of fancy calculations and weigh all kinds of metrics when evaluating investments. If you are not watching the fees, watching the taxes, and fail to stay diversified, you could find your profits not being so profitable! A lot of getting the best ROI comes down to smart due diligence, intensive research and knowing ALL the numbers.
Jul 14, 2017
What good habits will you find common among the most successful real estate investors? Goal Setting Setting goals is critical to get where you want to go. Everyone you know who has achieved great things has set clear goals. Think about applying SMART goals: Specific, Measurable, Achievable, Relevant and Time bound. Ongoing Education Going deep into debt for a college degree is only part of your education. Much of what you learn is self-taught by life experience. Being a lifelong learner is a sign of true intelligence. Focus on Your Process Having goals and a good investment strategy is the start. The real success comes in focusing on the right process and improving on it. Process and protocol can simplify how you operate and give you a clear roadmap that you can gather data with. Compete with Yourself Real leaders focus on getting better and improving themselves and their results year over year. Don’t spend all your time worrying about competition, compete with yourself. Eliminate Time Wasters Identify the time drains in your day and put a plan in place to remove them. Look at how often you answer your email, look at social media, take unnecessary phone calls and shuffle paper. This applies to both people and activities which are a waste of your time. Adapt If one thing is for sure, it is that things are constantly changing. Those best at adapting have the best chance to stay ahead. Remember the only constant in life is change. Be Persistent Persistence is the difference between the successful and the rest of society. Remember the story of Thomas Edison? “I have not failed. I've just found 10,000 ways that won't work.” Focus on the Positive You manifest what you think about. Stay positive and get positive results. This is a daily choice. You can’t control everything that happens, only how you look at it and react. Good Health Habits Good health habits help your mind work optimally and gives you the ability to stay positive. This increases your energy levels and stamina. You don’t have to become a bodybuilder, just practice healthy habits daily. Morning Rituals Smart investors have good morning rituals. They might include stretching, a cold shower, a meditation or quiet time or simply breakfast! These help them focus on their goals, stay positive, and stay healthy. Planning Ahead for the Day Create your own schedule, or you’ll always have your life and results controlled by others. Elite entrepreneurs like Elon Musk schedule their time down to segments of just a few minutes. Visualize Success Setting goals aren't enough. The real change happens when you apply visualization. This engages emotion and positive thinking and puts your goals into action. Practice Thankfulness Intentionally contemplating thankfulness daily makes a big difference in our mindset. Operating from a mindset of gratitude will change your outlook, reactions, and can really help when it comes to building relationships. Get Enough Sleep Sleep is underrated. It affects our metabolism, how we feel, and our ability to think well. Getting enough sleep is actually more critical than the amount of time you put into your waking hours. Nurture Positive Relationships Who you hang out with matters, a lot. Make sure you are spending time with positive people who will lift you up. Work on building real relationships and connections. Generate Multiple Streams of Income No matter how smart you are markets and individual investments can take some wild turns. If all your eggs are in one basket that can be a problem if the market corrects. If you have multiple streams of income you are setting yourself up for a better outcome. Work Smarter Work efficiently, and know when you are at your peak effectiveness. The question of putting in 12 hour days when your peak ends at 8 hours is something you need to gauge. Learn how to make the most of those 8 hours instead. That’s when you’ll get the best ROI on your time. Master Self-Reliance If you want good things to happen, it’s on you. It comes down to you to solve problems and take action. Take ownership of this fact, and look for ways to be self-sustaining to cover yourself financially. Make Time to Play Along with sleep, and hustling hard during your active hours, taking the time to play and actively de-stress is critical. Why work so hard on everything else on this list if you aren’t going to take the time to enjoy the journey too? Give The pinnacle of success isn’t really just amassing a fortune and hitting ‘your number’. The most successful go on to give big, pay it forward, donate, and volunteer. You don’t have to wait either. Make this a part of your process now. You may not be able to implement all of these at once. Take one at a time and focus on mastery and then move to the next. Each goal that is achieved and reward reaped gives you the motivation to push forward toward success in not just real estate investing but in your everyday life!
Jul 11, 2017
How can landlords and property managers prepare for the end of summer rush before school starts? Late spring and summer are considered peak season for home buying and selling. This can result in a back to school rush for tenants to relocate and get into new places before school starts. When you’ve got this much action all at once, it can get really crazy. If you aren’t prepared it may become very stressful and expensive. Stay ahead of the game, and you’ll keep earning the loyalty of the best tenants, and keep your returns up. Preparing for Exiting Tenants The first step is to get ahead of the game on existing tenants. If you have leases renewing you want to touch base early and get new leases signed. You want to keep your good tenants and have a shot at talking them into staying. You also want to know if they are leaving as soon as possible. Then you can capture other movers in the market and get fresh rental property ads up before everyone is locked down for the next year. Prepare for Turnovers One of the worst blunders real estate investors make is waiting to put property management in place after a new lease is all closed, and it’s time to collect rents. Savvy investors get property management in the game before the change in tenants happens. A good property manager can help with the needs in getting the property ready, the rental process, and ensuring a smooth turnover. Bring in Extra Help With more phone calls, move-ins, and repair requests expected at this time of year, it is smart to bring in extra help. This could just be a part-time outsourced assistant. Factor in what it takes to line up additional vendors and backup vendors for landscaping, turning over units, and handling bookkeeping and tenant screening. Home Warranties Home warranty plans can be a huge help at this time of year. Between new rental units, new tenants in units with older appliances, and perhaps new appliances being setup, there can be a lot of glitches. These can be a big time and money drain. Home warranty plans can help eliminate or minimize these expenses and disruptions. Inspections and Preventative Maintenance This is a smart time of year to set up routine property inspections and tackle any maintenance issues in advance before they get more expensive or disrupt the ability to keep units occupied. Preventive inspections of the heating units and winterizing the A/C unit is good to schedule for early fall. Better Property Management Software Better software may help streamline bookkeeping, reporting to any investor partners you have, and with accurately tracking property condition. These programs are constantly being updated, with new companies offering better and better solutions. Make sure you know your options and pick the one that suits your business. Preparing ahead of time and getting the proper players in place can get you ahead of the game and help you to deal with the back to school rush. Don’t let the big yellow bus, with the flashing red lights, get in front of you and hold you up in leasing your properties!
Jul 7, 2017
Property management can be a major time drain if you do not find ways to manage your time. Doing so is a crucial part of the bigger picture, of building a highly profitable real estate portfolio. The more efficient you can be in this part of your investing, the better overall returns you can achieve while preserving time to actually enjoy the rewards of real estate investment. Check out these ten simple ways to streamline your managing your properties..... Accept Online Rental Payments One of the ways to most dramatically streamline property management is to start accepting online rental payments. It will help cut down on time spent taking payments in-house or following up with bank statements and deposit slips. This can also make it easier for tenants to stay on track with their own rent payments. Get a Bookkeeper Unless accounting was your major, and you love it, leave it to someone else. Having at least a part-time bookkeeper can really pay off in maximizing annual tax breaks, and countless hours in pulling together receipts and documents at tax filing time. Proactive Inspections & Maintenance Slash the time involved in fielding complaints and repair requests, dealing with juggling vendors and additional bookkeeping by staying on top of regular property inspections, and tackling maintenance in advance. Small fixes done early can save many weeks and thousands of dollars. Freedom to make Repairs Whether you are a rental property owner with a property management company, or you are doing the DIY thing and are directly dealing with tenants, consider giving them more leeway to make repairs. Do you really need to personally handle every time a tenant locks themselves out, a toilet gets clogged, or a fuse blows? If it is going to cost less than $150 or $250, why not just give them the discretion to fix it? Renew Leases Early Ideally, you’ll know whether tenants are staying or leaving at least 60 days before their lease expires. This way you can work with tenants who are on the fence, which can save an enormous amount of time in turnover work. Or at least you know, and can minimize any vacancy periods. Release Deposits on Time Not handling potentially explosive legal issues fast can quickly create a lot of work and expense. That inevitably snowballs and impacts your finances in many ways over time. Deposits are a great example. If you delay mailing deposits back to exiting renters, that can lead to all types of problems, versus just handing them a check on the day of your move out inspection. Deliver Default Notices on Time The same as above applies to late notices. Train your tenants that if they are late you will start the eviction process. If they can come up with the money, that’s great. It’s also less likely they’ll let it go that far, and create a new turnover situation. Pay Vendors Fast When you drag your feet paying vendors, they drag their feet. It’s going to cost a whole lot more dealing with late penalties, digging up old invoices, and in time on the phone. You may even wind up being limited to only being able to work with the worst local vendors who can’t get employed by anyone else. Streamline Tenant Selection Process In your tenant screening process, go beyond the credit score or background check and choose who you think will maintain your property the best. The tenant selection criteria and screening process have to be process oriented and very cut and dry with no gray areas. By treating all applicants the same and completing the same process for each person it will help avoid fair housing and/or discriminatory issues. Passive Income Investments One alternative to cut out the need for virtually all the above is simply choosing passive income options, like turnkey rental properties, or investment models like Holdfolio which come with full-service property management. When looking at the time expenditure for managing properties, it is wise to take into consideration all of the factors that eat up the most time for you. Where can you cut, who can you outsource, and how can you ensure that you aren’t a slave to your properties?
Jul 6, 2017
Which type of property is right for your first investment? One of the most common questions new investors ask is, “What types of homes should I look for as a beginning investor?” So, what’s the answer? What You Need to Know The first step to deciding on which type of homes you should be looking for is to know what you really want out of it. What are your financial goals? What real estate strategies are you planning to use? What resources do you have? What talents do you have? What types of properties do you understand? What’s Important as a New Investor As a new investor, the important factors you should probably be focusing on include: Affordability Simplicity Exit strategies Ease of property management Low maintenance costs Beginner investors should be looking to test the waters, and keep their risk low in their first investments. Err, on the side of this being a springboard investment to launch you forward as you learn and get results. The last thing you want is to bite off more than you can handle, and get stuck. The ‘Bread & Butter’ House For all of the reasons above, most investors trend towards the common ‘bread and butter’ house. That is your standard 3 bedroom, 2 bath, single family home. It’s what will typically be the easiest to finance, rent and resell, and where most of your money will come from. This is the standard, neighborhood home which appeals to the most people. There are exceptions, however. If you are in an area where there are mostly 2 bedroom, 1 bath homes, or almost all condos, then those may be your best choice vs. the 3 bed 2 bath home. It all comes down to what banks will be most comfortable financing, and which properties will fit the largest number of renters and end buyers. Your first property is about maintaining flexibility and keeping risk low. It is about going for the homes that are going to deliver real, consistent results. You may aspire to live in a mansion next to LeBron James’ home, but that doesn’t necessarily mean it is a profitable investment. Leave the quirky homes and ultra-high-end speculation to others. Then you’ll be the one with the best investments making the most consistent cash flow at the end of the day. Summary Beginner investors should start by getting clarity on what they have, and what they want. They should be ready to take bold action and get going. Yet, to start smart, with properties that are going to give them the lowest risk, most options, and best flexibility. Once you get a few under your belt you can always expand to taking on more adventurous projects.
Jun 27, 2017
What type of insurance coverage do you need for your rental properties? Rental property owners need insurance coverage. You may not love making premium payments, but you’ll be glad you’ve got it when something happens. If you plan to finance real estate investments you’ll often also find that insurance is mandatory. Here are five types of insurance coverage you need to know about… 1. Title Insurance Title insurance covers your rights to ownership and use of the property and helps cover legal defense if issues arise. You do not want to buy property without this. Every dollar of your investment and future income can be on the line. There is a lot of fraud out there today, and without title insurance, you are at risk. 2. Hazard Insurance This is your basic property insurance. It typically covers fires and other common forms of damage. This is usually based upon the amount of the loan you have on a property, or the cost to rebuild the property. Make sure you keep the amount of coverage updated as your property value increases. 3. Special Disaster Insurances Basic hazard insurance is very limited coverage. It typically does not cover a wide variety of other natural disasters which can destroy your property. If you are in a flood zone you will typically need special flood insurance. This is normally very inexpensive. Those in coastal zones may need windstorm or hurricane insurance which also can be very expensive. 4. Renters Insurance Hazard insurance doesn’t cover tenant belongings. You don’t want to be on the hook for your tenants’ furniture and personal items if there is a fire, flood, or break-in. Typically, landlords will require that renters obtain their own renter’s insurance, at their own expense. This should be laid out in your lease. 5. Umbrella Policy Insurance Coverage There is generally a discount when you group all of the properties together and this also provides ease of management. If you do enough deals, and own properties long enough you’ll run into something. Often loopholes in the above policies will mean you aren’t covered by them, or they may not provide enough coverage. An umbrella insurance policy can be used to cover you and act as a second layer of protection across all of your real estate business and assets. This can help cover issues like “dog bite” lawsuits. Keeping in mind the need for all types of insurance coverage and this will make your property management experience a smoother and less risky endeavor.
Jun 23, 2017