Expected Air Date: 5/23/19
Today it’s apartment buying with a twist. Jeff Holst is host of the Old Fashioned Real Estate show. He is a self-described recovering attorney who spends his time as a real estate investor. Jeff graduated early and with honors from Michigan State College of Law where he was the graduating class speaker. He also holds an M.B.A.
At 30 years old, Jeff checked the last item off his personal bucket list by climbing Machu Picchu. He was on top of the world. As he stood looking down at the lost Incan city, he had been living the life of his dreams. He was well travelled, having previously visited the Pyramids in Egypt, climbed to the top of Mt Sinai, swam with sharks in Belize, and backpacked alone around Europe. He was married to the girl of his dreams. He had a beautiful house in the suburbs and a thriving law practice. Two weeks later, he was in the hospital dying. His business was in disarray, his wife was barely holding it together and he was on his way to bankruptcy.
Today, at 41 years old, just over a decade later, Jeff is back on top. He is a millionaire, with over 140 residential units in his personal portfolio. He also owns multiple commercial properties. He is still married and continues to travel extensively. He is also co-host of the Old Fashioned Real Estate Show where the hosts drink bourbon old fashioneds and talk about real estate.
You can follow him on YouTube and Facebook at Old Fashioned Real Estate or at www.oldfashionedrealestate.com
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- Aby Rosen, the real-estate mogul eyeing French eatery for his luxury skyscraper
- IRE Real Assets reported that many leading institutional investors are nearing their portfolio-allocation targets for real estate assets
- 17 Real estate agents reveal the worst parts of their jobs, from the lack of steady income to being on call 24/7
- Austin tops another list as a hot market for first-time home buyers.
- Chamber welcomes Berkshire Hathaway Real Estate
- Real estate brokers can help coordinate closing date with moving date
- Real estate investors bet on tech hubs to withstand economic downturns
- Real estate market in Hamptons is ‘in a rut’ due to new tax law
- Real estate sales in Rockingham County saw their highest gains this year during April, a 7.7% increase in single-family home volume and a 4.5% increase in residential condominiums.
- Senate Bill 669, AN ACT RELATING TO TAXATION — REAL ESTATE CONVEYANCE TAX, which would authorize the city of Newport to impose an additional two percent (2%) real estate transfer tax, has been scheduled for a hearing and/or consideration on Tuesday, May 21st.
- The National Association of Gay and Lesbian Real Estate Professionals (NAGLREP) joins the real estate industry in celebrating the May 17 historic passing of the Equality Act in the House of Representatives.
- For the first time in a long time, Denver’s bustling real estate market has slowed. The top line: The steep rise in prices is slowing and there are more houses on the market.
- Diane Oberhelman inducted into Commercial Real Estate Hall of Fame
- Builder and real-estate company combine forces to bring new homes to Butte
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Motivational Thoughts for the day
- “It does not matter how slowly you go as long as you do not stop.”
- – Confucius
[0:17] Show that teaches you how to make money in real estate wherever you are whatever your situation there is an opportunity for you flipping America is sponsored in part by American IRA
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And now you’re sad flipping America guy Rodger Blankenship.
Hello everyone it’s always a great day to talk about real estate I’m excited to bring you another episode of flipping America.
This is a little bit of the landmark show folks it show number 250.
That’s right we’ve been with you for just a little over two years now and show 250.
[1:05] And I’m excited about our guest today Jeffrey Holst Jeff Holst he’s a recovering attorney
I love you daddy that’s what he called himself a recovering attorney who spends his time as a real estate investor Jeff graduated early and with honors from Michigan State College of Law where he was the graduating class speaker he also
also holds an MBA at 30 years old Jeff check the last off of item off his personal bucket list by climbing Machu Picchu he was on top of the world.
As he stood looking down at the Lost Incan City had been living the life of his dreams he was well-traveled
having previously visited the pyramids in Egypt climb to the top of Mount Sinai swam with sharks in Belize and backpack the loan around Europe
he was married to the girl of his dreams he had a beautiful house in the suburbs and a thriving law practice 2 weeks later.
[1:57] He was in the hospital dying his business was in disarray and his wife was barely holding it together and he was on his way to bankruptcy today at 41 years old.
Just over a decade later Jeff is back on top he’s a millionaire with over a hundred and forty residential 140 residential units
in his personal portfolio he also owns multiple commercial properties he is still married and continues to travel extensively is also co-host of the old fashioned real estate show where the host drink bourbon old fashioned and talk about real estate
you can follow him on YouTube and Facebook at old fashioned real estate are at old-fashioned real estate.
Come now I just met Jeff recently when I was speaking at the Chattanooga Tennessee area.
[2:44] And he was there with the t-shirt on the said the old fashioned real estate show naturally gravitated over him to find out what show is about and I was thinking okay we’re in Chattanooga and.
You don’t have to go far from Chattanooga to you get out in the country and I don’t know what old fashioned real estate is but I had visions of you know my grandparents and great-grandparents and all four are from Western Tennessee and I remember.
You know things being a little old-fashioned around there you know it was during my lifetime that my great-grandparents got indoor plumbing and.
The floor plans of the houses were a little different back then.
No Central hallway and stuff and I just wondered how old-fashioned we were getting here and then when I asked him about it and he said we basically sit there and talk about real estate while drinking an old fashioned. I knew I had found a new friend.
That’s just a cool idea and so Jeffrey is coming up in a little while or Jeff and.
We’re going to talk about real estate and we’re going to talk a little bit about his career in real estate and I’m sure that we have a lot more to talk about then we’re going to have time but
that’s Jeff Holst he’s coming up in just a few minutes how to contact us we’re here at flipping America and.
Is there are a couple of websites if you want to reach me I’m your host Roger Blankenship and you can go to my website Roger Blankenship. Com.
[4:07] And if you have questions about real estate send them to questions at Roger Blankenship. Com we always answer all of the questions that come into the show sometimes we enter them on the air
even if we don’t answer it on the air we will answer the question so don’t hesitate don’t be shy don’t think it’s a dumb question
ask anything you want about real estate real estate investing even life in general hey look at your about to be a home buyer maybe even a first-time home buyer and you have questions about the transaction go ahead right into the show and let us know what you’re wondering about and we will
give you or get you an answer and that’s the other thing
if you are we know we talked a lot about single-family on here because that’s what I know best I’ve done over 900 fix and flips now and zeroing in on a thousand in the next year or two but.
[5:03] I didn’t know a lot about the fix and flips but if it’s another asset class I may not feel like I’m expert enough to answer the question that’s okay I know people.
I can go get an answer to the question for you all right I’ve barely connected with a lot of people doing a lot of different things in real estate and I am here to help you we are all here to help you here at flipping America okay do you want to follow us on social media and I hope you do please follow us on it
Twitter and Instagram go just booked our handle is at flipping America please follow us that helps us out
more than I realized so follow us there and on Facebook it’s flipping America media that you go to facebook.com flipping America media like something that’s posted
and then we’ll send you an invitation to like the page and that will keep you up-to-date with some of the goings-on now we have a private face.
Page for those that are in the mentoring program but I don’t I don’t think you’ll have you’ll find that one by accident
okay now some if you don’t do the social media I hear you I’ve heard about it and some of you really don’t even want to do email I get it that’s fine I’m looking at you Villages of Ocala.
I’ve been hearing for some of your listeners there that’s that’s fine we’re.
[6:19] We’re happy to accommodate you if you will at least be willing to dial a phone number are you ready to get your pencils and paper ready I’m going to give you the phone number this is our national comment line you can call 24/7.
404 no don’t dial 24/7 you can call us 24 hours 7 days a week butt dial 404.
[6:41] 369-1018 extension 1.
[6:48] That’s 404-369-1018 extension 1 leave your message or question and we will answer it if somebody asked me the other day why I didn’t do a toll-free number we could do it till free number but really who plays long-distance charges anymore and actually
who really even has landline phones anymore I know a few people do I know few people have better listening to me right now.
Have landline phones and you’ll be sure to let me know and that’s okay you know what whatever it is you want to say to me I’m I’m glad to hear from you so just send whatever two questions at Roger Blankenship. Calm and please when you’re right or call tell us where you’re from.
We we like to know your first name at least and tell us where you’re from and we also.
Would like to know how you found out about the show because a lot of you were listening to us from various sources we put the show on iTunes a couple of months ago and I’m.
Pleasantly surprised at how well the show is ranked and iTunes considering we have made zero effort to promote it on iTunes.
This might be the first time I’ve ever mentioned that we are on iTunes because we have our own app that flipping America app what you can download for free in the App Store I like for you to listen that way but I have no idea how many people are actually doing it the advantage to using the app.
[8:05] Are of it while it’s pretty clear number one you can go back and listen to any of the shows I know you could do that on Spotify and iTunes as well but when you get
dig into a show you can also access all of my show notes right from within the app and the links to the stories that we’re going to talk about we do the news here on this show from time to time we’re going to do some news today in a few minutes.
When we do the news you can click on the link and go right to the story that’s pretty valuable and here’s another thing somebody today.
Ask me about one of the show’s on a particular topic I don’t even remember the topic now I’ve had a half-dozen conversation since then.
[8:45] I said you know the app is searchable you just go in and put in a title or a topic or a name of a person and it will bring up all the shows where that word is used.
That’s pretty cool right there what’s the app cost absolutely nothing it’s free there is no in-app charge or.
Upsell or in-app purchase everything about the app is free free to download free to listen just listen to your heart’s content
and that we make all of our money with the advertisers I’m kind of kidding we do appreciate our advertisers and sponsors and partners but we don’t have enough of them to make a living yet.
Anyway that’s coming we’re picking up new interest in sponsorships all the time and we love bringing to you products and services that are valuable in the real estate world.
[9:38] Okay I think that’s the announcements well a couple of announcements we do lunch every Wednesday in Atlanta at boronda.
In Midtown and we do dinner every Thursday at City Tap
also in Midtown both of these are fine eating establishments and a great place to sit and discuss real estate which is exactly what we do at the evening meeting we call it flipping America local at the evening meeting on.
30th of May we have a special guest we had them on the show before mock Mark delphini is going to be here in Atlanta and he’s going to come by and
sit down with us we’re going to do a radio show I think in front of a live audience on Thursday night May 30th and beer anywhere near Atlanta and get down here for the 30th and be a part of our
I live audience enjoy some great food maybe an adult beverage or two depending on whether you’re driving or not and.
Listen to me interview Mark delfine as he talks about the VIP the and that’s his.
[10:40] Kind of his Paradigm for business model it’s about vision and for structure and process I had Mark describing on the show and I got to tell you I was struck by the depth that he goes to with his vision in peace it’s unlike.
Any of the cliche things that are out there and thorough and it provides a type of internal consistency for you so do plan to listen to that show and also if at all possible get out on.
[11:08] May 30th to City Tap at 6:30 p.m. and join us
let’s do the news here’s a headline I’m not sure it’s a real headline it’s kind of one of those well duh start sort of
articles that I love to make fun of your own the show the headline is the real estate market in the Hamptons is in a rut due to the new tax law
well duh we all saw this coming we knew it was going to be and it’s it’s really interesting to me that people tried to criticize the tax law changes as something that was being done for the rich
actually the rich and the and the wealthy homeowners in the northeastern us and along the coastal
areas of California they’re being punished a little bit because.
Of the reduction in the deductibility of a real estate tax and they have such high real estate taxes the.
The people in the areas with real high taxes such as taxachusetts and other Northeastern states they’re paying the price in here in the Hamptons you know the article has such an insightful comments like
the more expensive the house is the longer it takes to sell.
[12:23] I think we need to start a second when you’re called well duh yeah.
You know there’s nothing really particularly insightful about that and I am grateful that they didn’t really try to.
Make this some sort of a diatribe against the president everything.
[12:43] But it is a fact that the more expensive houses in high-tax areas are taking a beating right now and Hamptons is a prime example of one of those.
Well I’m picking on the northeast let me just tell you this really the state of Rhode Island is considering an additional 2% tax a conveyance tax.
So they’re already at
$4.60 1000 which is about the dollar sixty more than Georgia and they’re they’re trying to keep up with Max Massachusetts I guess but they’re considering taking this up to $6 a thousand four.
The conveyance tax that’s just a tax that you have to pay when you sell your house it comes out of your proceeds from the sale.
[13:29] And I know you might say what what to use for it while it’s used to support your local and state governments well is it based on fixed cost somewhere now you know
why why is it a percentage of the sales price why do I have to pay more if my house is worth more well because you know there’s a sense of fairness and progressivity if you charge a percentage of the sales price look it’s not trying to cover any kind of fixed cost they’re not trying to use the stamp.
Did the recording stand for the conveyance tax just to pay for a stamp that gets it recorded no that’s not it at all your they’re basically it just a money grab from the state that’s what it is and you know.
There comes a time when people say enough is enough and I could point you to some stories on this you know people in Rhode Island are squawking about all this and they’re just wanting to throw their hands up and move
and you wonder why the northeastern states are seeing their populations take a dive bomb
but there you have your answer if people have a choice.
If they have any free time at all to move then they’re going to move they’re going to get to a place where you know the living is better
and the government is not in every part of your life and is not as impressive and I’ll Tell You Folks if some things happened that gets the federal government involved in all of our Lives you’re going to see a lot of productive people
moving not away from the north but away from the US.
[14:57] We’re going next to the interview with Jeff Holt said when we get back from that I’m going to bring you some news in the commercial sector and also a little bit of world real estate news.
[15:22] You never know what’s around the corner
but you can be confident that you’ll be ready for whatever comes your way Legal Shield and ID shield look out for you so you can get back to living life.
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businesses for a low monthly rate you get comprehensive legal coverage entire law firm of professionals and provide advice whenever you need it.
Protect it for a number of legal issues and assistance with common legal needs just go to Rodger b helps. Com right now to sign up that’s Rodger V.
[16:03] Dot-com Legal Shield protection for every part of life I want to take a couple minutes and tell you about the ultimate
real estate investing course it’s my new course it’s available online and what it is is the compilation of everything that I’ve learned over the last 17 years of investing in real estate buying and selling houses
buying rental properties buying commercial buildings everything I know is condensed about it now is condensed into this course and.
The reason I can call it the ultimate real estate investing course is as I learn new things I will be continually adding to the course now this is the same content.
And I think in some ways better than people are going out there and pay him $30,000 for with the guru’s that come through town you can access this course are you ready for this.
$50 a month that’s right for $50 a month.
[17:00] You get access to the course all of the materials all of the spreadsheets the files the documents the contracts the papers everything
as long as you stay a subscriber you have access to all of those things once you downloaded the documents well they’re yours and you can just do with them what you want
and of course you know within reason and according to the law but all of this is available for $50 a month now there is an Initiation fee
an Initiation fee is $750 that’s going to get you.
Access to the course and then it’s $50 a month for as long as you want to stay a member I really didn’t even want to do the $750 Initiation fee but the people that are on my team now believe that the information is so valuable they wanted me to charge you if you know 1500 up front and then
I agreed to split the difference with him and so it’s 750 but here’s what I’m going to do because I’m the boss and I can do this I am going to give you an opportunity.
To save $300 off that because you are listening to the show right now all you have to do is go to Roger Blankenship.com click on the resources Tab and then click on Ultimate real estate investing course
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[19:08] Jeffrey Hulse welcome to the show any thank you I appreciate it
glad to have you here all right now but he told the audience that we met at the Chattanooga area and you had the t-shirt on Advertising your Shuffle I haven’t let the cat out of the bag really what the show is about cuz you got to tell it man cuz it’s one of the
coolest concept I wish I had thought of so it’s the old fashioned real estate show tell us what it is.
We basically go on YouTube and drink old Fashions and talk about real estate so that’s like the bourbon cocktail bourbon simple syrup
Critters and we just you know we wanted something trade if you know, give us a hook and old-fashioned sort of a units got a double meeting right it says old school way of doing it and also the drink so that’s what it is.
[19:54] I’m not sure I want to admit this for all of the Baptist that are listening right now but old-fashioned is my favorite cocktail
right world are you told me that they’re real and I thought me and this guy’s pretty great cuz
I’m maybe he’ll buy me an old fashioned someday I think I might head down to Atlanta one of these days and and and take you up on that so yeah well if you come down to the show tonight Thursday night I mean to the to our event or actually any Thursday night. Buy you an old fashioned you show up at City Tap.
I’ll make a point of doing it I doubt it’ll be this week but I’ll get down there one of these weeks that’s good it’s not that far you know okay so how do you pick your pockets or what do you talk about on the show
and so we just kind of pic you know that the show is designed to be the length of one drink so it’s about a 12 to 15 minutes episode however long we happen to go on a particular topic and make sure that long to get through one well
what were talking and presenting at the same time right so we’ve done shows on whatever topics we think people will be interested in hearing about.
[20:53] At work if we get any requests like recently had a request for
show about 10:31 so we didn’t want on 1031 exchanges nice that’s a good topic okay now it you say in your background that you’re a recovering attorney but now you’re a full-time real estate investor tell us a little bit about that.
Oh yeah so I mean I practice law for 5 years I did
bankruptcy work mainly and then I move down to Chattanooga from Michigan to add to a work in-house for in-house legal for a trucking company for a few years and the whole time I was
round 2010 when I moved the economy was different than it is now and there was a lot of opportunity so we started buying real estate up in Michigan in Metro Detroit.
[21:35] We bought over a hundred single family homes in about a five-year. And that’s the basis of the real estate stuff so
2 years ago when I was just just about 40 x 39 and and the company sold I got about 6 months Severance and I said you know I always want to retire by 40 so I’m just going to do it.
And since then I’ve just been doing the full-time real estate thing all right but now are you buying single or multi-family.
Governor multi families now while we converted shortly after I stopped working full-time I started looking at multi families more seriously since then we bought a 12-unit a 19 unit.
32 unit and then just about a month ago we bought at 41 unit so we’ve got about a hundred and four units a multi-family is now okay no I don’t think you told me that about the.
Michigan connection I wondered when we were when I met you what prompted you to buy in Detroit but I think we both want it off start talking to other people and I never did get to ask that but now I understand you were living there so you familiar with when you buy the multi families okay.
[22:37] I’m just kind of going with the topic here I didn’t know we talked about multifamily but I have a question that comes to me a lot if you’re just.
Doing nothing or if you’re doing some single families and so forth how do you transition into multifamily what do you need to be thinking about or better yet.
What do you wish you had been thinking about when you started into it now that’s a good question.
I wish I did which is not exactly answer your question is started earlier because the opportunities amazing and multi-family but.
Send the most important thing to think about is that the cash flow component and really understanding the numbers and really drilling down on it because you’re going to see a lot of.
Broker presentations offering memorandum things like that that have numbers in them and they.
[23:22] I’ve never seen one that was right let’s just say that I don’t think they’re lying necessarily but they’re they’re conveniently leaving expenses out there there may be overstating them out of rest or collecting she really got to dig into the due diligence works with a single family.
Or even a small multi like a duplex or something.
Are you going to know what your numbers are going to be once you’ve done it for a while that’s not necessarily true with the larger multi says each one’s a little bit different and you really got to dig into it I was going to say optimistic.
[23:54] Yeah exactly I mean there’s there’s a lot of that floating around especially now the way the market is his real trendy to get into multi-family so while people are jumping on board they’re going to these.
You know online trainings and things like that and say it all you know I can make so much cuz I can force appreciation what you can do but I mean it’s
it’s not simply tried him and that isn’t involved it’s definitely more involved in single families okay so when you’re looking at the numbers you’re looking at net operating income you’re looking at actual income not projected income right
that’s right well we look at both so we model that we have our own spreadsheets that we use basically what we do as we project what we think we can get it to Aunt to give us an idea of where it’s going and then we project
what we think there are numbers are now and then also we want to do things like adjust the taxes is that sale you know that you could get a trailing 12-month.
Financials from someone and they could be telling you 100% the truth but your numbers are going to be different than their numbers your expense structure might be different I’m for sure the taxes are going to be different so
we’re digging into those and kind of preventing so we’re looking at three to four numbers won the actuals
that the sellers are providing trying to make sure that those numbers are accurate and then what we think is nothing changed except for the stuff that we can’t control
you know what it would look like and then the third one is what we think we can get it to over in OS 6 to 12 months. Okay so.
[25:18] Yeah you’re looking at I was wondering about the taxes that’s what I was thinking about
why why did you say the taxes are for sure going to change when you do a sale the taxing authority to pay him where it is is going to re-evaluate and moved up in Michigan that’s going to be moving up to the state equalized value at least in Michigan their Captain how much they can raise each year
and then what happens is when there’s a transfer it gets stepped up to whatever it would have been had it not been capped
I mean that’s pretty similar in Most states I’ve dealt with I bought in Georgia and had a similar situation there also a Nelson Tennessee
that’s very good and I appreciate that because actually I am not a multi Family Guy I’m a single family guy I’ve always wanted to be multi-family and maybe I should have you know 10 years ago but
I think that if I want to dive in the multifamily I’m going to do what I preach you know first thing you do is partner with somebody knows what they’re doing.
Yeah well let me know if you want to we might be able to work something out okay alright that’s cool alright so now.
I think I know the answer to what I’m about to ask you and only put you on the spot and see if you can help the listeners explain this capitalization rate.
[26:33] Okay so when you’re looking at cap rate what’s the difference between cap rate and cash on cash return.
[26:41] Okay well they’re completely different.
The amount of cash Ali have after all your expenses which is going to be in after mortgage payments and all that
and you know really you’re going to it’s a ratio right so you put $10,000 down on a property and you make $1,000 a year in annual cash flow after all expenses.
You just provide that into it and you come up with a 10% cash on cash return.
Those numbers are obviously not multi-family numbers but if you put a million dollars down and make 100000 it’s the same kind of ratio there.
Cap rates really the Mets evaluation mechanism and surely there’s really three variables that go into it you got net operating income.
You got the whatever the the results of the ratio is which is your cap rate and then you also have your.
[27:34] Your purchase price or your value and so if you know any two of those three variables you can calculate the other one so what what really happens is cap rate is classically Davante.
It’s defined as the net operating income divided by the purchase price so you get a percentage so if you bought
a piece of property for $100,000 and it made $10,000 a year you take the 10,000 in a y divided by 100000 in to get it
10 cap rate and it’s useful because in multi-family.
You use cap rates to determine value a lot more than you do like a comparable sales approach like you do with the with a single-family and why this is super powerful is that.
[28:16] If you can raise the net operating income you can automatically raise the value of the property since everyone’s buying based on cap rate so right now I don’t know what the cap rates are in Atlanta but you know in Chattanooga or seeing me a seven or seven-and-a-half capsule
Detroit’s a little bit higher but 7 and 1/2 for a chap and what really happens if you raise your net operating income by $1,000 you can divide it by that capitalization rate of
what’s 8% and you’re going to raise the equity in that property by whatever that number is it going to be about $12,000 in that scenario.
It’s until you’re always selling for whatever the cap rate is.
Try eating you going to buy for the cap rate to so I mean you’re when you evaluate it you’re going to look at that net operating income to determine what the value of the property is
right and I see so many people selling quads and even single family homes and trying to give me a cap rate and I’m thinking.
[29:09] Really you should come at work quite as well I mean
sometimes there are investors that will buy stuff right on sing on a kind of capitalization right especially if they’re not estate investor they might say something like you know that they use the 1% rule
switch is just a different way of doing a cap rate in a way you know he doesn’t account for all the expenses but it’s the same kind of thing right.
When reality is when you’re buying a single-family or something up to a quad anything fiberglass you really are looking at comparable sales it’s much more
relevant and what’s the income for that
are done talking to Jeffrey hulsey’s the host of the old-fashioned radio show or the old fashioned adjustable fashion show right real estate show real estate show.
And we’re talking about multi-family right now and when we come back from his break I’m going to give Jeffrey a chance to.
[30:01] Think about this for a second but when you’re talkin about capitalization rate.
[30:06] And you use leverage that’s going to change your cash on cash return in and which ones are you thinking about when you get ready to
what were you saying about the most when you get ready to buy a multi-family and I got some other question about multifamily to we got to go to break.
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[32:30] Okay as we went to break I was getting my words a little discombobulated because I felt bad that I messed up the name of your show it’s the old fashioned real estate show.
Just right yeah and it’s on YouTube that’s the only place you can watch it right now but I was just about to ask that only on YouTube.
It’s right it’s you it’s youtube.com old fashioned real estate or just go to old-fashioned realestate.com and you can get to it from that as well
since we’re watching you drink do we have to be over 21 to watch it’s not required now and you know I mean eventually we might come out with an audio version but I feel like the audio only version isn’t nearly as entertaining as you don’t get to walk.
[33:08] Yeah I think I think I want to be on your show and let’s just extend the length of the show till we start getting silly and then we could have turned it off I mean we don’t like to admit it but we usually found two or three episodes the same day so trying to tell the progression as to which ones.
The ones where the math is right that’s right okay so well you know maybe maybe somebody should do a cigar bass real estate show.
[33:35] And we can hit well you know I mean to come up with a clever name somebody told me we should have went with Manhattan real-estate show but I thought you know the prices over there a little bit high so
alright so we were talking about capitalization rate and cash on cash return one of the things that I always say to people is look.
[33:55] Really if you’re just going to pay cash for a property or talkin single family homes they’re the same number.
Okay so just go with the cash-on-cash return but your cash return gets really interesting if you use leverage on one of these properties have a right
I’ll be there for sure I’m in an infant I would argue that.
Particularly on Multi families but probably on honey higher-end real estate if you’re buying $20,000 houses in bad neighborhoods
you probably aren’t going to be able to leverage it but do you have a higher quality asset than that you really should look at leverage that’s what it’s going to do is if you can borrow at a rate less than your capitalization rate you’re going to actually supercharger return
simple example of be something like if you borrow $100,000 on you know I’m a hundred
10. Hundred $50,000 house and your payment was based on a 6% rate you’re going to pay about 6% interest on the $100,000 if it’s a 8% cap rate
you’re actually going to make 8000 on the hundred thousand at the bank gave you and you get to keep that $2,000 difference.
[34:58] That’s very simple way of looking at it but that’s kind of how leverage works and we actually did a show on Leverage not that one. I feel like I have to tell you all this my partner on the old-fashioned real estate shows a guy his name is Brian Leverage.
It’s literally his name Ryan leverage that’s awesome here today than he would probably be rolling his eyes at me cuz I make this a lot but.
We did a show on on Leverage and we actually did one on him also and then one on the financial leverage so so you can check those out if you want to know more details on bridge on Leverage
outside I should have actually.
[35:39] Okay so now I always tell people when you’re looking at the cost of the money don’t just consider your interests a look at the mortgage constant do you guys roll that in there too
oh yeah absolutely it’s in our model I could totally make a Excel base model that that has all that in their the payment of course is the most important reason to look at the mortgage constant because if you borrow
my example I gave if you borrowed that it didn’t have any amortization in it and that’s not realistic in this market for most people
you have to consider that also you’re not going to have you could have positive Equity build but negative cash flow what she knows fine if you’re bloated and don’t need the money but.
We buy for cash flow right now when you buy a 41 you and if you said you had a 41 right that’s right we bought it about a month ago okay do you buy it with Management in place
that property is I have a partner that I met in law school who has a management company up in Michigan and he actually owns half of that property. So he manages it for us,
city is property as well so okay what are you doing Management on the rest of them.
He manages all of our Detroit assets and I’m he manages those and he’s partners with me on all that stuff I’m in the stuff in Chattanooga actually.
[36:53] Brian leverage has a property management company also so he manages our stuff down here and then there’s just a few more units something about 20 units that I have that I manage myself okay.
All right well I was I’m thinking about management because I know me and the Management’s not you know the day-to-day management the details the paperwork that sitting behind me here. Stuff that I really like to do
it’s definitely not what I like to do either in front of about ready to get out of mansion completely.
Yeah okay so typically what do you pay for management
you know we paid it depends on the project actually still like the multi families typically get a little bit better rate but it’s going to depend on size like I’m paying anywhere from six to 10% of the transfer management
I try to find people that.
[37:44] I think we’re going to treat the property correctly and they’re going to look at it like it’s their own property and they’re going to do the things that are necessary I would rather pay more for good management than Payless.
For bad management and it’s it’s it’s definitely a balancing act I mean even when you do turnover properties to management.
You do need to stay on top of it and actually we did a show on property management also not that long ago so you can check that one out too
listen to all my shows in just like her asking me about
well there’s there’s something else I meant to ask when we talked about the number she said your purchase price where do you consider your initial repairs your fix up make a rent ready costs.
[38:23] Yeah so I mean with the multi families we just budgeted and so we we set aside that money at purchase some what will you be doing.
Pretty thorough walkthrough where we have our contractors look and figure out what stuff we’re going to need to know so that if there is any additional.
Things that will we know we’re going to need to be done in the future in there always are right I mean even if the roots brand new and it’s going to last 30 or 40 years you still have to put aside one.
40th and that amount every every year so that you don’t end up with a big mess Subway in the future
yeah well I was thinking you know that I guess where I was going with that question was just
when I’m thinking about my numbers on a rental I consider the purchase plus the initial fix up as part of my acquisition and I use that determine my cash on cash return
yeah I know we do that too and it is going to depend a little bit on you know what your financing arrangements are such that
and some of the multi-family deal sometimes they’ll give you a lie interest-only for a. So that you can.
[39:27] Some money aside to to do some of the initial Repairs by having a lower payment in the first year or two and you can get some pretty Advanced topic being didn’t like non-recourse loans and there’s a lot of options there with all the construction for you so obviously have to balance all that stuff out with your
on cash return whatever money came out of your pocket. Sure cash you know Equity position and whatever
you know whatever Castle you expect to get from that is how you going to talk to you later cash on cash return of course there’s another metric that I think is really important in multi-family with just that
return on equity which is different than cash on cash return because Equity goes up over time typically when you have financed assets and
if you wait
you know it’s kind of ironic but it’s just a dimension return-on-equity the batter your property does in multi-family the more valuable it becomes the more Equity you have the lower your return on Equity becomes
is your intern doesn’t go up as fast as your Equity because it’s an inverse relationship.
So that actually tracing and send them to refinance every for 5 years and multi-family and pull that Equity out.
And utilize it somewhere else how big of a factor interest rates when you’re looking at refinancing.
[40:41] Well I mean if they have rights are the same it doesn’t matter I put on typically there’s going to be some change and rights if rates have gone down you want to refinance if they have gone up you have to really think about it because you have to consider.
The fact that you’re going to pay not just the extra 1% or whatever it is on the money or taking out but you’re paying it on the whole amount of money that you still owe so if you have $1000000 loan balance in the rate goes up at 1%.
Asking to add you know I just an extra $10,000 a year in cost in a plus whatever additional money take out in the money that you have to pay on that.
Okay so this is very interesting and we didn’t even plan to talk about multi-family when we
got on here I wanted to talk about really whatever came up and so let’s let’s.
Lift a Plane off the ground a little bit here and first of all I want to put you on the spot a little bit Jeff okay.
[41:34] I’ve been in this business down for 19 years I’ve been doing the show for 2 and 1/2 years and I have never met anyone who is doing real estate as a full-time career who plan to do it when they were a kid
so what I want to know is when you were a little kid what did you want to be when you grow up. I’m real estate investor
seriously I just had to say it actually some truth in that I was watching
that no money down. Carlton sheets remember this late night yeah yeah
13 14 years old and watching that going man that looks really great but the reason I wanted to do it back then I think was just as he had a nice and round a pool with.
With a bunch of people you know drinking cocktails or something I don’t know whatever he was doing on his late night show but
but it just sounded like a good life right so that’s why I wanted to do it but I think when I was a
really young kid I wanted to be a lawyer I think that might because my dad was a lawyer I remember one time I was at.
I forget the name of the Greenfield Village in Detroit it’s like a it’s like a museum put on by the Ford company and they Abraham the chair Abraham Lincoln was in when he was shot and stuff like that and it’s dumb.
[42:48] You know I got historical kind of thing and they do re-enactments there and there was a
person that was doing a presentation about Lincoln and they asked us and I was maybe like 6 or 7 years old asks you know if anyone knew what a lawyer did
cuz that’s what Lincoln was a lawyer before his present it and I said yeah I know they they make money so maybe it’s always been
and so I don’t know why I just did I’ve always been interested in real estate but I mean I never knew I was going to have a full-time job and real estate II never really.
[43:19] I never really planned anything to be honest I just kind of.
Go with the flow and just do it sounds fun and if I can make money during it’s even better it seems like it’s working out all right it’s been all right for me
all right so Jeffrey Holst the old-fashioned real estate show.
What you can find on YouTube is there any other way in case someone wants to reach out to you is there any any better way for them to reach out to you
or they can go to old-fashioned realestate.com in and we have a contact us form on there and so those are the best ways to get ahold of me but I mean I’m on
all the social media Facebook. Old-fashioned real estate Twitter at old fashioned real estate Instagram old fashioned real estate plus my personal Pages RI
all public as well so so if they go looking for you they’re definitely going to find you
right now there’s only one of the Roger Blankenship out there was a big presence on the internet needs an MMA fighter and he’s a he’s a lightweight so when you look at him if you know me.
Not the same weight class.
[44:24] Anyway thank you so much for joining us today on Flipping America we appreciate it man thank you thank you again we appreciate your time.
[44:49] If you’re a real estate investor.
[44:52] You owe it to yourself to get a profile on the fan the flipping America Network it’s a flipping America network.com.
The profile is free if you’re a buyer a landlord a rehabber you enter what you’re looking for.
Particularly the ZIP codes of interest you can put up to 10 but we’ve already we’re working now to expand at 2:25.
You don’t have to sit on the app you don’t have to sit on the on the website.
All you have to do is tell us what you’re looking for your profile includes your cell phone number which will verify at the time you register and when a property is posted in the zip code you’re interested in your going to get a text message that says.
Look what just hit the fan.
[45:36] Everyone should register all 43,000 ZIP codes in the United States are included and you could be finding your next property.
Just by listening for your text tone we call it snap click sold because if you are a seller.
[45:55] You can download the app will anyone can download the app and in the App Store it’s called flipping America Network all one word no spaces you download the app flipping America Network and.
[46:08] If the course has a buyer you can search for properties using the app but as a seller you could be at the property negotiating a deal with someone that you want to wholesale you could take a few pictures of the property that’s the snap.
Then you can click to upload this property to the fan put a little information about the property there and.
Immediately that property will get texted to 5:10 dozen hundred I don’t know
however many investors have expressed an interest in that zip code you no longer need to manage a mailing list you don’t have to go out and put together your flyers in your brochures or create
ads for Craigslist or other sites just posted in the fan dozens of people will see it it may be sold by the time you get back to the office that’s why we’re calling it snap.
Click sold www.dot flipping America Network. Com register now.
[47:17] So I got this headline from the real deal. Com waning appetite the world’s largest institutional investors may slow their real estate.
Acquisitions listen up if you believe that the commercial.
[47:33] What’s going on in commercial real estate is kind of a leading indicator for what’s going to happen in residential real estate you you want to pay attention to this
many of the world’s largest institutional investors are moving closer to their portfolio allocations for Real Estate assets which may slow the pace of their property Acquisitions according to a new report
survey data in interviews from i p e real asset show that 53% of the top institutional investors expect to be net buyers of real estate Assets in 2019 and 32% neither net
sellers Nore net buyers basically what this means is they’re slowing down and their Acquisitions and some are going to be moving anything anywhere at all
now I’m not going to bore you with the entire story it’s not really that boring but you kind of got to be interested in commercial real estate.
It is interesting that they were talking to people like a lion’s real estate Allianz valued at 72
point four billion with a B.
The China Investment corporation 52.9 billion Abu Dhabi investment Authority 51 billion APG in the Netherlands 48 billion and TIAA 47 billion.
These are some large large institutional real estate buyers and they’re beginning to pull back a little bit this bears.
[48:55] The further eyes Fred the don’t worry flipping America guys got it
we got eyes on the situation and we’re watching all of the indicators because so many people are very nervous now that things are about to turn and the Market’s going to crash okay just relax
I don’t see a crash coming but even if a crash happened Savvy investor can find opportunity.
Alright so don’t worry about that another story Real Estate Investors this these are the institutional investors bet on Tech hubs to withstand economic downturns
it’s a study that shows that the the big Real Estate Investors one of the metrics they consider is the innovative.
Score of the particular cities they’re looking for cities that are Innovative and into the technology okay.
So they like cities like San Francisco Tokyo Singapore Beijing London.
[49:50] San Jose Boston Soul Shanghai Los Angeles.
[49:58] Munich Shenzhen Seattle Sidney Toronto Berlin Amsterdam and Stockholm they also tend to go where there’s a good concentration of
talent in the tech industry and that’s pretty much the same cities okay this study considered a hundred cities around the globe and
picked out these Innovative cities and then correlated that with
large institutional real estate investment and so that the thing we take away as the little guys out here investing in single-family homes is you don’t use the Starbucks effect
if the large institutional investors are liking the cities then we little guys might Auto like these cities as well and I’m not saying you should go invest in real estate in Shanghai
but you definitely might want to be considering what you can find in places like San Francisco New York and Boston and
I know these are the cities that tend to be overpriced so you got to find the right opportunities it’s just another thought another possibility and
what you want to do in those cities is by something you’re going to hold onto for a long time those are the highlights of the news of the day but.
[51:11] If you have access to the app or even if you’re sneaking around and finding where we’re posting this online you can look at my notes and you’ll see that there are 20 stories that I’m not even going to really mention except.
That word you you can see that we are tracking what’s going on in individual markets places like Butte Montana.
And Rockingham County.
[51:35] And Austin Texas my point here is we’re pulling stories from all across the country and keeping up with what’s going on watching individual markets looking for any signs of a Slowdown mainly
so I can be among the first
to tell you when the market turns and also be among the lonely voices who are telling you everything is alright we are not looking at an impending crash.
[52:02] Real estate doesn’t sneak up and and crash all of a sudden nothing in this business moves that quickly we would have.
Pretty good sign of what’s about to happen and it would be confirmed by foreclosure rates default rates interest rates
home sales and so for now I’ve got another story in the news that says the home sales were down again for the 18th consecutive month you know.
We got to a such an overheated State about a year-and-a-half ago there was really nowhere for the market to go but down so guess what I predicted a year-and-a-half ago.
The market is going to go down the market is going to slow down but what we’re seeing is not a drop in prices but a slowing or a reduction in the rise of prices property values are still going up.
[52:53] They’re going up at a rate slightly above the historic average of 3%.
There their Rising the projected to rise this year nationally about 3.8%
3% is pretty strong my friends if you have a $200,000 house this year with 3% appreciation
your house is worth 206,000 next year and then when you had 3% appreciation on top of that you’re looking at a house that’s worth $213 and fourteen thousand I didn’t do the math in my head and I didn’t whip out my calculator but it’s.
It come pounds that appreciation so
the values are continuing to go up there not coming down and the as I said on other shows but in case you missed him I’ll tell you again I do believe we’re going to see a little come back to us in the pricing in the coastal areas.
Washington DC northward to Boston on the East Coast.
All of the West Coast we’re going to see probably some lowering of prices because of the market just got to overheated.
[53:52] They were unsustainable but nothing like
crash levels and nothing like Crisis and nothing that screams out that we’re going to have a devastated economy because of all of this and what we’re doing is we’re moving back to a normal balance Market is about a 3 month supply of houses
and that means it’s going to be a little bit more of a challenge to sell your house and it’s going to be a little bit easier to find one that’s what a balanced Market is like.
That’s where we’re getting folks.
Okay so you can review all of the stories in the show notes if you want to and there’s some other things that you know don’t seem really worth mentioning but that you know the team puts him in the notes and I read them and then dutifully ignore them selecting only the things that
have the have pertinence to most of you listeners.
[54:40] I received a question from several of you and so are the naming individual names just know that I’m answering all of your questions you’re looking so confused about the app in the app store all right we actually have three apps in the App Store and all of them are free
okay so this is not a sales pitch the first app that we put in the App Store was called property grade it’s still there
you can download it for free and if you can answer 10 simple questions about a potential Fix and Flip it’s going to tell you immediately what your projected profit would be your return on investment you return on cash if you are borrowing money.
[55:17] And it’s going to give the project
a letter grade based on the proprietary flipping America investment grade algorithm it’s an algorithm that I wrote and developed over many years trial and error well it didn’t take driving there to write the algorithm
trial and error understanding how to grade these properties because we were trying to compare it seem like apples and oranges and even though it’s a house and that’s a house how do we know which one of these to go for once we.
Created the algorithm in we did Tinker with it for a couple of years to really understand.
It to get to a point where is a valuable tool for us we know that we will always take an A Deal over a b deal if it’s an A minus versus a B plus they’re pretty closely scored so we digging a little deeper.
[56:07] But it did tool is generally helpful and it’s free the other tools there’s a there’s confusion of the names this were the questions really coming in.
[56:17] We have the app flipping America which is this show.
[56:22] And it turns the show into a podcast so you can listen to anywhere and I’ve said enough about that.
But the other app is called flipping America Network
this is the app for the network that buy cell site that we’ve been talking about it said flipping America network.com you can go there and create your prefix re profile whether you’re a buyer or a seller but when you download the app.
You can do everything on the app that you can do on the website the app is not basically a
teanaway phone friendly version of the website it is a completely dedicated app that has all of the robust functionality of the website built into an app
it’s I got to say I know I’m a little biased.
That is pretty doggone cool and once we get our user base up to the point where we have something like critical mass watch out.
[57:16] This is going to be the place for investors and for home sellers I don’t see us putting
The Venture Capital funding I buyers out of business we’re not even compete with them really because unlike them we are not going to base our offers on.
A deceptive business practice and we’re going to be monitoring what’s going on if we get complaints about certain investor you know.
Some people are investors are Real Estate Investors because they don’t quite have the morals to become a used car salesman I understand that there’s all kinds of crazy things that go on out there
and we’re not necessarily going to police the activities of the people on the fan fact we can’t control him and that’s clearly and implicitly understood but if we hear of people doing
weird and questionable things will this kick him off all right.
[58:05] So that’s the flipping America Network now that in the store is flipping America Network all one word no spaces.
[58:13] And the music’s playing we’re wrapping up today I just want to say from the bottom of my heart thank you to so many of you.
That has sent cards and letters and notes of condolence.
I’m about the recent passing my mother really my heart is touched and some of the things that you said I meant so much and I just want to thank you thank you for listening and thank you for loving.
We’ll talk again.
[58:50] Confucius said it does not matter how slowly you go as long as you do not stop.
This thought has brought to you today by the foundation for Renewal working together with communities Nationwide to bring lasting life change and impact find them on the web at renewal fund. Net and as always your gift in any amount is texted.
[59:10] Very much appreciated my friends it is truly an honor to serve you as your host of this show I look forward to seeing you again very soon.
[59:31] You’ve been listening to flipping America real estate investing for everyone if you have any questions about real estate send them two questions at flipping America network.com.
Listen three times a week on stations across the country or on the flipping America app free in the App Store.
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