The 8 Do’s & Don’ts Every Real Estate Investor Needs to Know

So we had a really fun dinner last Friday with a couple of friends. Of ours, knuckleheads I've been around a long time. Yeah, and the boys came too, you know, Kyle and Caid. I know it's so great, yeah you so Okay. So I think that the boys just see all the success, right, like all the how your friends are successful and how their businesses have been successful. But what we really got to in dinner was how we started. Yeah, how you started, and kind of how scrappy that was, and it you know, it really is like bootstrap stuff. Well it turned into it's goind have turned into a podcast because the stories, some of those stories I hadn't heard before. They were literally straight out of college. I mean, I won't tell the whole thing, but Marty basically said he was working ten sleeping for working ten, So ten for ten. That's essentially he was. He had like two full time, two full time jobs, things going, and he's like, I could sleep just four hours a day. Now, this is I mean, obviously he's in his early twenties, straight out of school, trying to figure life out, and then what he's done from there is just remarkable. Absolutely. And then Danny our other friend who Marty lived with was saying that, you know, Danny bought a house in the hood and there was like there was like please helicopters every night. Over there, leased the spots. Well he well, typical Danny. He leased all five bedrooms, except he leased it to like eight or nine guys, so he didn't tell them that until after they moved in. This is a guy that just took a company public last year. Yeah, very successful entrepreneurs that so, yes, So we're going to get down to the in the nuts and bolts of what's really like in that in that first few year period. Yeah. Absolutely, And you know, we're gonna have Marty on our show probably in February, and you know, we're chatting with him. But it was just interesting because you know that that didn't work out for him. You know, when he bought that fast food restaurant there was it was supposed to be the next what like McDonald's or whatever. Kings and Joe's, and it was I think it was owned by Subway. Yeah, that's what I Yeah, and it obviously didn't go anywhere. But you know, I think, what's what was the takeaway there? Because I had my two boys there was they whatever they were trying, whether it worked or didn't work, they were still trying. Yeah, and they just kept altering and failing and trying things and then succeeding slowly. So they probably failed more than they've succeeded. Yeah, And I think that that is interesting because when people see you or other entrepreneurs, they think, oh, they just like figured something out and then it just went great for them. And but to your point, you know, it's like thearing spaghetti against the wall. You have to keep trying and try and trying to see what is actually going to work. And we're not going to divulge those story. But that story I laughed so hard. I don't think I've laughed that hard in a long time. And we have Marty on, we'll have him tell it. But he put it this way. It had something to do with the chicken suit. I was I was crying. I was crying. It's a true story. Yeah, yeah, but I thought that that was just fine. And then the boys just see it, and I think that, you know, our kids and then also us learn from, you know, seeing that, like seeing people fail. I think kids learn from seeing people fail, you know, and they think they learn from seeing people succeed. That's why they watch YouTube. The Internet's full of that, right, look at all these people, these nice cars and houses and all these cool things that they're doing their lifestyle. Really, what's behind it is not all that at all. No, it's just it's just a lot of you know, hey, is this gonna work. Let me try this, let me do this, Let me get out of this bine, let me get out of that bind. And you know, I mean I think with Marty with that fast food place, he ended up, you know, losing all his investment on it, you know, and then but luckily being able to walk away from the lease, you know, and that was his big win. Now granted he was you know, twenty five, twenty six years old. Yeah, but what he's grown from there is unbelievable. Yeah, absolutely, And so that was fine. That was kind of what we did this weekend. And then we're packing around the house, you know. Trying to pack. Yeah, we're getting ready to move in our new place. We bought a new place. We're moving in in January. But I think that kind of I pack really differently. So that's been kind of a new revelation. Here's the thing, I pack. No, I pack you I just I pack. I just I don't know. If she packs, I don't, she says, she packs. Well, there's a lot of prep before you pack. We're kind of starts throwing things in boxes. Well, because my goal is I don't want to take everything to the new house from the old house. I want to purge a little bit. So you got up in the morning, went straight to yoga, didn't come back and tell five pm and I I packed, Well, I had emerge. I had a run all emergent. Those are truth. Well, actually, let's chat about my run all emergency that I had, because I think the audience could probably learn a thing or two from this. Well, that was a pretty funny one. Actually, DiDio decided that she wanted to replace some floors in between Airbnb tenants. So yes, it was this was partially my fault because I decided that I'm going to replace the floors. As you guys know, one of my tenants basically rents from me and then sub lets it on Airbnb. So I talked to our handyman and he said, sure, I can rip up the carpet and replace the floor on Monday and Tuesday, I said perfect because the chances of an Airbnb guess booking are low. Well, what happened was he got sidetracked. He ripped up the carpets, and then he had to. Leave to go out of town, and then he hired another guy, and. He hired another guy that was trying to do it after work and then texted me after one day saying he's too tired to go back over there. So d Nail's oh, for two, she's done an Airbnb tenant. Moving in and I, yeah, I have an Airbnb guest that could book at any second, mind you, because it's open on Airbnb. But they're certainly moving in on Monday. And the place doesn't have carpet. The bunk beds are all taken apart, there's crap everywhere, no. Floors, no floors. And the best is Daniel's try to figure this out. And I guess who else is involved me? So I'm getting all the texts, all the pictures. So I'm texting everybody I know. Do you have a floor guide? Do you have a floor guide? You have heart? So luckily Albert, our our contractor, saves a day. They were able to install the floors and everything was done yesterday, two day, like a day and a half before the people moved in. But I had to go over there and be the airbnb cleaner yesterday. So I always anything d Nail's ever cleaned, so like for real, like she came over, she goes, I'm not used to clean. I don't know how to clean. I go, I'm well aware. I hope well. I called my dad when I was over there, and I was like, how do you. I was like, I'm I'm cleaning my airbnb and he goes, you're cleaning it? And I said yeah. He goes and are you charging your cleaning fee? I go no, I just got to get it back to how it was before. But anyways, I can't wait to see what it looks. But it looks awesome that But but I guess my lesson was, for one, make sure you have good communication with your contractors. I talked to my handyman and I was like, listen, do not tell me you can finish the job again if you can't finish it, because you really put me in a bind. But then two is you know it was my fault on poor planning around the holidays, people travel. I should have got this done way earlier in the year, so I'm taking fifty percent responsibility. Well that's new. I think the what you should do always is just allow for other people's errors. Well, well that's it, give yourself some room. DiDio likes to literally fill them. She likes to fill it up within one inch and so that you can't even move, so there's otherwise swift of water all over the floor. That's how she has filled the bath them up half full. Yeah. Well literally one time I was taking bath and you came in and the water was one inches. One from the top, and I said, this is pretty much how you live your life. And that's all you got to that analogy. When everything goes perfect, it's perfect, but when it doesn't, it's not good. It is all that time. But anyway, so that was kind of It's been a little chaotic at our house between packing, my tenant, floor issues and. Christmas and that hasn't even included me. And then there's ken it's that time of year. We're doing a predictions webinar for twenty twenty five. Yeah, it's going to be on all the craziness going on in the real estate market and where you see home and rent prices headed next year. Don't wait to share that with you guys, so you can act accuardly. It's going to be noon New Year's Eve. That's twelve thirty one Mountain Standard time, and it's free, and don't forget to come with your questions and your comments because we definitely need those. Yeah, and the link is invest with NC dot com Forward Slash twenty twenty five. Ken, see there, we wanted to chat today. You know, real estate investing has gotten really popular on YouTube and podcasts, and you know, everyone's trying to do it and a lot of people are getting burned right now because you know, rates have went up and prices of when you know, are starting to stabilize and they're not as high as they were. And expenses are up and rents are a little bit down. Rents are down, expenses are up, rates are up. Everything is going in the wrong direction. So for those people that have already invested or looking to invest again, or those of you that haven't ked yet invested, we wanted to go through some does and don'ts, and they're you know, they're pretty you know, Ken has a lot of knowledge in this. He's been doing this a long time and you know, we kind of went through all the different dues and don't send these of the ones he feels like are the most important. Yeah, the first one is rush. And I think it's it's pretty self explanatory, but I'll give you an example. I have a Mastermind and one of the one of the people in the Mastermind sold something and called me and said, you know, now I want to do this, now, I want to do this. Now I want to do this, which is totally fine, you know, because once you kind of exit something, you know, you've got time on your hands and you want to like immediately get going. And I'm like, dude, take a break, take a big breath. And so so they're rushing to try to get the next thing right because they want like traction. I completely understand this, but it happens a lot. Even even when our front TK sold his company like three years ago, I said, I have a rule, don't don't do anything for a year. Don't buy a company, don't start a company, you know, don't do any of that. Well, and so I was kind of having the exact same conversation, and that's what I what I realized is they're rushing, they're rushing just because they need something to email about, text about, call about, you know, go and and he's like, I went, I visited this, uh, this property five times. And I said, so you're emotionally attached already, like you know, and I'm like, dude, Like it all boils down to math, like everything has to make sense financially and and you know, don't feel like there's a rush. You know, the way you built your last business was over time, super calculated, very strategic. And I think what happens is people aren't used to a break. When there's when there's a pause or a break, there's an uncomfortableness with it, and so they fill it with something and then they were you know, they rush. It's like they it's like they don't have anything going on, but they do. They're doing recent or they're doing due diligence, they're doing you know, and finding something good. Finding a good real estate deal can take months. Yeah, it can take a really long time. And I think people got into this habit in twenty twenty twenty twenty one, when everything was flying off the shelves that you have to go in. You have to make an offer right away, you have to waive the inspection, you have to offer more than it's listed. You know, you. All the common sense and all of the due diligence kind of went out the window. And it's not that kind of market anymore, and people need to really take their time and not have this fear missing out right, like what if somebody else buys it? What if you know? And it's like, you need to make sure you do your due diligence. You can't just jump into these decisions. And I think that the people that I've seen that have made the worst real estate decisions have rushed into it. They've just kind of they love it, they get attached to it, they want to buy it. There's two offers, and they counter with a higher price. They don't think about that higher price. They just go with that because now you know, they're fully they're fully detached from the math. They're just being emotional. And I want to make clear that this is exactly what I used to do. I remember I remember somebody very specifically. I was meeting with them and they looked me across the desk and they said, you buy a house like I buy a shirt, And I was like, wow, that's actually kind of true, you know it was it was about the transaction, it was about speed, it was about accumulation, and it really made me think that's probably right. What happens is you start to shortcut things because maybe you have cash, maybe you have time, maybe you have the knowledge, maybe you have the wisdom, maybe you have the network, and all of a sudden, you're like doing all this work and you're like, I just need to I need to apply it and we need to move toward close. You know, well, it almost becomes a competition, right, you have seven offers on a house, you on it. You want to be the quote unquote winner that gets it. So all the common sense just goes out of the window. That's right. And that's why I was trying to talk them out of And I said, listen, you know, like the math has to work, and I can see at least fifty things that could go wrong, and I say, I said, I think that you don't see that many. And and so what happens is you kind of and it kind of moves into the second thing, which was kind of the emotional decisions. The rush and the emotional decisions is the emotional is the second one. They're kind of hand in hand a little bit yep. In other words, it's a mindset that you have. You you go see a property and one of the things he said to me was, you know, it doesn't have a very good broker and it's been on the market for like two years. And I said, well, that's a that's a positive, not a negative, right, right. You want somebody who doesn't understand what they have and you want something that's been on the mo mark in a long time. That's because you the seller now is going to have a little bit of stress. The problem is unless you hear that now. By to his credit, he called me. We talked it through. I was like, it's it's better off you. What you want is you want to like even the house we just bought that it was on the market for a year and the guy lowered it five six times. Well, yeah, and to the point of the house we just bought because you didn't want to get emotionally attached. You didn't even go look at it until it wasn't a price point you thought was reasonable. Correct, Yeah, it went it went down. The house went down four million dollars. By the time I actually looked at it, I was watching the house like almost a year and I didn't even mention it to you, right, and I was like, okay, and then it lowered all of a sudden, I go, this is a good price for that home, and within what forty eight hours, we were in it. Yeah. Absolutely, And because at the end of the day, real estate is a numbers game, not a feelings game. So when you put your feelings in it the worst. That's why when realtors show you houses, it's like, this would be a great kitchen for your family, this would be a great yard. You're your kids, we're running around in the backyard here. Yeah, exactly, because you're trying to make the home look like you know, But when you get that emotional attachment, that's when you make these decisions like we have to have this, We're gonna wave the inspection. You know. I remember when my brother and my sister in law were trying to buy a house in like twenty twenty one, and you know, there was all these offers on the house they wanted, and their realtor said, you know, part of the deal is like waving the inspection because this other couple decided to waive the inspection, and you know, they were kind of at this point where it's like, do we wave the inspection because we love this house. This is like the best house we've ever looked at data and then you they they luckily came the decision. That's not a good idea because that's putting emotion into it. When you decide to make those decisions. You would only make that decision because you want it so bad. You're waving common sense. And I want to be clear that a good realtor is going to do the opers of what you should be doing. They're going to want you to rush, and they're gonna paint the picture emotionally for you. Yeah, there's salespeople, whereas you're supposed to not rush and also not make an emotional decision. So just understand that those are those are the chess pieces going in. Yeah, and and that's it. I mean they're always going to put uh, they're always going to put a rush job on it. Well, and they always have other offers or other people interested. I mean that's part of being a real ur too, right. It's like, yeah, we had somebody else we think is going to put an offer on tonight or you know, to kind of try to pressure you but at the end of the day, this all comes down to the math and that takes us to point three. And this one's a big one and we're seeing this a lot now with people, and that is, don't allow yourself to be cash flow negative. Yeah, so one one point of reference here, if you have a lot of equity and your cash flow negative, I would exit, Yeah, I just would, you know, unless you can fix the cash flow negative because it could be operational, it could be aufancy issues or who knows what. But there's no reason to buy something where you're funding it. That isn't the point at real estate at all. The whole point is to cash flow passive income, take advantage of all the tax benefits and all that kind of stuff, and have your tenant pay down the mortgage. And when you're cashflow negative, hardly any of that's happening. Yeah, And you know, renolds always costs a little more than you think they're going to so you're going to be putting in like I'm putting in flooring and I'm painting and I'm doing all these things. And if you're negative and that's all coming out of your pocket, that stinks. Versus if you're actually cash flowing. That's a good point. Like how much money did you spend in the last six months on that one rental? Probably almost eight or nine grand. Okay, So that guys, is happening as a result of a turnover. So you have to be you have to be aware of all of those kinds of things. Yeah, and that's part of cashual negative. Like it's real cash that she had in savings that's now gone. Yeah, because at the end of the day, you have to fund it because you have to make that place livable, you know, and if you're going to rent it for the maximum you want to rent it for, you have to have nice sluring, you have to have fresh paint. That's what tenants are going to want. And the bummer is when I see people that are working a job they don't really have the money they're having to come out of pocket for that rental. That's when the people hate being a landlord. You talk to people that are a landlord or have been a landlord and tell you to never do it. If you really dig into their financials, they were cashflow negative and they had to keep funding the property. The other one that we're seeing now is that a lot of people are trying to figure out what to do with these airbnbs because and we've told you guys, never ever, ever, ever, ever buy a real estate deal that only works on an airpnb. It needs to also work if you have to break it down. So what's happening is airbnbs are soft and people aren't having the occupancy like they were and it's basically a hotel. So now that there, not only are is Airbnb under fire with the local and state regulations, but the hoas and everybody's kind of after him right now and the police and you know, we're seeing that all over Scotsdale as an example. So when you now have to back away from that and you have less occupancy in your negative cash flow, you need to take a look at that again. Yeah, and we always said not to do that because that's going to put you in a bind because your long term rental income is probably a half to a third of what your airbnb income was. And that's why my one tenant's pulling out is because he wasn't making money any longer on the airbnb. Luckily I based the income on a long term tenant, so it's fine, but a lot of you didn't do that, and now that that's softening, we're seeing a lot of those places up for sale. Well, you actually looked at one. We won't say who's right, but you looked at a full airbnb that the guy said you can, I'll give it to you for what I paid, right, And you came back and said, uh, it's tight. Yeah, based on you know where everything's headed. Well, it's hard because if you base it off last year's numbers, last year's numbers aren't this year's numbers on Airbnb, right, I mean there's more supply, as you guys know, people are getting squeezed on the vacation side of it. I think the luxury renolds are still doing okay, but all of the you know, smaller two three bedroom ones, they're really getting squeezed by this because people are finding it cheaper to just go run a hotel with all the cleaning fees and everything else. And so be careful. You don't want to catch a folly knife here, guys. You don't want to right now, the smart investors are trying to unload the negative cashflow deals. Yes, and be very careful as you're starting to take a look at these, you should look at all of them. Yeah, but be very careful. Just like what Daniel did. She went and physically went there, looked at the deal, looked at the numbers, met with the property manager, all that kind of stuff, and came back and said, you know, I think I'm gonna that's exactly what you should be doing. Yeah, you really want to base it on long term numbers. You know, when you're going to look at an Airbnb, say how much could I rent this for? If I don't airbnb it, and then I rent it just normally on a long term lease, why would it rent for and base your numbers on that. Then if you want to try to airbnb it and you want to try to make more money, you can, but then you can also convert it back. So yeah, and you guys always know, never ever buy anything, whether it's Airbnb or not, unless it cash flows. I know. You guys were just down in Florida. There's a whole neighborhood of it. Yeah, yeah, we are. We always rented from this guy named Dustin. Every year we would go down there, and he's great, but he's listed his house and he he bought it in twenty twenty, so he's really cash flowed because he bought it for four eighty and now it's listed for six hundred and something. But it's been sitting on the MLS for six months now, he's had hardly any saves on it, and he's having to lower it. So now it's in the high five. But I'm wondering howll he's going. To have to go before he you know, this is kind of the point, and it's an airbnb, but. It's an airbnb community, so you're not even allowed to have long term tenants there, which I would never recommend anybody do. Crazy, So if I were him, I would I would drop the price to four ninety five and call it a day. I did notice he lowered it to be the lowest in the whole neighborhood. So he's shooting for that. But I know, get out, get out now. Because also when we looked, wasn't there like six or eight others? Yeah, there's a lot of big neighborhood. No, there's probably fifteen total, and it's not a huge neighborhood. Yeah, so anyway this is happening, be careful, you know, don't catch a falling knife. Obviously we keep saying this, always, always, always always make sure it cash will now if it's one hundred percent vacant and there's a turnaround, and you could throw a renter in there, different issue. There's nothing wrong with buying something that's broken and you can fix it, but be careful of what the fix is and make sure you can. And these people are throwing around these Airbnb numbers like, oh, I made nineteen thousand dollars a month on Airbnb last year, or I made you know, eight thousand dollars a month on Airbnb. That's last year's numbers, are not this year's number. So I would not base my purchase price on those numbers. I would only base my purchase price on what I could run it for a long term. Right now. That's what you have to do, guys, because the rental market right now is also a little bit in flocks because of you know, all all kinds of migration things and all kinds of new supply and all that stuff. So we're going to talk about that a little bit more, but you want to base it with a little bit of vacancy, with a little bit of cap X. Make sure your your operating expenses are going to go up because they're certainly coming after you with insurance and property taxes and utilities and all that kind of stuff. Make sure all that's baked in and give yourself a little bit of breathing room because these things are supposed to be easy and positive. Danil's got a rental where the guy, uh what is he? Maybe contacted you once or twic a year? Yeah, he kind of. Well, the one we share, it's like he contacts us like maybe two times a year. Yeah, that's what you want. Dream tenant. Yeah, dream tenant. They're out there and he pays his around every every month. Cash frows like crazy. That should be a hashtag on Instagram dream tenant, dream tenant. There wouldn't be veryone. I just want to point out guys that the one deal that I'm doing with to Neil, we get the dream it I sleep at night, I know. But you're lucky that meanwhile she goes and cleans units. You're lucky that's the dream tenant because if not, I'd been constantly letting you know about our not dream tenant. The fourth thing that we need to do is a don't is don't forget to look at the hoa's financial. If there is an First of all, try to buy not in an hoa if you can. That's number one. But not all hys are bad. Mostly they're well intended, but typically you don't have people that are cent real estate. But I just saw this the other day. Somebody bought a home that had needed a bunch of work the whole community, and they got a big assessment. So assessment means that you basically step in, you buy the home, and you're like, oh God, I'm glad it's management in hi. Next thing, you know, there's a couple hundred thousand dollars with work, and that gets that gets allocated amongst everybody in that h way. So the h aay financials are important because nobody that lives there once their ha dudes raised, and as costs go up, like let's let's just say, let's say your hay dudes are three hundred dollars a month. Well, costs have gone up a lot in the last two years, and and their first if they were three hundred a month in twenty twenty, they need to be three fifty. I'm telling you right now, Oh. At least I kind of went up for my one place, like probably, So. This is gonna rebound, because what's gonna happen is there's most com owners groups are not going to pass and dues increase, Right, they're gonna keep it at three hundred, keep it at three hundred, keep it at three hundred. Meanwhile, the management company is not gonna able to pay all the bills. You're gonna start to see things slowly, they're gonna they're they're not gonna have the money to pay for them. And and then next thing you know, you're gonna need new roads, new roofs, new landscaping, new plumbing, new this new swimming pool, whatever it is, and and then that's gonna be an assessment and you're gonna get tagged pretty good. So let's chat about the HOA piece though, So, like we're in Arizona, it's hard to find, you know, places that don't have hoa's. They're definitely out there, but they're hard to find. You know. Florida is kind of the same way. But the one thing I've noticed is my HOA costs are going up quite a bit on most of my properties. And you really needed to account for that in your cash flow, right, Like if you're cash flowering like a couple hundred bucks. I can tell you this year, my HOA is going up fifty dollars on my one h AA and seventy five dollars on my other HAA per month. So those are big increases when you have tight cash flow because their expenses have been going up. But then to Ken's point, you also need to make sure when you're buying something that the HOA is in good standing, because there are places where hoas that are in bad standing that you might be walking into a ten thousand dollars assessment. There's plenty of those out there. Be careful guys, I'm telling you. So the HOA of financials are really really important. But more importantly, the way you you need to look at them. You need to understand the numbers. If you don't understand the numbers, ask somebody that can help you. Yes, I looked at the numbers on the HOA the home literally a home that we have now, I actually looked at all the numbers I do every year. What do they have budget for each thing? And you know they do a pretty decent job, but I can tell you most most are not run well. They're usually run by people who don't our stand them and of course, like anything, the last thing they want is for duce to increase because they're now the board that increases every single homeowner to pay more. And and it's just like you talking about it now, you're not happy about it. No, not happy about it at all. So who wants to be Who wants to Who wants to be that homeowner that oversees a board that that increases all their neighbors? Nobody? Well, and here's the problem too, is a lot of people ask their real litor how the hoa you know, financials look, and your real litor, for the most part, is not going to know. So you really need to ask somebody that has that experience, you know, anybody that's just look. At the financial savvy. It's all there, it is, but but you need to know if what looks good and what looks bad, and how much they have budgeted and if that's realistic. Another thing I like to do is talk to the neighbors, especially if you're in like a condo complex. There are great barometers on if you're going to get an assessment, if there's one planned, if they've had an assessment in the past couple of years. You know, all of those things, so I doubt definitely always loved to knock on doors. Yeah. The other other thing too that you say about the hoas that I found interesting is you don't like to invest in buildings that don't have a lot of units. So like, if you had a twelve person building, you would veer away from that a little bit more of than it was, like a fa you probably wouldn't have. Well, I'll just give you an example. I was building a home. This is going back a while, but I was building a home and so I listed the home in and somebody came and wanted right away. So I was like, ohh so I had to go find a home. So I was like, well, I might as well just go. I might as well just go buy a home and I could ran it later, which exactly what I did. But this particular, this was really nice little subdivision with twelve homes, beautiful with a pool in the middle, and you know it's twelve homes. Well, of course it had common area, had common parking, had gated, had the pool, a pool house, and all this stuff. You start to realize, how, you know, all those common area costs are spread amongst twelve people. So the point is you could actually add fifty more homes and have that exact same setup. So now it would be spread amost sixty two people, if that makes sense. So you just look at whatever the cost of let's say the parking lot and the pool and the pool house and all those things. Maybe that's fifty grand a year. Let's just say for the whole thing all year, well, over twelve people, it's one thing. Over you know, over fifty people, it's quite another. It's the exact same thing. So so when you start to multiply the amount of people, it's just like you know, like Bellevida that where you are, there's three hundred and ten units there. I think there's two pools. That's it. There could be one actually, so you could have one pool spread over three hundred people, or two pools spread over three hundred people. It's going to be more with two pools. And then sometimes you go to places without three, four or five pools. So now I know I'm just picking on pools, but you get the point. You start to see you start to see all these common area things as they start to stack up. The people that are in those condos pay for it well. And we had a big storm ripped through Bellvida a couple of years ago and knock down trees, take out carports, you know, do a lot of damage. We were not a theested because there's three hundred people paying dues. If there would have been fifteen of us, we would have had to come out of pocket to repave, to rebuild carports. You know. So those are the things you have to be careful of if you're joining a small, small community. That's right, that actually happened. We had. I guess I kept that rental that house. Actually I moved into it for like six months and I kept it and sure enough, like six or seven years later, Oh, we got to redo the pool deck, the pool, you know, the whatever, and it was like, I don't know, fifteen sixteen thousand it so it was a thousand bucks you know per house right to get all that done. To your point, though, if there were sixty seventy houses in there, it would have been. A few hundred dollars or if you're not even assessed at all, because it could have come out. Yeah. So those are the kinds of things, so just be you know, one, you got to see how NHOA is funded. It's called the replacement reserve, not the dues. The dues are supposed to just pay pay for monthly operating expenses. That's it. And then there's then a part of that is supposed to be dumped into a reserve account that has a whole bunch of cash for those kinds. Of things, right, And if it doesn't have that replacement reserve or it's very low, that's what you need to be Leria right. Okay, So we talked about the things the top things you wouldn't do, So let's talk about what you should do. So you should educate yourself and have an investment strategy. There's no question like again, guys, you know location market, you know how you finance it. If you're a gp LP, are you doing your ordeals? What are the fees? What are the rents? Are they going up? They're going down? Are people moving into the market out of the market, you know, are they pro building not pro building? There's so many variables here that again, that's the whole point of this channel is you know, the choice of where is the most important thing. And that's why you know, we talked about Russian emotional decisions that oftentimes compromises choice. Yeah, and I think you know, when I was in b and I for my business, they always said, you need an elevator pitch right. You need to be I should be able to tell you in thirty seconds what I do and what you could you know what I'm looking for and for me, you know, I think you should have that for real estate too. So if you were to ask me, Neil, what are you looking for? I would tell you I am looking for the least expensive house in the most expensive area. Period. That's easy. That's it. If a realtor were to ask me, if an investor were to ask me, if a friend weren't asking, that's what I want. And that's very easy to identify because you know, if you don't have a strategy, and if you can't define what you're looking for, then how's the realtor going to find something for you? How? You know, how are you going to get people to invest with you. You need to have a strategy. You can't just be open to investing in anything and everything. And I'll tell you one great example. We had a portfolio properties that came to us. It was a low income portfolio, which doesn't mean that they were bad units. It just means that they had the policy and the legal that made them lower income, but at some point those expire. And we looked at the deal and I noticed that the landlord was paying all of the water, the sewer, the trash and all that kind of stuff. And the we that a lot of the deals that we're buying today is that's all passed to the tenant in a small number, like thirty forty dollars a month, where the tenant would actually pay for utilities for their own place. And so it's called Rubb's resident utility billing. And so it was like five hundred and fifty thousand dollars. And so what I said was, I said, this is really simple. This is why we're going to buy this building. Now. These are there are eight buildings, eight properties. And I said, because now we're gonna be able to pass this five hundred and fifty thousand dollars back to the residence. Now, it'll take a couple of years, but that's going to grow the net operating income by over five hundred thousand dollars just in a couple of year period by just renewing leases and telling the people that rent new places, it's your your rent is acts plus your utility bill is thirty dollars. And so all of a sudden, we were able to pass all that expense, which turned into revenue. So the expense didn't go away, but we now have revenue offset it. And so that's what I mean by a short story, because I basically said, oh, we're just going to take this five hundred and fifty thousand dollars and we're gonna we're gonna collect the money to offset it. It'll it'll grow. Then, why not operating income by that much? And that's what we did. Well, that's your strategy to buy the building. You weren't just buying it and just hoping things will just eventually go up and you can sell it. So that's and so every we always say, every every real estate deal has to have some kind of a story. So I'm buying a vacant building, but I already have a tenant. That's a story, right. Or I'm buying this building and you know it's the rents are five hundred dollars under market, and here's the market study. We're going to increase that. Or I'm buying this building and I'm going to put an ADU in the back and I'm going to double the income for this property. That's a story. So everything has to have some kind of a story. Yeah, and that's really important. And also too, you know, with your strategy, are you going to self manage, are you going to hire a property manager? You know? Are you going to do short term rentals, mid term rentals, long term rentals like all those are different strategies that you have to know even before you start looking. Like I know with you with your strategy with MC companies is you're always looking for opportunities to increase cash flow. So somebody asked you, you know, what are you looking for in these buildings, opportunities to increase cash flow. You're going to do it different ways with different buildings, but that is what you're looking right. We look at everything now at this point, right, we're looking at locations. We're looking at first floor, second floor, corner units, views, no views, pull view, landscape, view, you know, view with a freeway, all that stuff. You price it accordingly. And then then of course there's the other income side of it, which is can we add yards, can we add garages, can we add car ports? Can you know? Can we add storage units? Can we you know what are we gonna do with pets? Like all, there's a whole lot of things that you can do to increase your income, not to mention the customer service side and lowering your turnover and and all the things that you would do and to want to keep somebody there, you know, like our dream tenant, Like you know, our dream tenant. The reason he's a dream tenant, it's not because he pays on time. It's because he doesn't call a lot and we haven't had any vacancy for three years. That makes it a dream tenant. So you know, those are really things that you can do anywhere you What happens is people shortcut, they rush, they rush the real side of things. They rush the tenant approval, they rush the credit check and or they allow you know, bad behavior. The second do is you need to understand how to manage people and a property. Yeah, this is one of the biggest ones. And this is something that you've had to learn. Well. You know what's funny is if you would have asked me when I started, and I think most people, do you need more help manage in the property or more help manage in the people? I would have said, well, for sure, the property, because that's going to be the hard part. But the property is most of the time the easy part. It's the people that's the hard. Part, right I'm telling you. It all revolves around the tenant. So if you pick like a dream tenant, like we like we keep talking about, that person is going to communicate respectfully with you. They're going to pay on time, they understand their role, the responsibility, and what's going to happen is they're going to let you know in fact he has he's like, hey, my landscape or my screen doors broken or what. Well he thought the landscape was, you know, costing him too much money on his waterbell was awesome, and it was awesome. Week we figured it out. Yeah, yeah, we fixed it for him. Whereas you have another tenant that basically bangs on you about every week, and I hear you talking about them all the time, and I was like, oh my god, like what and you're like, I've had it with this person, I doubt And you're always sitting the patent's guys over there. So okay, So this is again a people issue. It's it's a people issue, but it's a management issue too, And it's one thing that I'm learning, right, and I always talk about this on here, but you can't let your tenants dictate you. You are the landlord, you own the property. You make the rules other than obviously the the law, but other than that, you make the rules. And so you know, I've learned, you know, to not let people know that I'm the owner, and I've learned to run everything through email not my cell phone, you know. So I'm learning, but sometimes you know, as you're learning, you still have the tenants that you have when you start it. Yeah, and there was always a rule when I was a school teacher that you have to go in mean on your first few weeks because then you can be nice, but you can pull it back and if you go in nice, you get walked all over. Well, my tenant that I have issues with, they've been there a long time, and I was too nice. So now you know, I didn't set any boundaries, so now there are no boundaries with her, unlike other tenants that I have. So you're mean, I'm just. I'm just actual. I'm totally understanding this relationship. Now, I'm just actual. Well, but your tenants don't dictate the rules, and it's very black and white, and the only things that are in an emergency are things that are truly in emergency, Like a leak can be an emergency, but a fire is an emergency. But you know, an ac out is not an emergency. Well, I tell you this, Like the most leases generally are kind of all created equal. So if somebody signs the lease, the issue then becomes people, and sometimes it's you. Sometimes it's just are you managing to the lease or not? What are you allowing? You know. It's it's funny because I watch We have hundreds of people that work for us, and some of the best people we have are military trained. Yes they're military trained because they come out of the military and things are really black and white. They're disciplined and there's rules and they follow them, and they are some of the very, very, very best people for property management because they it's it's like a manual, you know, the least and so there, you know, And what I find it's kind of like when you see you know, like when you go to a restaurant, you see kids run around like crazy and the parents are like, oh yeah, I eat fine, and they're you're ripping the plats down and bothering all the people parents are just drinking. Then you see another one where the kids sitting there, yes, ma'am, no, ma'am, you know, and being super respectful. That's the difference. And what happens is you see landlords like this, and so the question is is do you want to let your tenants run around the restaurant like that or do you manage them according to some basic rule. Well, and tenants are well, people in John, I just don't want to say just tenants, but people in general are still like kids. You know, they're going to test your boundaries, right, They're going to demand that something gets fixed that night. Now you can either fix it that night and pay all the emergency fees, or you can follow the least and you can follow the law and you can follow what you think is reasonable and you can get it done. But they're going to push. And if you allow them to push, then you're going to hate being a landlord. If you can set boundaries, then you'll you know, you won't hate being a. I'm just saying tennis could be bullies, landlords could be bullies. Just just know just know that, well, you know, just follow the lease. Well, something that I started doing very recently with my tenants, and I think it's been really good. Is when they move in, I send a welcome email, and I go from the property management company, which is me, and I explain, you know what an emergency is, what it's not, you know what, how to communicate for various things, and that helps the tenant and that also helps me. And that way, if the tenant doesn't follow those instructions, I can revert back to the email because a lot of times people don't read the lease, and the lease isn't going to say, you know, this is an emergency, and this is not an emergency, and this is how you contact me, and this is not how you contact me. So when you lay it out for them like that, you're setting the standard and then they can then choose to follow it or choose to not. But if they choose to not, you can just keep reverting them back to the email, right, reverting them back to the welcome letter. And for me, that's worked really well so far. You like, put like a mean emoji on there because you just told me you start off me it's a. Very nice letter, but it's very firm. The mean emotion. No, it is a firm letter. Well, I always say this because I made this mistake at the beginning. You cannot be friends with your tenant. I will, I will die on that hill. Even with your dream tenant, you can't be friends with them. You are just you're the landlord, they're the tenant. It's a business relationship and that's it doesn't mean you can't care, but you know, you just have to keep it very factual. I completely agree with that. So the other thing that you should be doing is having a go to team. Yeah, so this actually, I know we made fun of you about the flooring, but the reality was is that you actually had a lot of options. I did, and this this was an important piece made You made a mistake. Yep. The mistake was you try to fit it in between tenants and things went sideways, and you went through three different contractors. But you had them, yes, the important pieces that you had them in your toolbolt. Yes, after Albert you were at zero. But the point was you went through three and the first two didn't work, and so you got to build your bench. You have to have a team. You have to have people that can respond accordingly. We have several maintenance people. Well handyman are the biggest right. You can't just have one handyman. So at the beginning I had one handyman and it was great until he started to get busy. And then something happens and you're kind of in a buying right, so you need to have a few different handyman. You need to have an acy person, a roof or electrician, plumber, cleaners, you know, all of the locksmith I just learned. I didn't have that on my team until recently, but now. I have a lot of night and this is what happens after you own for a while. And by the way, these are hard working, great people. But I remember when you got a bit for the roof, I think it was you remember how different the prices were. Oh yeah, the prices can be extremely different, and even for the AC unit. Like my go to team member AC guy was really booked, so he couldn't even get over there for two days. So I said, you know what, I want to fix this before I'm going to send these random AC people over. Well, they told me I needed to replace my air conditioner. Yeah's then you were like. I don't know if that sounds right, Da da da, So then I called our AC guy Joseph, and I said, hey, Joseph, you know I had these other people out. I really want a second opinion. So he goes out there had been three days. Now, the tenant's mad because she's been without air for three days. But he goes, oh my gosh, this is such an easy fix. I'm just going to replace it for freaks. It's only take me five minutes. And I called the other AC company back and the guy was like, didn't even charge me for the appointment, right, because they had lied to me. But that's that's why you need a team. But it will get gout. I think that was an eight or nine thousand dollars decision. Yeah, and you'll get gout. And that was three years ago and I still have that AC unit and as of right now, it's still working. Right. So it's important that you always have a little bit of tension between subcontractors, right, always with painters and ac people and multiple bids bids, and you need to let everyone know I'm going to get a couple bids. So we just had our house done. Our new house. We used one of Daniel's roofers. It's a guy that I never used before. And when he came out and he went up. I met with him and I said, hey, I'm getting a second bid, and he said that's fine, and I said, so just make make it your best number. And I did, and he came in and he did it, and you know what a great experience. Well, but I also think that a lot of times the reason so on our house, like on a home you live in, it's super easy to say, you know what, I'm going to get another AC bid, or I'm going to get another you know, the roofs leaking, I'm going to get another bid. Wait, wait, screws it up? In my mind that I had to get over was the tenants right, because the tenants are mad, like I can't go without AC for another day, I can't go with a leaking roof for another day. I can't go without hot water for another day. Well here's the thing. You know, our hot water heater broke in the middle of the year. Last year. We didn't have water for like five days. Okay, so your tenant's mad after a day. But realistically, in Arizona, you have ten days to fix that stuff, and you're just trying to do your due diligence. So you don't get worked over, and so you need to tell this is why you know, those boundaries are important. You know, I am going to get this fixed for you, and it's very important to me to get it fixed, but it might be another day or two. Because that's what you're going to do for your house, that's what you're going to do for your rental. You just need to communicate it with your tenant. And you just have to have those boundaries because if you try to and I did this, if you try to fix everything for your tenant as quick as possible within twenty four hours, you have no additional time forbids, you have no additional time to figure out who to use, and then you just end up paying, you know, a ton of additional money. Then you would have to pay or you get shoddy work. It's like in Titled Kids, it is like you. Just have to let them know. I mean, because realistically, oh that's right. I follow the landlord tenant law. All the landlord tenant law, and I'm a good landlord, and I'm sure most of you listening are too. But you know, having to fix everything in one or two days, that's not always realistic. I mean, that's the goal. But when you're having to shop around because you have a bigger issue going on, or you know your your normal go to team isn't available. You know, I learned from that AC experience. If my go to team's not available, then the tenant's going to have to wait. If it's two days, if it's three days, they're gonna have to wait. Because that's the only person's opinion I'm going to trust because those are my go to people. Yeah, and that's the point again, this is managing costs and having a good bench, you know, having a go to team. That's the most important thing. Yep. So another thing that's to do is having an air tight lease and doing background and credit checks, which you slightly touched on. But let's dig into that lotr Well. First of all, if you're ran a couple grand a month, the way you need to look at this, it's a twenty fourth thousand dollars contract. Most people don't think of that, right, Like, this is a big deal. This is more than their car payment, right right. So so either you know, people kind of haphazardly. Just they print things off. Oh yeah, hey, no problem. But if you're buying a car, I can assure you that they're running all kinds of stuff on you to see, you know, and so there's it should standard reason and it should be very obvious that you guys need to run as thorough background check on whoever is going to be paying you twenty four thousand dollars a year potentially for multiple years. That's what you need. You need to do the exact same thing that they would be doing for anything. And what happens is people shortcut this. Well, they try to do a cheap service, or they try to you know, I've even had tenants, you know, tell me your potential tenants, tell me, hey, I already actually had a credit background check ran if you just want to use this one, and they try to email me something and a lot of landlords take it because they'll be confused, Oh that's weird. You won't take it. You know I have, but it's like no, because because they don't want to pay that application fee, right, they don't want to pay for another one. But that's just part of my process. Yeah, you got to wonder why they had a most recent one done? Yeah, right, Oh, like I just have to have one, hmm, I wonder why, you know, most people don't have credit checks done a lot, Like you know, you're getting a loan for something, or you're you know, buying something or renting something, so you know, maybe once a year, maybe twice. So it's very very odd that somebody would just have one hangout. Oh I know. But to your point, and I think the other thing what you guys always got to be thinking about it. We talk about this in some of my YouTube videos. If you have multiple places, let's say a four plex, eight plex, twelve plus, and you're moving in people that are next to good people, that's a problem. You know what does that mean? What that means is criminal credit background checks. You need to be consistent. You cannot vary obviously for under any circumstances, and use the exact same criteria. That's why I like to use the third party service, is you know everything's done through a third party that that will say the mortgage companies do the same thing, you know, and and just have and make sure that whatever whatever criteria that you are going to use, you use the same one over and over and over and over and over and over. And you don't want to deal with the drama anyways. Like even though I have single family. It's like I had a girl and she moved in her boyfriend and they actually did both pass the credit and background checks. But you know, he caused problems in the community. So even though that didn't affect I didn't have any other homes in that community, I still got the calls from the neighbors. I still got all the things, and you know, it's just it's it's just better to have a peaceful, quiet experience. And then also you really want to check your lease right and for multiple things. But I mean, I've had tenants challenge me on whether or not they need to pay an HOA fee that they incurred. They want to move out early and they don't want to pay any fines, and I always refer them back to the lease. But if you don't you printed out some random one sheet of paper or two sheets of paper for somebody to sign for their twenty four thousand dollars loan, then it probably doesn't have all those things in it. And then you're probably going to be holding the bag because if it's not in the lease, you can't enforce it, right. And I tell you, when we first started my business is going way back. I think the lease was maybe three or four pages, now it's like six or eight. What happens is as you start to become more experienced, you realize that there are holes in the lease, there are things that come up that you don't think about, and so what do you do? You modify it. And that's where again, if you're using a third party or you're using you should always look for somebody who's been around the block and has a lease that kind of covers everything. Yep, and theddendums are good too and all. That, and you need to understand what's in it, right, So don't. Great, You should definitely read your lease before you have anyone. Sign it, right. But the more thorough the lease, the better. Yeah. Absolutely. And then another do is to check your property at least once a year. Yeah. Now, when we're talking about here, the landlord tenant law basically says you have to give notice to the tenant and that's your right. And so you physically go to the property and walk in because this is something that happened to you. Yeah recently. So I we've not been good about this because I just I don't know. I'm busy, and I trust my tenants and I have any complaints. Well, this airbnb that I had, people aren't really staying in there twenty four to seven. So I go in and I realize that the roof has leaked, and there was a few different spots. Let's back up first, let's talk about the landscaping when you drive up to it, like like, okay, this does not require a notice, Like you could have just driven to the property. It was the front yard, look. All right, did you say you couldn't even there was supposed to be a barbecue there. You couldn't even see the grill because the plants had grown so much over it. All the way, it's definitely a fire hazard. By the way, the ha won't look you in the eye. And they are the ones who see the front of the house and you say, all the plants are dead in front, Well, okay, yes, you know the answer. So so it doesn't always drive by your properties, guys, like like, seriously, these are not like stalks, right, these are these are things you actually need to drive by. Danil's going to tell you that it was all in the backyard and all on the inside. But what what you can see on the front you can expect in the rest. Well and Here's the thing too, is that you know, I see landlords that want to stop by their property every couple of months. In fact, when I was growing up, I had a landlord. He would swing by all the time. And that is unnecessary. But to come in once or twice a year, you know, offer to change the air filters, offer to do something while you're there, make it feel like you're helping out, and you are. But also while you're there, kind of take a look around. You don't need to go crazy. You just need to know do they have dogs that they never told you about? Are there additional people living there that you don't. Know about it? And there's a really easy way to do this, and I agree with Danil. Literally you can just say we do an annual AC check or an annual you know, we do a systems check and and that's it. And you go in there and you bring a tech or maybe it's you, and you walk in there and you go look at a few things. You go look at the water heater, you go look at the air conditioning, you go look at the you know, the basically the condition of the property. Maybe it's a pool, whatever it is. I know that's outside. But The point is you're essentially just going in and doing doing a property check. And by the way, this is less than one hour. You guys can do this in less than one hour a year. But I will say that as much as I love our handyman and I love our ac guys, they are not the right people to report on a property. I mean, by the time they're reporting to you, there's a problem, that's a really big problem. They're not the most detail when it comes to that kind of stuff. You want to get a pair of eyes on it, or you know somebody you trust that's kind of meticulous, just so you really know what's happening. Absolutely yeah, it's you know, I have story after story after story here and of things that will shock you of what people do after they rent. So trust me, you want to know, you want to know, and you can do it casually. But all that's obviously all in the least anyway, But just do an annual inspection and you got to give proper notice and there'll be a lot of things that happen as a result of that. Absolutely. Well, we hope you guys have a happy holiday and we will see you next week. Cheerous guys. MM hmm.