384: The REI Cleanse

January 31, 2020bmanasseroUncategorizedNo comments

SHOW NOTES FOR EPISODE 384: THE REI CLEANSE

There comes a time with real estate investors where you need to re-evaluate your goals, focus and refine your portfolio. As farmers know well, strategic and effective pruning yields a bountiful harvest. In this podcast, Bill shares how he is letting go of certain properties in order to better direct his time, effort and resources to achieve greater objectives.

Tip of the Day

Make a commitment to networking: Meet a new contact every week!

Join a local REIA club
Meetups
BiggerPocket meetings
Form your own group or mastermind
Kiyosaki’s Cash Flow 101 Game Meetings (see episode 101)
For networking skills, check-out:

The REI “Cleanse”

I recently had a podcast called The REI Do-Over recently on episode #380 because I really feel it’s a regular part of adapting, refining and re-engineering for success. Well, sometimes you just have to shift and change your strategies and focus. Also see Gary Keller’s Shift.

The great thing about being a real estate investor is that you are your own boss. You can decide what properties you will buy, where you will buy those properties and how much. You can decide what type of asset you will buy: single family homes, apartments, trailer parks, self-storage, office buildings, hotels, etc.

As you dig-in and start investing, you’ll know better, with time, what type of investing you really want to do.

That’s what I’m calling the REI Cleanse. Sometimes you just have get rid of some of the extra stuff that’s either bogging you down, slowing you down or bringing you somewhere you don’t want to go.

How am I cleansing??

Cashing Out of My Smaller Properties

Switching focus to multifamily
- Why multifamily? Check-out the attached links
I’m doing what I call the “REI Cleanse”
I’m getting rid of my old C properties for B class properties
- 342: Are Class C Properties a Smart Buy for Today?
Because they are class C properties, they have a higher return… but you pay in other ways… time and headaches to get earn those returns…
Class C Properties = Higher Risk
- Tough to find good property managers
- Tough to find good tenants
- Evictions, tenant damage, etc
- More repairs, higher maintenance
- Time-intensive! Robs you time from devoting time to:
  - Finding more and better properties
  - That valuable time with your spouse, family, grandkids – the stuff you want to do in your retirement
  - It stops being passive income and become a full-time business
- You not only pay in time and headaches to get those returns… but you also pay in cash… that great spread you bragged about to your buddies quickly dissolves… as you are chipping away at that great ROI, cash-on-cash return because of
  - Higher repairs & maintenance
  - Constant turn-overs – which are very expensive
  - Vandalism
  - Evictions
  - Broken leases
  - And more
- Also, looking at enter different markets and exiting others that are not so good
- Although these properties have cashflowed well over the years, they also tend to be a distraction and take a lot of time… sometimes
- Making the move now – while it’s still a sellers market – A Good Time to Sell!
- Get top dollar
- Using equity funds to
  - Pay off debt
  - Capital projects
  - Build reserves to purchase in a market correction

Also to Pin-Point Focus

Want to stay fixed on my goals set in my 2020 Strategic Plan
Without smaller properties, it allows me to be more focused on key goals for 2020
- New emerging markets
  - Building new teams in new areas

In the Beginning

In 2014, I received some inheritance funds
- Looking to diversify my investment portfolio
- Wanted tax advantages to off-set large cash gift
Wanted something truly passive
Thought real estate would meet my needs
What did I do?
- I do what I a lot of people do
- I “got my feet wet” with smaller, less expensive properties. Why?
  - They were cheap
  - It’s easier
    - I’ve bought a home before
    - Knew how to do it
    - Easy to find single family houses
  - Less risk
    - Buying more small properties gives you more flexibility – can sell off bad performers, keep the good
    - If I blow it – I lose less

Why I Didn’t I Just Start With Multifamily

I was intimidated.
That was something with much more experience did
Felt I didn’t have the knowledge
The cost of mistakes seemed too high

I Started Meeting People Who First Started Real Estate Investing With Multifamily

Through my podcast, I met many very interesting people
And a surprising number of those people STARTED investing with apartment buildings
I was amazed!
The people who were most successful started with expensive coaching
I was wary because I had had experience with the gurus who want nothing more than to upsell you into bankruptcy
I bought plenty of home study programs

How Did Other People Start With Multifamily

Expensive coaching/hand-holding
Found a wealthy, experienced partner
I had none of this
Could I have done what they did?
- I could have used my investment capital to invest in my own education for $20,000-40,000
- What I didn’t know was that there are those programs where the coaching is more than just education. The Gurus:
  - Educate you
  - Give you templates
  - But some even…
    - stick with you through your first deal
    - help you find the money
    - help you find JV/partners/sponsors who will qualify you for the good loans
    - Plug you in to valuable network of others who have succeeded
  - Why I didn’t
    - Didn’t know the programs
      - Was turned-off/scared away by the boot camps, up-sells, and pushy tactics they use to get you signed-up
    - Didn’t know anyone who had done it (I needed a friend I knew and trusted who had done it and succeeded)
    - $20-40,000 was still a lot of money and I was looking at houses I could buy for that much

In Conclusion

The “Cleanse” I’m doing now is a good move
I would have liked to start with multifamily early on but didn’t
But I’ve learned valuable lessons along the way
My first duplex taught me the basic benefits of economies of scale

Podcast Episodes Featuring Guests Who Started With Multifamily

DISCLAIMER: Many of the above strategies take knowledge and have a higher degree of risk. You need to do your research and/or work with someone who is experienced to reduce your risk.

IF YOU LIKED THIS PODCAST, we would love if you would go to iTunes, Apple Podcast, Stitcher, GooglePlay, iHeartRADIO and Spotify and Subscribe, Rate & Review our podcast. This will greatly help in sharing this podcast with others seeking to learn real estate investing as aCBRE means to achieve a successful retirement.

Check out our other podcasts at olddawgsreinetwork.com.

Get a FREE copy of our 3-Minute Rental Property Analyzer at olddawgsreinetwork.com.

Additional Episode Sponsor: Meno Studio – menostudio777@gmail.com

bmanassero

Previous post Real Estate Deals – Ten Myths Next post 385: 2020 Market Outlook