June 2, 2017
Joe Fairless

Friday Facts – Best Real Estate Investing Advice Ever Lightning Round

Learn this week’s Best Ever guest’s best ever books, real estate deals, ways to give back and biggest mistakes

Kim Ades from JF999: World Class Author, Coach, and Thought Leader Sheds Light on Why the Successful RE Pros are Succeeding

Best Ever BookAsk and It is Given by Esther and Jerry Hicks

Best Ever Deal Kim has Done – “This house, the house I live in.”

“I was supposed to buy it, and then it got pulled out from under us and we ended up buying it afterwards at a lower price than out original offer.”

“It was a matter of maybe a month or so. A month or so later, with a new agent, things had changed and we found a bit of a loophole that allowed us to get us a lower price.”

“The loophole was the size of our balcony. Our balcony is oversized, and apparently because it’s oversized, it had to be ripped down, so we asked them to pay for the tear down theoretically, and they took that amount off the top of the price.”

Best Ever Way Kim Likes to Give Back – “Coaching, It’s just what I do.”

Biggest Mistake Kim Has Made So Far In Real Estate – Not knowing the tax law

“I mentioned to you that I used to own property when I was young, with my first husband (I’m remarried now). One of the things that happened to us is we owned a company together, and as our marriage unfolded, I ended up selling my shares. I didn’t know much about tax law or anything like that, and I made a huge error in the way that I sold my company, and a couple of years after the sale I ended up getting a call from our government (CRA) letting me know that I owed them $300,000 in taxes… So not quite the real estate story you wanted, but still, definitely an investment that kind of blew up on me, and it was a scary time. But luckily, I had the money, so I just paid it off and right after that I just really scaled back. I stopped going to get my hair done at the hairdresser’s, I learned to color it myself. I just took care of things a little bit differently and stopped living very frivolously, and just kind of scaled back until I recalibrated and kind of felt more comfortable again, but it took me a couple of good years until I got back on my feet after that.”

“There’s a way that you sell your company where you get a $500,000 tax exemption from the sale of a company, and I didn’t sell it that way, so I didn’t get that benefit, so all of it was taxable. I didn’t know, and because I didn’t pay that on that amount for a few years after that, not only did I incur a tax bill, I also incurred a bill on the money that wasn’t paid.”

“[My recommendation is to] speak to an accountant, and even a tax lawyer would be really helpful. Don’t just sell your shares… Understand what you’re getting into and make sure you’re taking the right steps from a legal standpoint and understand what the tax implications are. Taxes are a big deal.

Read Kim’s Best Ever advice: The One Characteristic Differentiating a Real Estate Pro and a Real Estate Rookie

Ricky Beliveau from JF1001: A Hidden Wealthy Niche that Involves a Fine Tuned Team

Best Ever BookHow I Built This (a podcast, not a book)

Best Ever Deal Ricky has Done – First rental property purchase

“The first building I ever purchased. I currently own it today – it’s my largest rental property. My purchase price was $930,00 and reappraised for $2.2 million.”

“I used FHA Owner Occupant, and in Massachusetts at the time the max one you could get was $816,000 for FHA, and then actually using the paper that I wrote I went to my mother, who had just inherited some money, and I asked her if she would invest in the property with me. So she gifted me $160,000 to get me started on that first property.”

“It’s a three-family property. When I purchased it, it was a nine-bed, three-bath; I lived in one of the units and I got my hands dirty and renovated it and turned it into a 12-bed, six-bath.”

“I was able to really drive up the rents and drive up the value. And also, I bought it at the perfect time. Boston in 2010 had really plateaued. From 2007 to 2010 it had almost been dead even, and then right in 2010 is when the market started to explode, and it hasn’t stopped since.”

Best Ever Way Ricky Likes to Give Back – Mentoring college students

“Right now, I’m a member of the Venture Mentoring Network at Northeastern. What that is is it’s startups and college students who have ideas and they’re trying to start their businesses. Right now, I’m mentoring a bunch of college students, trying to help them get their businesses going.”

Biggest Mistake Ricky Has Made So Far In Real Estate – Self-managing

“Thinking back, one mistake I made from the start was that I tried to self-manage my rental portfolio. I think that you can’t really deliver the high level of service that these tenants need when you’re doing it on your own, at least from my standpoint. I quickly realized that it was a mistake that I was trying to do that on my own, and I was able to correct that by hiring a management company to take over that for me.”

Click here to listen to my full interview with Ricky and learn about the hidden wealthy niche – condo conversions

Matt Wood and Mike O’Connor from JF1002: A Unique Way to Pay Investors Using a Property’s Cash Flow

Best Ever BookRich Dad Poor Dad by Robert Kiyosaki

Best Ever Deal Matt and Mike have Done – “Our 32-unit deal. We picked it up for $640,000 and it just got appraised for $1.35 million. It brings in roughly $18,000/month.”

Best Ever Way Matt and Mike Like to Give Back – “We’re pretty involved in our church and we like to get involved with the service aspects there. We do different habitat type builds and stuff like that, so it’s just getting your hands dirty and getting involved.”

Biggest Mistake Matt and Mike Have Made So Far In Real Estate – Rushed a Rehab

“I would say on 16-unit deal … We basically rehabbed all 16 units; some of them were floor-to-ceiling molds, a good majority of them were. We — I’m not going to say we cut corners, but we rushed the job in some areas, both with our repairs and with our tenant placement to get the thing up and running quicker than we needed to, and I would say that that probably cost us about six months of being at full stabilization, just because tenants were having to be evicted, repairs that we made weren’t holding up… So really going back and actually doing that right the first time would have saved us a lot of time and a lot of money.”

Click here to listen to my full interview with Matt and Mike and learn a unique way to pay your investor’s their preferred return

Joel Owens from JF1003: What the Big Box Companies Look for When They Lease Commercial Real Estate

Best Ever BookInvesting in Retail Properties by Gary Rappaport

Best Ever Deal Joel has Done – $410,000 commission from BiggerPockets

“On the brokering side, I have a client that contacted me off of BiggerPockets a couple years ago; he’s one of my higher end clients, and he bought two pieces of properties for about 22 million dollars, and I made about $410,000 in commission on that one.

Best Ever Way Joel Likes to Give Back – BiggerPockets forums

“I’m a moderator in Bigger Pockets, I’ve known Josh since he started the site a long time ago; we’ve got over 730,000 members now, and I’ve got about 12,000 posts on there, and I usually go on there … I don’t have time to help everybody individually because I’m working with my clients and my own investments, developing deals for myself, but if I can put something on there and then it can stay on there 24 hours a day, seven days a week, and thousands and thousands of people can read it… So I’ll usually try to answer questions or put information on there that people find useful.”

Biggest Mistake Joel Has Made So Far In Real Estate – Purchasing Multifamily from Fraudulent Owner

“There was one deal one time, it was a multifamily building that I bought, it was around 20 units, and it was an owner-financed deal. It was showing that the tenants were all paying, but the owner actually took a home equity line of credit out for their personal property, and they were putting that into the units. Only two were supposed to be vacant, 18 were supposed to be occupied, and you looked through the business bank statements and it was showing that 18 of them were paying, but found out post-closing that half that money was coming from the home equity line of credit. They were taking that and putting it in like they were collecting those rents from those tenants.”

“That is considered fraudulent, but an attorney told me that basically I could take him to court and we could spend a year, a year-and-a-half of my life on it, and even if I win and collected a judgement, I’d still have to chase him for the money. I lost about $15,000 on that and spent a lot of my time, effort and energy on it. But it was a good learning experience, and I just learned from that that the residential space – I hate dealing with those types of tenants every day; it’s just not my cup of tea. I just like retail, national tenants backed by thousands of stores; it’s more passive, I can be traveling, I can do whatever and I’m not worried about bigger headaches, residential landlord laws being changed more in favor of the tenants. When you get into business landlord law, it’s a lot more favorable to the landlord.”

What would Joel have done differently? – “I’m trying to figure out if someone’s doing something fraudulent. I think I should have looked at the records more; it was many years ago, I was just getting started, and you get excited when someone’s willing to owner-finance something. I should have looked at the purchase price I was paying more, and I should have conducted more tenant interviews, and I should have looked at these files that they presented with the leases and really saw what wasn’t there that should have been there as far as the quality of tenant and the income levels, and everything else… There were probably more red flags, but at that time I wasn’t as seasoned an investor, and so it goes back to it, again — if I had had someone looking at that asset for me that had that deeper level of experience, maybe I would have never gotten into that property in the first place, because they would have known to look for things that I didn’t know to look for at that time.”

“It’s the same principle with retail – if someone’s willing to buy something, they need to use somebody or go through someone that has that level of experience that sees a hundred things, versus the three things they might be looking at.”

Click here to listen to the full interview with Joel and learn how to lease property to large commercial tenants

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Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.

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