June 21, 2019

JF1753: Last Week's Best Ever Lessons #FollowAlongFriday with Joe and Theo


Joe is sharing three of his favorite lessons learned from interviewing Michael Sjogren, Nate Palmer, and Marco Santarelli. We’ll hear about managing short term rentals, eating healthy and working out, and how to find the best real estate investing markets. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“Use a ring doorbell camera and wifi locks”


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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff.

Well, Follow Along Friday, we’ve got Theo Hicks… Theo, hello sir.

Theo Hicks: How’s it going, Joe?

Joe Fairless: It’s going well, and today we’re gonna be talking about three of many lessons that I learned from last week’s interviews. As a refresher, I interview all the interview guests on Thursday, so I do a bunch of interviews on Thursdays of every week, and here are just three lessons that I learned from those conversations. Ultimately, the purpose of this episode – like all episodes – is to help you with your real estate endeavors; the purpose of this episode is to just recap some of the things I’ve found really interesting, and give you a sneak peek of what’s to come for these episodes that have yet to be released, and they will be released over the coming months.

First one, we’ve got Michael [unintelligible [00:02:01].22] He’s the guy — if you want to learn short-term rentals, he gets in the weeds of how to run a successful short-term rental business. I’ve known Michael for maybe 3-4 years or so. The interview that I did with him — this is the first time that I’ve had him on the podcast, but the interview I did with him, I knew about what he was doing going into the conversation, and I was even more delighted hearing him talk about short-term rentals than I thought I would be, and I had high expectations going into it. Very solid information if you’re looking to get in short-term rentals, or looking to enhance your income stream from short-term rentals.

Here are five tools that he gave us to manage short-term rentals from long distance. So if you have short-term rentals that aren’t close to you, or if you are planning on buying short-term rentals that are not close to you, or even better, if you have short-term rentals that are close to you, but you wanna treat them like a  business and you want to put in a process so that you don’t have to do the work yourself, then here are five tools that he gave us. He gave us a bunch of information during the interview, but here are five tools he gave us to help you manage your short-term rentals effectively.

One, ring security camera. He says he uses a ring security camera so he can see when people are leaving and entering the house. He does not put a security camera inside the house; that is creepy for a short-term rental. But outside, on the doorbell area, that’s where he’s got the ring camera, som that’s number one.

Number two, Wi-Fi locks, so he gives a code to the people renting; they have access via that code. That code expires after a certain point in time. I asked him specifically what company he uses, and he says August Home. He says it’s a little pricey, but the quality is really good.

Three, NoiseAware. It’s an app, but it’s also hardware that plugs into an electrical outlet of your short-term rental property. He said it looks like a Glade Air Freshener. So it plugs into there, somewhere in the house where you think the noise would likely get really loud, like a living room, or outside if there’s a hot tub and people are partying out there… Just so you are aware of when the noise gets to a certain level, or gets past a certain level, a threshold.

He says he’s only had to do it three times, where he’s reached out to the short-term rental residents and said “I’ve got a complaint from the neighbors, just as a reminder to please keep it down at a reasonable level.” And I asked them “How do you know what level to set it at?” and he said “This NoiseAware app has certain guidelines for how to set it.” That’s number three.

Number four, for pricing your short-term rental – you probably know about this already if you’re in the short-term rental business, but he says he uses PriceLabs.

Number five, for turnover and cleaning he uses TurnoverBnB. That’s for turnover and cleaning, which I imagine is the biggest headache. I don’t have any short-term rentals, but I imagine it’s the biggest headache – getting the unit turned over, since you’re doing it on such a frequent basis. But when you have a service that you’re using, then it sounds like it’s pretty effective in managing that process.

So those are the five tools that Michael [unintelligible [00:05:45].28] gave us. Michael’s website is OccupiedNow.com. He’s a very, very good resource for short-term rentals if you’ve got any questions, or if you’re looking to learn more.

Theo Hicks: Yeah, and just to add one thing and then we can move on to the next point… The first Best Ever debate we ever did was with a short-term rental expert, Sue Hoyuela. If you go to YouTube and type in “Best Ever debate Long-term rental vs. Short-term rental”, or I just google “Joe fairless short-term rental debate”, that will come up. It’s about one hour long, and we kind of just go back and forth based on five criteria, determining what strategy wins out long-term, long-term versus short-term rental. I learned a lot from that conversation, and I’m sure you will as well.

Joe Fairless: What’s the answer, which strategy wins out?

Theo Hicks: Like all strategies, it depends. [laughter] It depends on what your goals are, it depends on how much time you have, it depends on where you’re at in your business plan… Obviously, the biggest difference between the two is the profitability. Short-term rentals have crazy high rents. If  you buy, say, a single-family home, you could probably rent it out as a short-term rental for 3 or 4 times more in rent… But obviously, there’s also a lot more expenses. I think she was saying how management fees can get up to 20%-25%, for people that are managing your short-term rental portfolio. So it kind of just depends on what you wanna do. Short-term rentals is not something that I personally want to do, but it’s definitely a very profitable strategy… Especially if you’ve got something already. She was mentioning how she started by converting the garage or a shed in her backyard into a one-bedroom, and rented that out and made 60k/year off of that. That’s kind of how she got into it, and then grew a whole business around it.

Joe Fairless: Oh, absolutely. What a great way to create income into something that didn’t already have income, like your primary residence. A lot of people wouldn’t be okay with renting out your primary residence, and I am in that category now… But I’m in a different stage in life. Before, if I didn’t live in New York City during my single days, and if I didn’t rent an apartment in New York City, then if I was living say in Texas and I had bought a house right out of college, and I was living in it, then I’d be all for that, because it covered my mortgage, and then I would basically be having someone else pay for my mortgage, and I’d be living mortgage-free.

Theo Hicks: Yeah. It’s kind of similar to house-hacking. If you don’t like house-hacking, then you’re probably not gonna rent out a room in your house to someone, Airbnb style.

Joe Fairless: Yup. Alright, the second thing I wanna mention is a gentleman named Nate Palmer. He coaches entrepreneurs to become unstoppable by (I love this) weaponizing their nutrition and training. He’s got a podcast called “The Million Dollar Body Podcast”, and he’s the author of Passport Fitness. You can probably guess what we talked about – that is nutrition and fitness. The reason why, clearly it’s relevant to us as real estate investors and entrepreneurs – we’ve gotta have our body right in order for our mind to be right. We’ve got to have the energy to sustain all the stuff that comes at us during the day.

What we talked about is nutrition primarily. My conversation last Thursday – about a week ago – has influenced what I’ve eaten since last Thursday. Here’s what he suggested – and he goes  into it in more detail in our interview; I recommend listening to it, as well as other things… But he suggests for breakfast do a high-protein, high-fat breakfast like eggs, avocado, veggies, or a protein shake. That way you are staying full and you’re not having, say, a banana or something that peaks your sugar level and then you crash later. And again, I am summarizing it from an amateur’s vocabulary and perspective, so all you nutrition people who have studied this a lot just bear with me… But I know I have the general concept down, but I might use different words that aren’t in place, that shouldn’t be there. So that’s breakfast.

Lunch is, again, high-protein meats, eggs, lots of vegetables… He suggests eating lighter for lunch, limiting or not even having carbs, as you’ve noticed, for breakfast or lunch, because he says the carbs make you feel more full, and you can get more lethargic… So on your salad, stay away from croutons or creamy dressings, and instead get a vinaigrette or olive oil.

Then for dinner, he’s like “You know what, enjoy your dinner.” He said most people suggest not having carbs for dinner, but it can help you sleep, he says, because it makes you more lethargic, and it can actually be a sleep aid… So he suggests for dinner have a carb, a protein and a vegetable.

What I’ve changed from my diet for the last week is instead of oatmeal, which I would have for breakfast, I’ve had a protein shake. And it’s a chocolate protein shake, so it’s delicious… [laughs] And you know what, Theo – it’s in this mug, that you and your wife gave me.

Theo Hicks: That’s awesome.

Joe Fairless: I don’t drink coffee, so I was like “Well, I don’t know what I’m gonna do with this mug” whenever he gave it to me, but my wife Colleen brought in the shake with the mug, and she’s like “Well, if you’re talking to Theo today, tell him and show him the mug that you’re drinking out of.”

Theo Hicks: That’s really funny.

Joe Fairless: So thank you, Theo, for the mug, and thank you, Nate, for the insight. He also said when you first wake up, have a bunch of water; I said “I’ve got that box checked, Nate. I have a liter of water with  a scoop of wheatgrass every day when I wake up”, and he’s like “Good job, Joe”, and I pat myself on the back.

So those are his tips. Theo, you use to be really heavy in cross-fit, you used to be the golden child of cross-fit, and you’re really strong and athletic, so what are your thoughts about this?

Theo Hicks: Yeah, when I saw this in the outline, I was excited to talk about nutrition. I entirely agree with everything he said. The biggest takeaway out of this, for sure, that you want to realize – and this kind of goes against what we learned growing up, for sure – is the carb question. And again, all this really depends on how much you’re actually working out. If you’re working out a ton, then you’re going to need more carbs than someone who’s not necessarily working out, like all of their workout just consists of walking.

Back when I was doing cross-fit insanely, I did the keto diet. I don’t do it now, but I should. I think for the normal person the keto diet is amazing, especially if you’re trying to be very efficient with your time, because you don’t need to eat as much. But I’ll go into that in a second. But yeah, you don’t wanna eat carbs, definitely not for lunch. For breakfast it’s not as big of a deal, but for lunch, you’ve already been awake for a while, and most people, when they get that 1 or 2 o’clock crash, it’s because of what they ate for lunch, it’s because of all those carbs. The way carbs work is quick energy up, quick energy down, whereas protein and fat are a lot slower, so it’s more of a consistent burn, so a consistent energy. [unintelligible [00:12:47].18] For dinner, in general, you wanna avoid sugars. I was having a conversation with someone last night, how he lost 65 pounds and literally the only thing he changed was cutting out sugars. He didn’t work out… He was very overweight, but he didn’t work out at all. All he did was cut out sugars.

So if you’re overweight and you want to lose a large amount of weight, and you don’t necessarily want to have to work out for an hour a day, if you just cut out sugary drinks, desserts, things like that, you’ll be fine.

But I did want to mention the keto diet really quick. This is like a newer, fad type diet, I guess; people talk about it a lot in the news now, but essentially it’s 80% fat, 15% protein and 5% carbs. Again, as Joe mentioned, I’m not a nutritionist, neither are you, so this is just from what I’ve researched… But essentially, you convert your body from being a carb burner to a fat burner. So rather than burning carbohydrates, burning glucose, you burn fat, ketones instead.

I did this diet for a month, and again, I was working out an insane amount, so it’s not good if you’re working out for like three hours a day like I was… But I would literally drink a bulletproof coffee for breakfast, which is just coffee, some sort of oil you buy, butter, heavy cream… I would drink that and I wouldn’t eat again 2-3 o’clock in the afternoon. I’d have a lunch, and then I wouldn’t eat again until dinner. So I could literally work — I woke up, it’s two o’clock, without having to stop… And the way that you feel – you feel a lot different. You’re very energized, everything is super-clear. It’s kind of like a euphoric feeling.

Now, I got really sick because I didn’t do it properly. If you don’t completely convert your body to burning the ketones, then your body is gonna keep looking for carbs, and since you’re not eating any, you’re gonna get sick. It’s called the keto flu. Plus, the amount I was working out, I needed the actual carbs for those faster workouts… So I stopped doing it. But I’ve kind of been slowly reintroducing it now, just because I remember how good I felt and how energized I was.

I’m gonna try to find the book before we get off when you start talking again, that I read about it. That goes over exactly how it works, why you should do it, and then how to actually do it, and some things you need to buy, like [unintelligible [00:14:49].14] to make sure you’ve got ketones in your body, and things like that.

Joe Fairless: And just for the record, since this conversation did get into nutrition… My personal belief is eating more plants is always the better approach than anything else. That’s my personal belief based on other stuff I’ve read. Alkalizing your body, and having more of  a plant-based diet. So that’s my belief, and that’s what I think is the best – salad over other stuff; have more greens, and then have some meat, and then whatever else. Those are my thoughts on it, but everyone’s got different stuff, and certain things work for certain people. I’m in a territory that  I know not a whole lot about, so I’ll move on to real estate.

Alright, Marco Santarelli… He is an investor who has been on the show multiple times before. He has a company called Norada Real Estate Investments. They provide turnkey investment properties. If you’re on the West Coast, you probably heard of his company, know Marco or know of Marco. I’ve interviewed him episode #111, #1012, #1425. Those three episodes. And during the most recent conversation he talked about the three kinds of markets. I talked to him about how do you find and invest in the best real estate markets, and he talked about “Well, the best real estate market is relative to the person who is defining the word ‘best’, because it’s based on what they’re looking for and what they need in their own portfolio.”

He talked about there’s three types of markets: 1) cashflow market, 2) growth market, and 3) hybrid market. He gave some examples. He’s like “Okay, cashflow market: Memphis, Birmingham. Growth market: Atlanta, Dallas. Hybrid market: Indianapolis, Chicago, Jacksonville.” He said markets shift from one category to the other category over time, and I think it’s just important to look at our investments in that way, because even if we’re not looking at markets in that way, because even if we’re not looking to invest in a turnkey property, it is interesting to look at the way he’s categorized it. I did from the perspective of our multifamily investments, and we target growth markets with our value-add strategy; and the reason why we target growth markets with our value-add strategy is because those markets are dynamic enough that allow us to get the rent premiums that we’re achieving on the renovated units. That’s why Dallas is a  growth market, Atlanta is a growth market — we’re not in Atlanta personally, but we’re heavy in Dallas.

The cashflow markets, I would imagine – he didn’t mention this, but I would imagine Cincinnati would be a cashflow market; I know he wouldn’t put that as a growth market, and he probably wouldn’t put it as a hybrid, so it’s probably cashflow.

At Ashcroft Capital we don’t buy in Cincinnati, at least not now, even though I live in Cincinnati. The reason why is because it doesn’t have the dynamic fundamentals where Cincinnati is just getting jobs left and right; employers are not flocking to Cincinnati, and they’re also not leaving Cincinnati, but it’s just a steady as she goes market.

As apartment investors – because I know we have a lot of apartment investors who listen to this podcast – take a look at how other people in our industry are defining markets or are investing, because those lessons can certainly be applied to what you’re doing as an apartment investor… Because maybe, if you are going to invest as an apartment investor in a cashflow market like a Memphis, or Birmingham or Huntsville, it could work out; however, you’re gonna need a competitive advantage on the construction front to really make sure that your costs are lower, or some sort of overhead is lower than the competition, and that way you don’t have to get as high of rent premiums and you get a similar spread… Or you’re a long-term holder of those properties and you don’t need as high of projected returns over the short-term as you would if you were in a  different market and had a different set of investors.

So it’s interesting to think about, and I find it interesting to talk to people who are not doing exactly what we’re doing, but whose lessons they’ve learned from doing what they’re doing, in this case turnkey investment properties – it can be applicable to apartment investors.

Theo Hicks: Yeah, there are a lot of different market reports out there that do similar categorizations. One I’m looking at right now – and again, this company bases it off their own criteria, but they will categorize markets by expansion, hyper-supply, recession and recovery. This is a yearly report, and they base it off of vacancy rates, new construction absorption, employment growth and the rental growth rate.

Kind of similar, a little bit different, but that is the IRR… I think it’s Integra Realty Resources publication. If you just type in “viewpoint commercial real estate trends report IRR”, that will come up. I’m not sure if they have their 2019 one created yet or not, but I do know they have the 2018 one at least… And again, it does it based off of hyper-supply, expansion, recession, and one other category.

Joe Fairless: Cool. Good stuff. What’s that book – did you find that book?

Theo Hicks: No, I couldn’t find it…

Joe Fairless: [laughs] You sound like you lost your puppy dog.

Theo Hicks: It was a really good book… And you could just find any book on the keto diet. But as Joe mentioned, test out different diets, and whatever works for you, works for you.

Joe Fairless: Alright. What’s next?

Theo Hicks: Trivia question time. This is the month of the whacky real estate laws… Last week’s question was – in Hawaii it is actually illegal to perform yard work at your home on Sundays, so the question was “What other state has the same law?” I think you said Arkansas…

Joe Fairless: Yeah, I think I said Arkansas.

Theo Hicks: The answer was New Mexico.

Joe Fairless: Oh… It was not on my radar.

Theo Hicks: The reason why both of these states have this law is in order to reduce conflict between neighbors on Sunday. That’s the justification for that law.

This week’s question – and I’m realizing I should probably get a little more specific on these questions, so people have a chance of getting them right… What North-Eastern state – so this is again gonna be  a state question, but I’m putting it into the North-East, thus reducing it from 50 to 10 or 15… So what North-Eastern state has a law that says you are not allowed to have  a fence that is taller than six feet?

Joe Fairless: The whole state?

Theo Hicks: The whole entire state. You cannot have a fence that is taller than six feet.

Joe Fairless: I’m gonna guess a state that doesn’t have a lot of farming, because if they do have farming, they’re gonna have to keep out the wild animals… So now I’ll go with Rhode Island. Maybe there’s not a lot of farming in Rhode Island. I think it’s the smallest state… I was just talking to an investor of mine who lives in Rhode Island, and he said it takes 45 minutes to go from one side of the state to the other.

Theo Hicks: That’s definitely a very small one. So the first person to get the question correct, either in the comments of the YouTube video below, or if you email info@joefairless.com – the first person to get it correct will get a free copy of our first book.

And then lastly, the Best Ever Apartment Syndication Book review of the week – if you buy the Best Ever Apartment Syndication Book, leave a review, not only will you receive all of the free resources that come along with the book, but you’ll also have the opportunity to have your review read aloud on Follow Along Friday.

This week’s review comes from Hunterlock, who said:

“This book is overflowing with actionable information for investors. For example, some books might say ‘Do a market analysis’, leaving the reader feeling like they need to go get a degree in real estate markets to accomplish their goals. Instead, Joe and Theo’s book walks you through the process of doing that analysis for yourself. That concept of actionable advice is present in all the subject matter covered, and is the main reason I say that this book is a must-have for anyone serious about being in the game.”

Joe Fairless: Hunter, thanks for that review. I’m glad it was helpful. Best Ever listeners, I enjoyed our conversation. I hope you got a lot of value from it, and we’ll talk to you tomorrow.


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