BiggerPockets Real Estate Podcast - 121: Creating the IDEAL Real Estate Investing Business with Andrew and Phillip Syrios

Episode Date: May 7, 2015

In this episode of the BiggerPockets Podcast, learn how to build an incredibly successful real estate business using the “IDEAL” system. Andrew and Phillip Syrios have built an incredible rental property business in just a few short years and today they’ll share all their best tips so you can do the same. Discover the truth about property management, getting dirty, working with family, rentals, flips, and more! This episode is destined to become one of the most talked-about (and fun) episodes in BiggerPockets Podcast history! In This Episode We Cover: How Andrew and Phillip “get things done.” How the brothers started in REI Flipping 200 houses… impossible? How discipline has helped them buy properties What “IDEAL” real estate investing is… and why it matters The truth about depreciation How to find the true value of properties Tips for newbies on getting started Working with private lenders to fund deals The 4 pieces that need to work in order to have a good buy and hold investment The most important things to know as a property manager Running a family business And SO much more. Links from the Show: BP Podcast 117: Maximizing Productivity to Get Things Done with David Allen Buy & Hold Real Estate is the Ultimate Investment: Here’s Why (blog) How to Buy a Small MultiFamily Property: A Step by Step Case Study The BiggerPockets Book on Flipping Houses BiggerPockets Forums Books Mentioned in this Show Getting Things Done: The Art of Stress-Free Productivity (revised edition) by David Allen Brandon Turner’s The Book on Investing in Real Estate with No (and Low) Money Down The Book on Estimating Rehab Costs by J. Scott The Millionaire Real Estate Investor by Gary Keller The Landlord’s Survival Guide by Jeffrey Taylor How to Win Friends & Influence People by Dale Carnegie Great by Choice by Jim Collins Good to Great by Jim Collins Tweetable Topics: “The number of houses you flip is not that much important, the main thing is how much money you made.” (Tweet This!) “Grow in a sustainable consistent manner than trying to get from here to there in a snap of a finger.” (Tweet This!) “Deferring gratification and being able to see the long run is what buy and hold is.” (Tweet This!) “Every property has some sort of value.” (Tweet This!) “If you hate working, then nothing’s going to work.” (Tweet This!) “You’re only as good as your management.” (Tweet This!) “If you’re the property manager, then you should be the good guy and always on their team.” (Tweet This!) “Success builds on itself.” (Tweet This!) Connect with Andrew Andrew’s BiggerPockets Profile Andrew’s Real Estate Website Connect with Phillip Phillip’s BiggerPockets Profile Phillip’s Youtube Phillip’s Twitter Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast, show 121. And so we're trying to build a company that can sustain that wealth for us where really it's just we're creating opportunity with the wealth we're building. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online. What's going on, everybody? This is Josh Dorkin, host to the Bigger Pockets podcast here with Brandon Turner.

What up, Brandon? I'm coming to your house tomorrow. You ready for me? I am absolutely not ready for you. Good. Go get the bed ready downstairs. My little, like, you know, I got your little guest room next to the bathroom. It's a nice little place.

I like hanging out there. Thanks. Thanks, man. Yeah, we're going to have a good time in Denver. We are. We are. forward to having you in town, man. Thanks. That'll be fun. It'll be fun. Yeah, most people, maybe the people don't know that, but I actually live on the West Coast and Josh lives in Denver.

And so we don't get together that often. I don't know what to reach four times a year. Yeah, something like that. Something like that. But yeah, man, very, very exciting. We're looking forward to it. We're going to knock out lots of important bigger pockets business while you're in town. So, yeah, it should be good, man. Should be good. But speaking of good. This show. You've got a pretty good show today, don't we? This is one of the best. I'm going to say that. One of the best we've ever done, I think, in terms of just rock, content, helpful tips to help anybody, no matter what your level is. A lot of fun.

A lot of fun. These guys are hilarious. And yes, guys, plural. We got a couple guests today. Yes, yes, yes. So let's kind of get to the business and then we'll get to the show. So why don't we start with today's quick tip? Today's quick tip is if you have read either the book on flipping houses, the book on

estimating rehab costs or the book on invest in real estate with no end, low money down, do us a huge gigantic favor. If you can see me, I'm on my knees asking, not really. But do us a favor and leave us a review in Amazon. We're really trying to get a bunch of reviews. We want to get all three of those books over 100 reviews right up for this podcast. So go ahead and do that for us. That would help us out a ton.

And it's a good way to support Bigger Pockets without having to do much. Awesome. Good job. Good job. Do it. Do it. Just go to Amazon. Or if you want to know how to leave the review, BiggerPockets.com slash no money review. is actually the page

that there's a description exactly how to do that. So BiggerPockets.com slash no money review. Nice. All right. Cool. All right, guys.

We've got two brothers who are enthusiastic, intelligent, and they're rocking it. So these two guys, the serious brothers, Andrew and Philip,

started investing, I believe, in Oregon and ended up moving out to the Kansas City area. and they've done everything from flipping to buy and hold. And they just got some really great insight.

They're young, but their dad's been doing this since, since, you know, the 80s. And, you know, the knowledge has definitely been passed along. And there's a ton of great stuff here. And like you said, they are really rocking it, like in terms of hundreds of properties that they're buying. Like, it's crazy. Yeah.

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or guessing market timing. It's about building durable, tax-aware wealth over time. Learn more at biggerpockets.com slash bam. Did you know your house gets bored when you leave? I can't actually prove that, but it probably misses out on the action, the footsteps, the late-night fridge raids, Yeah, when you're gone, your place is basically on unpaid leave.

It's sitting there in the dark thinking, I could be contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation, spending money like it's a sport, while your staircase at home is fully capable of sending your income upwards. Here's the twist. You can go on a trip and actually earn money. Airbnb makes that possible with the co-host network.

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You travel, your house works. Everyone wins. If you're ready to host but could use some help, find a co-host at Airbnb.com slash host. So with that, why don't we bring in Andrew and Philip? Welcome to the show, guys. Good to have you here. Thank you.

Good to be with you. Thanks. Yeah, we're glad to have you. Can I call you Andy and Phil? Or we are you not going to be, Andy. Are you guys, show me, Drew. No, we're not twins. But no, we're not twins.

Half of the people think we look nothing alike and half of the people think we look identical. That's true. That's true. Who's the uglier one? The uglier one. That would be you, Brandon. There you go.

There you go. Thank you for answering that one. Yeah. You save them there, Josh. All right. So today on the show we're talking to, obviously, both Andrew and Philip, Andy and Phil, as their friends call them. And we're going to talk about you guys as like journey, like how you got started, all that good stuff. So, you know, I don't think we've ever done, like, had two brothers on the show, have we?

This is the first time. First time. First time. It's a precedent. It is. All right. Let me start with a question we've never asked before. How did you guys get started investing in real estate?

Hold on, hold on. Before we go there, I just want to say, Andrew was in town here a couple weeks ago. And, you know, he hit me up. He's like, hey, Josh, I'm going to be in town. And I happen to have some time. He's like, let's link up. We linked up. And he was in town for this thing.

It was a conference called Getting Things Done. And the reason I bring that up is to plug a show that we previously had, show 117 with David Allen. the author of getting things done. And you guys obviously haven't heard it because that show hasn't yet aired. That wouldn't be a problem. It would be, but it was a great show.

And since you are a practitioner of GTT, I'm assuming, Andrew, I would love to just really, really quickly hear from you about how was the conference and would you pick up anything cool or, you know, was it worthy? Yeah, the conference is great. It was just eight hours of just going through every step that you need to do to put together his system.

And a system is so, we like it so much because it's so flexible. Like I use it, I have a, I use Evernote, so I have like an online version. And Philip uses just a bunch of notebooks. You can have just stuff that you carry around, but it outlines everything you have to do. It takes it out of your head. And so it's no more forgetting things. You have a good idea of how much you have on your plate. So you can throw things to someday maybe that you just don't have time for at the time.

Because a lot of people, they just stack up all these commitments and they end up doing everything badly or half-heartedly. The system just makes it so easy to know, this is what I have time for. These are my priorities. These are the things I need to do. It just makes everything more efficient. There's actually been studies on like willpower and it looks like using this system actually increases your willpower because there's less, you have to keep in your brain and just

using that mental energy takes up your willpower. So how much do you actually, I mean, like, because I read, you know, getting things done, and I do probably 60% of what I should be doing to implement it the full way, right? So how much do you actually do on a big scale? I use it basically every work item that I do comes from getting things done on some level. I have like eight notebooks that have all my lists on them. And I basically go through, you know, I have a list for things that I have to do during the workday. And during the work day, I just look at that list.

and I know to get things done off of that list. And then I have another list of things that I need to get done, but I can do them after work if I need to. So I'm not stressing about those things. What do I have to get done before the work day is over? What do I have to get done after work? I just know, and I can see it right in front of me, and I don't have to worry about it.

So my work life completely revolves around it currently. My home life, I don't have that completely integrated yet, but I'm working towards that. And the great thing about getting things done is you're constantly building it and improving it with the weekly review that you're doing of like what's working for me, what's not working for me, how can I make it better, how can I improve the workflow of my life, and how can I not stress about all the

stuff that's going on all the time? Awesome. Awesome. That's great. That's great. We highly recommend it. Awesome, guys. And normally we do start with you guys, but because, you know, this just happened and we just talked to him, I thought it'd be really cool to kind of hear from a firsthand experience. So thank you. So back to, back to Brandon's question. My precedent question. How did you get started investing in real estate? We got started from our father, actually. Our dad has been investing in real estate since 1981. And after I graduated the Evo, I joined up with me.

He had this internship. He had like 10 students from the University of Oregon and Oregon State. It was just a complete mess, but it was very, very educational. And we did all sorts of things from like marketing to trying to find sellers to putting out offers. I don't know how we kept it organized, but it was quite an experience. and after that I got into him with fixing flip in Oregon. We flipped something like 200 houses between 2006 and 2010 in Eugene Steyland, Portland, Oregon. And then it kind of tanked a little bit.

We were doing a lot of short sales at the time, and Banks just tightened it really hard. They were giving them away at one point, and they just stopped. They were given no more than the BPO. and then in addition to that there was the first time home buyer tax credit and that went away and so we couldn't we could have buying very well we couldn't sell them very well and so we came out to the Midwest where we have a lot of extended family and we looked around and the prices were so much more reasonable than they were in Oregon which is like you know it's west coast it's California light and it just was weird west coast people exactly exactly which we are no longer

part of, I think. Maybe, I don't know, we're kind of in the middle. Yeah. And we've just been buying and holding in Kansas City ever since. Cool. Cool. So 200 flips in Oregon. I mean, you know, that is not an insignificant number. Clearly, you guys didn't just walk up and start doing it. You had your dad who had the background that'd been doing it since,

you know, was it Carter? Or somewhere around there. Lincoln. Yeah, Lincoln, maybe joined Washington or something. Yeah. The articles of Confederation, I think. There you go. There you go. So how does, I mean, you know, how do you do 200 flips? I mean, it's not you, you two and your dad.

I mean, you have to have systems in place to be able to flip 200 houses over a period of 10 years, over 20 years. Philip wasn't in the whole part of that. I didn't do any of the play. Oh, Philip, then get the hell off the air. No part. That's what I'm saying, right? We had, we brought on, I think, six different, six of us came on. from the internship. There are two internships and a total of six people came on. And so we opened up

two branches and then sort of a third. The Salem and Portland were kind of a hybrid branch. And we just went pretty crazy with marketing. We bought some on the courthouse steps. We made some offers on REOs, but we'd sent out letters and all sorts of things. And then when we were really doing the short sales, we were getting in touch with the agents who had, you know, because that was back when, that was back when everybody and their brother was underwater on their house. And so it was not hard to find agents who had listings and we were trying to purchase those properties and we could wait as long as we wanted it. And whereas the normal home buyer is going to wait maybe two months to buy a short sale, process can take four or five. So we're willing to wait. So we had all sorts of properties under contract. The one thing is we had too much overhead. So we flipped a lot of houses, but the number of houses you flip isn't that important. The main thing is how much money you made. And we didn't make some money, but we didn't make nearly as much as we should. have that much volume. Well, so I'm still kind of trying to get over the 200, right?

So how many houses might you have been flipping at any given time? You know, how many crews did you have? I mean, really, just trying to understand. I mean, it seems like an absolute, you need to have a fairly sizable organization to manage something of that size. We did. We did. We had a couple of crews going and some employees doing work as well.

of what we were doing is more like whole tailing. Like we would do some work to it and then sell it. But usually these houses weren't huge rehabs. They were people, they were just homeowners who had fallen, you know, the crisis that hit, and they had fallen underwater. And so the houses didn't need to be gutted. And the banks were so desperate to get rid of these when we were doing the short sale until they decided that they weren't that desperate to get rid of them.

But we could, that we really had a lot of volume without having to do a ton of construction. We had quite a bit going. But we usually had, you know, close. 10 projects we were working at the same time, 10 properties. Some of them would not, the BPO wouldn't come in, the bank wouldn't agree to it. We usually had something like 10 under contract. That was just in Eugene. Salem and Portland were doing their thing as well, which I was not a part of it. Interesting. Interesting. Interesting. And one thing you mentioned a minute ago that I think we just kind of like, you said really, well, no, before that. But you said really quickly,

but what was the exact phrase you said? It doesn't matter how many you flipped. Like the volume doesn't matter. What matters? That's how much money you make. You know, I hear people all the time, especially like, you know, I don't know, gurus or whatever, you know what, people that are selling stuff are like, I flip this many houses a year. And they're always bragging how many houses they flip per year. But you sell them here. Yeah, we made this much money last year or this is how much money per house we make. Like, it's a volume thing that they, that people brag about. But at the end of the day, it doesn't really matter your volume other than, you know, as bragging rights. Well, and I think that's one of the reasons we wanted to move back into buy and hold. That's what,

how my dad, you know, built his company. He built this company on student rentals around the University of Oregon and he had a lot of success doing that. And we wanted to get back to that model and Eugene was not a prime market. You could do it in Eugene still. It was just a lot harder and we wanted to find a good market to use the power of buy and hold again. And so that's what led us to Kansas City where we now currently invest. Yeah, I would actually say we probably grew too fast. I think a lot of real estate invests, a lot of people in business in general want to get from point A to point Z, you know, as quickly as possible. Whereas when you, when you do that too quickly, your system start falling apart, you start making mistakes, your due diligence goes down.

And we probably would have been better off if we had just flipped 120 houses or something like that. So part of, I think one of the lessons from that is really to grow in a sustainable, consistent manner versus trying to get from here to there, you know, a snap of a finger. And how do you do that? I mean, you know, it's, I could see, how, hey, I picked up one, cool, and you know, you got this pipeline, right? So the volume's coming in, and it could be really easy, addicting almost to go and say, hey, I'm going to pick up on, oh, cool, there's another one that's kind of a buy. You know what, we need another property, cool, in case we don't find another one in a week.

So we're going to pick up this one. Oh, you know what, there's another one. Let's just jump on that. How do you have the discipline to not do that? And I know the answer, but I'd like to ask you for that. Yeah, I mean, discipline is actually even. harder with buy and hold in some ways because if buy and hold you have no feedback with when you're flipping a house and you're not if you don't make any money or you break even you know

you're doing it wrong with buy and hold there's a million rationalizations for why it's still work you know it's still cash flows or i think it still has a little bit of equity in it you really need to be even more diligent with buy and hold because if you don't you're going to start settling for you know worse and worse deals and just still hoping to get through with it The big thing with discipline to me is just you have your systems, your goals, and in place, and you don't deviate from them. So you know what you want ahead of time. You know you want to buy this many per month.

You know you need to get this type of deal. And if you're not getting that, then you have a big problem. You need to continually review and continually measure. If you're not doing those things very quickly, you're going to start falling to the, you know, falling to the shiny object temptation or something like that. I like it. That's smart, wise man. All right, let's move on to buy and hold because you said you got out of flipping, moved to Kansas City, and now you decided to buy and hold there. You had family there, so that makes sense while you're in Kansas City, even though, I don't know, moving away from the West Coast, it's nice out here. I don't know. And Kansas City? I mean, it's not Detroit, but man, I've been there, man. I mean, it's really? Oh, I love both cities. Oregon, Eugene is a great place to live, but I fall in love with Kansas City.

It doesn't rain nearly as much here. Although we do have the snow, which is no fun. It does freeze and it does boil. All right. So buy and hold in the Midwest, obviously a lot of people like the Midwest for buy and hold for that very reason because you can get a lot better cash flow.

Maybe besides this cash flow, maybe in addition to, I want to talk about kind of the benefits of buy and hold. For people listening to this show that don't, maybe aren't real up on the whole, I don't know, why would I want to rent out a property make a lousy hundred bucks a month or whatever. And deal with crappy tenants and headaches and evictions.

They're like, oh man, flipping. Yeah, flipping's way more fun. You can make 20, 30 grand and then lay on a beach or whatever. So like in your first, you guys are at least, I don't know if you're both writing or just Andrew was writing, but on the blog, on the blog, your guys' first article ever was called like, now I remember, it was like the five benefits of buy and hold. I think it was the ultimate investment ever.

If they're not doing it, there's something wrong with you. Something like that. I think. It was something like that. Yeah. something nice and catchy like that. No controversy or anything like that. It's clickbait. Yeah, there you go. So in that, in that post, you talked about an acronym, the ideal acronym. Do you mind if we run over that real quick? Do you guys remember what that was?

Yeah, absolutely. I think first, buying hold is a get rich slow scheme. It's the ultimate long game. Like just recently, our dad ran into a guy that he had sold a property to in Portland in 1985. He bought this property for $60,000 in Portland, Oregon in 1985, put a little bit of money into it, tried to do the rehab himself, and failed miserably. The market was horrible, and he ended up selling it for 70, breaking even, and he was happy to do that. Anyways, he runs into the guy that he sold it to, like, two years ago, and the guy's like, you want to hear the rest of that story.

He had the property just sold again. This was like 2012 or 2013. It's like, it sold for $950,000. 30 years. $950,000. Not even 30. It's like 20, some. Well, yeah, it was about 30.

But yeah, you're a millionaire if you bought that one house and how long? to it. So it's the long game. It's, it's about, there's this old experiment they did, it's called a Stanford marshmallow experiment. And what they did is they gave these children marshmallows. And they gave one marshmallow and they could sit there for 15 minutes and not eat the marshmallow. They'd get a second one. And so they, most of the kids failed, but a couple of them were able to find a way to do it. And once they ate the second, until they got the second marshmallow, then they checked on these kids like 15 years later. And the kids who had held off with the second marshmallow had like substantially better grades, less likely addicted, you know, be doing using

drugs and things like that. Everything about their their place in life was better. And so it's all about being able to defer gratification and being able to see the long run. And that's what buy and hold does. It is a long game and it has massive benefits. You're just not going to see them immediately. I love that. That's great. You know, I wrote an article a long time ago, and we talked about on the podcast before. Like my, I always joke about how when I eat Lucky Charms, I eat the cereal first in the marshmallow later. And there's something very telling

about that type of personality, I think. So hopefully that means I'll be successful, you know, hugely successful someday. We'll call the Lucky Charms experiment. There you go, exactly.

I want a blog post co-written by Andrew and Brandon on the marshmallow on Lucky Charms. Well, Josh is the guy, Josh is going to like... Harvard's doing it next. Yeah, we'll let them take care of.

When Josh is a guy that goes and takes my marshmallows and then just eats them and throws a cereal on the floor. You're cereal unless... Shut up. This is hypothetical. Okay.

All right, move back. I think we've moved way off here. Let's get back to the acronym. Ideal. I'm working on this podcast. He's too money to manage. Ideal. Is for ideal.

No, what is I for? I is for income. Income is basically cash flow in your pocket. You know, when you get into a buy and hold investment, the whole point of it is that the rent is more than the mortgage and the expenses on the property. So if you have a good buy and hold investment, it's putting income or cash flow into your pocket every single month, which that's what people are trying to do typically when they're doing a buy and hold investment.

If you have an investment that you have to pay every month, it's basically a company that's losing money, which is no good. So if you buy a good buy and hold investment, you have income or I in your pocket every single month. That's what I stands for. I'm going to just switch back and forth. Yeah, let's do that. You guys good?

I mean, you guys got some money? We got it. We got it. Yeah. Dea's depreciation. So that's basically every 27 and a half years of property is the taxes depreciate from the value bought it through nothing. And that counts as a loss, you know, a quote unquote loss to the IRS. You have to ride off that income. So you end up not really paying any income taxes. I don't think the last time I think our dad has paid income taxes was like 1980 something. I'm glad now all the people who are in the IRS who listen to the show. We pay plenty in property taxes. We pay money in property taxes. I'm just checking. Because of the depreciation of all his assets, the IRS sees him losing money every year,

so he doesn't have any taxable income on an earnings basis. So that's just a benefit that Uncle Sam gives real estate investors. Can you guys very, very quickly just explain in even more layman's terms what depreciation is? Because I think a lot of people don't fully understand it. Give me just like a really, really, you know, bread and butter example. Yeah, so basically is that

every real asset, everything breaks down over time, it wears down over time. So the IRS thinks like, okay, if you have a car, it's going to break down over a certain period of time, you bought it for this amount, it's not going to be worth the same next year. It goes down in value. The same is true with houses. The IRS considers them going down in value,

but that's not how it works in real life because one, you just put maintenance into the property, you do the capital repairs that you need to. So you actually improve the value. It goes up, actually, I think, slightly faster than inflation. And so the IRS is considering that house as if it was depreciating. It was wearing down to the point where it would be worth nothing. It considers the asset to be worth, it's going to be good for 27 and a half years. So one 27th and a half of the value of that property, you get to write off

as a loss. So if you made $50,000 in taxable income and you had a house that depreciated for what's one 27th and a half of $100,000 is like $3,000. So you only have to pay income taxes on $47,000 instead of the full $50,000 that you actually made because that asset is depreciating. So you have to make tax on that last bid. You guys are awesome. I totally put you on the spot on a question that wasn't the easiest question to explain. I think you guys did an awesome job. So thank you.

I have a follow up, Ben. Why 27 and a half years? Let's explain that one. Someone decided to make it really complicated with the math. No reason for it. We need to get that guy. Whoever came up with 27 and a half. I got this email.

One of those. chain mails, you know. It was, uh, it was about, um, why train tracks are separated as far apart as they are. And it goes back to like the Roman era. And it's like, I don't know if that's true, but it's like, what the hell are you talking about train tracks? We're talking about depreciation. Oh my God. I feel like I'm watching house of cards or something. I was just talking about non-sequitur stuff. All right. We're going back. We're going to E. Okay. Let's go to E. Okay. So E stands for equity. And with a typical buy and hold investment, you're going to get a mortgage from a bank, which is how you typically finance the property,

not always, but typically. And if you get a 30-year mortgage, the principle on that mortgage goes down over time. If you see an actuary charge just goes down, or an amortization chart, it goes down. And so over time, it's kind of like a savings account almost. You're building up your equity in the property over time. And like Andrew said, it's the ultimate get-rich slow scheme. And so over time, your equity position in the company just are in the house just increases, over time and you have this asset that the loan is really small by the end of it and your equity

position is really large. So you can either sell it and not have to pay back much on the loan that you've paid down or you can refinance it and pull out the equity you have through another loan. A is appreciation and properties generally go up slightly fast than inflation. I think the national average is like for the last 30 or 40 years is like 4.5% and inflation is like 3.5%. So you have the property is increasing in value and your principal is going down at the same time. So you almost have this exponential growth in the amount of equity on the property over the long period. Now, does that hold true?

So if I bought a property in Detroit 30 years ago. Right, Detroit was in Detroit? Today, I'm still... I promised Ben Lavevich we would pick on another city. We're going to pick on Ohio. We're going to pick on Ohio, yeah. No, it's not through everywhere. You've got to pick the right spots.

It's just a general thing where over time, if you look at the history of appreciation in America, over time it has gone up about four point something percent. And it's done pretty well. Now, every market does not go up every year. And we obviously saw that in 2007, 2008. So it's not something to speculate or guess what's actually going to happen. But if you're in it for the long run, a lot of people have made a lot of mistakes in real estate,

and it's been all wiped away because their properties went up in value. It's the whipped cream on top of the ice cream Sunday. Yes, yes, yes. The last one is leverage, the L is leverage. and that just you can leverage properties so much more that you do with stock market or stocks or bonds or anything like that. So if you buy property for $100,000, it goes up to $5,000, it goes up to 105. But you're only into that property for 20. And so you've made 25% on your money.

Now, you can't do that. It's called margin in the stock market. You can, but not as much, I don't think. You can do some dangerous margin, man. Well, didn't that cause the crash in 29, so we don't want to want to. cause a lot of crashes and it caused a lot of people to lose a lot of money. And I used to work for a stockbroker and I saw people lose a lot of, yeah. Actually, I mean, leverage can be a dangerous thing to get involved in because, you know,

in real estate too. Yes, if it goes down in value, it means you lost 25% on your money. But Andrew can go into this little bit more about why we think real estate kind of makes more sense than buying a bond or a stock or something like that. Yeah, there's this thing called the efficient market hypothesis. I don't think it's completely true, but it basically goes where the stock market, all the information is out there. It's easy to buy.

It's easy to sell. So the price is pretty close to being accurate. I think the crisis refuted that. But I think there's a lot of truth in it. In fact, these guys looked into these different stock brokers, and they found, like, the correlation between how successful they were year on year out was 0.01. It was like there was no correlation. It was almost just

gambling. But with real estate, since it's an inefficient market, it's completely inefficient. There's no question about it because you can find people, you can find motivated sellers, you can find banks that any property is off their books, all sorts of things like that and get the discounts that we get and any investors should try to get. And if you get a property, let's say, for 75% of its market value. So you buy it for 75% it's worth 100, the market goes down 10%.

Well, now you only have $15,000 of equity in it, but you still have $15,000 of equity in it. You've still made money from that purchase. By getting good deals, you have insulated yourself from the risk that is thereby leveraging it. And it's extraordinarily difficult to do that with the stock market or things like that. It's so much easier to do with the real estate market, which is why real estate makes so much sense in this regard. Yeah, you basically have a, like if you find a motivated seller who's only talking to you,

you kind of have a monopoly in working with that seller, and they need to get out of the property, you're the solution to the answer. They're willing to give you some of the equity to fix their problem. In the stock market, no one's that motivated. Anybody can sell shares of Google or buy shares, but no one's that motivated to get out where they're going to sell at a discount. With a house or an apartment building,

people are in that situation, and so you can get a margin built into the leverage that you have. So you take advantage of the benefits of leverage while insulating yourself and the risks of leverage by getting really great deals. Well, and it's the illiquidity of the home that gives you an investor the advantage by providing, as you were saying, Philip, the solution to somebody's problems. It's not like there's 100 people banging on their door saying, hey, I'm going to help you out of this potential problem. So awesome, guys. Really, really, really good explanation.

I very much like ideal. You know, it's an acronym. Is that what is? Yeah. It's a great acronym. Did you guys make that up or did you read that somewhere? My dad told it to me. So we'll just say he made it up.

Okay, we'll go with that. He made it up or stole it, you know. Yeah, yeah, either way. We're going to take it today. It's now a bigger pockets rule. So good job, guys. Thank you. Yeah, we're claiming it.

Do you high five? Yeah. All right. So I want to go back to your story a little bit and kind of tie in the whole buy and hold. So first of all, how many deals? I mean, like, you guys are buying buy and hold in Kansas City. How many have you done now since you got there?

We have 120 houses and I think about 89 apartment. No, about 90. Yeah, so we're close to about 200 units or so in Kansas City currently. Wow. I'm assuming you're working with your dad still on this thing. Is he part of the company, right? Yes. Okay.

The three of us are partners in the company, yeah. That's awesome. And what's the average price per door that you guys are paying? Probably about purchase or all in. Purchase. Purchase is probably in the 40s. Okay. $40,000.

45, I'd say, was probably the average right now. And what's the average property type that you guys are buying? Oh, it ranges. We try to get a good mix. depending on the area, like if it's in a really nice area, we'll buy, you know, nice area for us, we'll say. We'll buy two ones. But if it's not so nice area, we'd want to get at least a third bedroom. But anything from a two one up to a four.

So it's all houses. No, we get duplexes, fourplexes, small apartments. Small apartment complex. So we came to Kansas City looking for larger apartment complexes. This is really what we wanted to get involved in. But we couldn't find anything that really made sense to work. So we kept going down in size and we went down to fourplexes and we went down to duplexes. And we just realized this was 2011.

There was so much inventory on the market single family houses. We're like, it's easier to find four good deals that are single family houses than it is to find a fourplex. So we just found the niche that made sense to us. And we just attacked that niche. We still look for smaller apartment complexes and stuff like that, even bigger ones if they make sense. But our niche is small single family or small apartment buildings. And we just have attacked that niche ever since. Quick question.

Philip, you said you guys do two ones. You know, that's something that a lot of investors will shy away from two-bedroom one bath. Why do you guys pick those properties? Again, a lot of people think that they're not as appealing as a three-two. They aren't. They aren't as appealing. That's a plain fact. The reason we like them is because every property has some sort of value.

Sometimes that value is negative if it needs to be torn down. But every property is some sort of value. A two-bedroom one-bath house has value to it. It's not as much as a three bedroom two bath house, but someone is willing to pay rent for it. A bank is willing to refinance it. We just know we have to get it at the right price compared to other two bedroom one bath houses. And so if we can make it cash flow by renting it for enough,

we can get it for inexpensive enough price and fix it upright. We can turn that into a cash flowing asset for us and get all the benefits. It doesn't have to fit into a particular model if that house in itself works as an investment. To piggyback off that, I would not recommend flipping a two. one. I've done that. Terrible. Terrible idea. But they can cash flow really well. So I think they work much better for buying a whole than for flipping, but you still need to, you still need to have that equity that you can't sell it if you need to. So that's where we look at our equity. We need, we can, actually there's two reasons. If we want to get in our business model a little bit,

it's twice as important to get a really good deal because what we do is we buy our properties. We look for every deal we can find. Most of them actually just get off of the ML1. less REOs. We go out on property tour and look at 15, 20 houses, make offers on probably three quarters of them, get one or two. Our goal is to use more lumber in the paper that we send out on the offers than in our rehabs.

I like that. And you guys are writing like this stupid lowball offers, I'm assuming, across them. Not always. Actually, there's a house that, okay, so there's this HUD house that with that HUD had repossessed and they were selling. And they have a 30-day period that you can, only homeowners combined, but they put this property on a 30. It was a 3-2 in a good area. It was worth

probably 130 as it sat. They put it on for 32. It was just ridiculous. So I was currently living in the basement of our office because we were just trying to live by a shoestring. And I needed a place to live. So it made perfect sense. I'll buy this house as my son, you know, as a homeowner, I'll move there. So we were the 17th offer and there were still two days to go in the period. We think there was something like 30 to 40 offers. We offered 56,000. So we offered went 24 over asking. We got it and we just had it repraised. It came in at 1.30 and I think that was low. So sometimes when it's like, when it's these REOs, sometimes you have to go above asking. Often when you're dealing with, often we'll make low balls. Yeah. We make a variety of offers.

But sometimes it's not always the case that you want to go that you just, this is the asking, the asking prices should be immaterial. What is the price that you want to pay for the property? I love that. I love that. And I like how you said earlier too that, like every property has a price. I mean, a lot of people like, sometimes it's negative. Sometimes it's negative. Yeah, I was looking at one back a few months ago. And yeah, no matter how I did my numbers, in the end, I always came back to, they got to pay me about 15 grand about this house. But no, I think a lot of people when they want to get into real estate, they go look at a house.

I mean, my brother did it yesterday on the phone to me. He was saying the same thing. It's like, yeah, it looked like a good deal, but they're asking way too much. So, you know, move on. And I'm like, well, what's it worth then? You know, like, tell me the number. and if I don't know, you know, maybe it's this much. Well, okay, go offer on it.

I think they're my brother. He was a friend. I don't remember. Somebody did that yesterday. And that's, I mean, that's one of the reasons why I talked, you know, formally talked smack about D-Town was really Detroit. You know, they were selling houses for a dollar. They couldn't give houses away for a while there.

And, you know, it wasn't, it didn't behoove the average person to pick up those properties because they were worth negative money. to the average person. Actually, it's a real danger for anyone investing out of state. We've seen, it hit us, too. We made some mistakes because we took some assumptions from the West because these prices are so low, they have to be good. Or if somebody's coming from California,

we've seen Australians come in. These prices, you know, Sydney House started a million and go up. And, you know, when they see a house for $25,000, you know, $25,000 on the intersection of Skid Row and Warzone, they might not know that that's the intersection, and they buy it, all of a sudden they realize you can't keep it rented, the tenants don't pay rent, they destroy the unit, on and on. So the price of the property, it doesn't tell you what.

You need to take a look at it in its global sense. You need to value it as kind of a business investment. Like Warren Buffett is known as one of the greatest investors, you know, of our time, basically. And what he does is he goes out and finds a company like Geico, for example, and he sees that, oh, this company can make a bunch of money, but I'm going to buy it for less than it's worth. You have to think of all these houses as little companies that can make profit for you, but they're only worth how much money they can actually make you. It doesn't matter

if the house can't make you any money, it's not worth anything as a business. So it doesn't matter if it's selling for $100. If you can't make a profit from it, it's not worth anything as a buy and hold investment. It's worth the cash you could generate minus your expense. That's pretty much it. And if you can't rent something out or you can't keep tenants in there or it costs you too damn much to fix up and get rented out, then it's not worth doing. So, yeah, now that's great. All right, so for somebody getting started, how can they decide what kind of investing that they want to get into?

I mean, you guys are obviously going with this buy and hold, and I think it's a great strategy. Formerly did the flip thing. What would you tell somebody who's like, hey, you know, I'm 21. I can't get a job or hate working, and, you know, I want to do something. What do I do? You hate working. I don't know if this is going to go.

Well, thank you. That's a great point. That's a really good point. I think it all depends on what your goals are. I mean, you've got to know what you want to accomplish, and then you have to pick the model that kind of fits that, and there's different models for different types of goals. And where you start from, like, what we're doing right now is we will buy a house for,

we try to get, you know, all in for no more than 75% and less if we can do it. That 75% is a really key number, because we try to fully finance this with private lenders that we know, of various people that we've come across with. And so they'll give us a trustee on the property. And then we get fixed up, get rented. And then once it is seasoned or a bank will be willing to look at the property, not as how much money do you have into it, but what does it actually work? Go off the appraise value.

It's usually about a year when they're willing to do that. Then they'll refinance it out. You refinance it the loan. So you put in this high interest private note and it's got a cash flow there too. Then you get to the point where you can refinance it out with a bank loan. And then it's going to cash flow all the better. So that's how we do it. And it really depends.

We're able to do that because we have a network. Our dad is great at raising at finance. people networking and things like that. Whether or not that's a possibility at front, it really depends on where you start. And what your goals are, like if you have a really good income and you're making good money from a job, and you don't buy that job, maybe the best thing is to just stay working and use your proceeds to buy real estate. Or you can do a combination.

You can flip one house, use that money to live off of. Flip another house, use that money for a down payment for a house that you're going to hold and just rinse and repeat. Or if you can find people that are, that one investment, you know, you know, you know, you know, lend money to you, are willing to do so, go that route and try to borrow the money and buy the properties that way and then refinance that with the bank. And that's worked great for us. And it just, it depends. It's a hard question to answer because it's where they start. They want to make a ton of money up front. And you have a little bit of money for rehabs.

I'd start with flipping. If they want to, if they have some money or they really want to build sort of a long-term retirement, long-term wealth, I try to get into buying hold of. as quickly as possible. And one of those ways are probably the best. I love that. Yeah. I want to touch up. You talked about financing there. And that was actually my next question was how do you guys finance them? So clearly, private money is a big strategy. And what you just mentioned there was

just to make sure I'm on, I'm tracking with you here. So you buy a property. Let's say you find a property for $50,000. And you get a private lender to then fund the entire $50,000 or a good portion thereof. And then a year goes by, the seasoning requirement. You have to wait. And then you go to a bank

and they refinance that property then into a long-term actual mortgage so you can pay off the lender. Let me give you an example. Please. This is one of our... This is not typical. This is one of our best. This is, you know, not as ever... This is the best we've ever done probably with one of these houses.

I like how you guys share brands without even talking. You know what the other one's talking about. Some say that we're like genetically similar. We're a little mutated. But, okay, so we bought this house down to South Kansas City. It was early, it's actually fairly recently after we've gotten there. And they listed at 39-9 and I offered like 25. And they came down to 28, 250.

I don't even know this area very well. And I look at the comps and everything is over 100. And so I'm just like, accept. And we put about 12,000 into it. We get the loan from someone who had some extra money. I can't remember on that one. I think it was an insurance agent or retired insurance agent. And so the loan is for $40,000.

Yes, we loan us for $40,000, $9. interest the property rents for 995 so it's still cash flows really well and then we wait a year or so we get it a praise it just appraised at 105 and so now we can borrow almost just shy of $80,000 on it pay off that first and also get some pull some cash out as well typically it's not quite that good like we had another property that we were all into per was it 55 yeah another house we buy in the south part of Kansas City, we bought it for, you know, we were all into it for 55,000. We only got a loan for 50 because that's what we thought, but we went over budget on a rehab. Who's ever done that before?

Nobody except us, apparently. No, everybody's done that once or twice. It went over budget on our rehab. So we've tried to fully finance it, but we only got $50,000 on the 55 all in investment. We got a 9% interest-only loan that costs us $375 a month. We rented that one out for $775. So we still have a margin there to kind of cash flow the property. We then get an appraisal on it for $70,000 a couple of years later.

We then refinance it, refinance it for $50,000, payback the private lender of the $50,000. And we're all into that property for $5,000 of our own cash, but now we have a cash flowing asset with long-term financing in place. And so banks don't want to loan us 100% financing up front. They want us to get the asset reperforming so that it's cash flowing and it's a good asset to lend on, then they'll give us a loan on appraised value rather than just the money we have into the property. I love that. I mean, so I talk, you know, people ask me a lot, like, what's my favorite no or low money down strategy? Like, what's my favorite of all the things? Hands down.

I did not even bring up the book on investing real estate. No, but people ask me what's my favorite. And like, hands down, hands down, that is my favorite, is working with a private lender to fund the entire deal. I did that with a member I met on Bigger Pockets, actually. He funded the entire $90,000 fiveplex that I bought. I wrote about this like a year ago in an article called How to Buy a Small Multifamily Property. I'll link to it in the show notes. But anyway, bought it for 90,000. The private lender funded the whole thing. I just got the appraisal done like, I don't know, two months ago. And I got a loan now for 90,000 long term 30 year amortized loan from a bank. It paid off the lender. Yeah. And now like the whole thing

took nothing. I mean, it took a few thousand dollars of closing costs and repairs because I didn't borrow that money from him, which I probably could have. But either way, I mean, thing worked out really, really well. Now, that sounds really, really awesome. I was going to ask, what are the down, like, what are the risks of doing that? Before you guys do that, I just want to ask Brandon, so what kind of rate were you borrowing at from the private money lender and what kind of rate did you refy to? Okay, so I hope the private lender is listening to this, but because he's a bigger pocket lover. No, so it was actually a funny story. He asked me, so how much do you want to pay? And I'm like, I don't know, about 12%. And he goes, sure. And now I'm thinking

about, like, I probably could have easily said, how about 9%. And he probably would have been like, sure, probably could have said. But whatever. Like, I picked the number and I paid 12% refinanced to a 5, I think 5.125 on that. Nice. And that's a huge, huge difference, obviously. So for those people listening, I mean, you know, you definitely want to make sure also that you could sustain that 12%. I mean.

Correct. And we were breaking even for that whole year. We didn't make a dime on that property. Probably lost a little bit because we were paying such high interest. But, you know, I don't know if this is true. our dad has told us that like 9% is sort of like the best there to aim for. If you go 10 or more, it almost sounds a little like,

yeah, but if you're under that, it's like it starts to get. And I know people can get it. If you can get less than that, go for, I listen to a podcast with I think Don and she does crowdfunding and gets like 6% or something like that,

go for it. If you can get less, go for it. But if it can cash flow at 9%, that's really kind of the, it sounds like the sweet spot. It's not too high to sound ridiculous, but it's also,

if you're getting 0.2% to see. in a CD, it's going to sound very appetizing. What we're doing is very similar to flipping, except we're getting that, you know, 75% of the total ARV of the property, but we're going off of appraised value. And then instead of flipping it for all the cash, we're refinancing to pay back the lender and keeping our new equity in the property to hold the property long term. Love that strategy. Okay, so what are the risks?

I mean, what could go wrong in that, in that situation? There are a couple things that can go wrong. One, if you get lazy as a buy-and-hold investor and start settling, you could buy a property that doesn't have enough equity in it, then you can't refinance it out. And so you're stuck with a higher interest loan. Or if you don't do very good due diligence and no very good budgeting, and budgeting is not easy, but you need to kind of know what you're going to get into. And so you want to add a contingency.

You want to go through everything. Read as much as you can. Jay Scott's got a great book on it about estimating. The book on estimating rehab costs. That would be a five. That would be a box. It's not a lot. If you'd like to plug your book, I mean, we'll let you plug at something.

I'll let you plug it some time in this show. Brandon's book is one of the greatest stuff. Biggerpockets.com slash no money. There you go. It is a good book. And thank you. It is a good book. It's the best book ever written on that topic.

I decided today I'm going to take a grant card on a standpoint. On any job, it's the best book ever written, period. I mean, it's like my book followed by like, I don't know. I was going to say the Bible, but that's sacrilegious. I'm going to put the Bible followed by my book. Then we got the rest. It says the junior pastor. Wow, you just got kicked out of your job.

I know. I'm losing my job. There's Aristotle and then there's John Locke and then way above the rest there's Brandon Turner. There's lots of risks. One of the biggest risks of this whole thing is property management. That is something that really only buy and hold investors have to deal with because that's the only way you can extract the value of property.

People say you make your money when you buy. But with the buy and hold strategy, you never realize your profits until you manage. That's when you actually see the money come in the door. So if you don't manage it correctly, you cannot make money with buy and hold. I mean, going back to Warren Buffett, if GEICO doesn't have a really good advertising campaign that everybody knows GEICO because of the get-go, then, you know, they make a lot more money because of that. You can't tell me a good property manager is going to have the same vacancy percentage as a bad property manager. And so it's all dependent on how well you manage the property. It's sort of a, our dad puts it as a circle.

You start with the acquisition. You have the rehab. You have the property management and maintenance. And you have the financing. All four pieces need to work. And so if you're not getting enough financing in front, you can't buy it. If you're getting too high interest. Why do we have you guys when we could have your dad on the show?

Brandon, why did you even book these guys? They blackmailed me. We do all the work. He just finds all the money. He's often like Tekeety right now. So he'll be back. time. Must be nice, dad.

He works hard too. You guys talk about management. Do you guys self-manage or do you have an outside company to it? We basically built their own management company. Yeah, we chose in-house management over out-house management. That's the best quote I've ever heard. At what point did you do that? Did you do that from the beginning?

Brennan's like all trying to hold this together. I'm going to use that forever, out-house management. No, I mean, it's a question everybody has to ask themselves. You all have to figure out what is your goals? What do you want to do? There's advantages and disadvantages to both. But our dad has taken property management on as the challenge of his since he kind of started his investing career in Eugene, Oregon.

We took that same thing over to Kansas City. One of the main reasons we felt like is because the big advantages is no one's going to care more than us. And these assets are going to produce as much. income as we, you know, how well we do. And, you know, there's a lot of risks with putting it with another management company. A lot of managers are going to be great. And if they can do a better job than you, give it to a good management company. But, I mean, actually, this happened three weeks ago or something in Eugene, Oregon. The largest property management company in Eugene,

Oregon basically turned out to be kind of a pyramid scheme. They had 3,500 units. And then basically, it went into receivership, and they ended up finding out there was $9,000 in the bank account. And this was all tenant deposits. This was all owner deposits. And basically all these They had paid owner distributions in two or three months. I had the same experience, by the way, with a different company. So it's just you're only as good as your management. And it was so important to the success of our company, we decided to keep it in-house. And at some point, you know, with 200 units, the reason I got involved in the business was because I kind of became the head of the property management of our company.

I was playing poker for a long time That's what I did professionally I saw the ideal investment With buying hold and I'm like I gotta get involved in this I jumped in in the management And then we had to build our own management company Because I can't manage 200 units on the only And I let him jump in with a lot of things

He let you and he won't let you forget that little brother By the way You and Jay Scott in a room Playing some professional poker That'd be kind of fun to watch it I bet you we've got other pro poker players. Yeah, we had another one on the show. Oh, I know his face.

Ben, Grice. Yeah, Grice. Yeah, you had a couple of them. Awesome. You know, it's just critical to the success of what you do. So we kept it in-house because we knew how important it was. Yeah, I have a lot. And I know, like this morning, Brandon and I were talking about, you know, his property

management ordeal, so to speak. And, you know, he's been kind of turning over more and more of his management to a management company. They'd been doing it themselves. An outhouse company. There's been a fair amount of, you know, not a complete satisfaction with what's been going on in this morning. You told me something really cool. And I, you know, I figure since we've talked about it on the air, you might as well just kind of get to where we are now, Brennan, which is. Sure. So yesterday, again, people listened to this over time. Probably

thinks this is going on for months and months. But we recorded a lot of these episodes at one time, like within like a two-week time. But anyway, so to, Today, last night I sent her an email, this property manager and just said, look, this property has been vacant for three weeks now. There's been no work done other than a little bit of emptying out of his stuff. Like nothing. Is this? And I asked her the question, is this how long a turnover for you normally takes or something

going on that's, you know, wrong with the situation? And she got back to me right away this morning and said, I'm so sorry. And of course, said her vendors and whatever were the ones that fault. But still, she claimed, you know, she claimed responsibility despite it being her vendors that, and she offered to like make amends not going to charge me for this month or the placement and she's got tenants to move in now and she'll have it done by Friday. So we'll see. That's three days from now.

We'll see. But yeah, hopefully, hopefully she had a very good response. So I'm excited. Yeah, hopefully that works out. I didn't just. There are good management companies. We don't want to make it sound like they're all. But you have to manage the manager.

You have to know if they're doing a good job or a bad job. Yeah. And I think that's what I've been trying to do. Like, it's a hard line trying to figure out how much is, how much is trying to do their job for them and how much is managing the manager? And that's something I haven't quite nailed down. Even in the letter I sent to her, I'm like, how much am I pushing her and how much of this is normal? And, you know, it's hard to figure out.

But you're in a bad, like, Brandon's in a different position than the average person, I think. Because I'm so good looking? Because you're clearly insane. Oh, okay, okay. No. This man wrote the greatest book ever read. The greatest book ever. Well, it takes a crazy man to write a great book.

The line between brilliance and insanity. No, no, no, because I mean, like, he didn't have a lot of choice, right? There's no property managers where he is, and he's trying to train, you know. Yeah. I don't know this person who's managing them, but, you know, somebody who probably isn't super savvy and try to kind of get them to work up to become really, you know, high quality. And that's hard. Whereas, you know, you're in a major city or even a minor city.

The odds are you've got, you know, you got five, 10, 20 managers you can choose from. and you should be interviewing all of them. You should be meeting with them all and deciding which is the best. You don't just pick one. You've got to kind of talk to them all. Absolutely. And check their references too. Oh, yeah.

I think that gets skipped a lot. People just assume they're going to give you good reference. We called one reference for a property manager mentioned they had to come flying out of estate and sit down with them for the whole weekend to work out their books because they were so screwed up. He's the reference he gave me, told me this. Wow. And so I was trying to find a new contractor.

I called his references. they were all great. And he called me the next day. And he was like, see, I heard you call my references. You know, it's fine. It's the problem. It's just like this first time that's happened in like 15 years. Yeah. Yeah. I'm like, are you kidding me? So, yeah, it's critical to do that. They'll tell you things. Even if they're recommended by the person that you're asking them from, they will tell you things. Awesome. Great. Awesome. There are two kinds of real estate investors, those who have reviewed their insurance and those who think that they have. Most don't realize their coverage wasn't built for how they actually invest. Vacancy periods, rehabs, short-term rentals, or LLC-held properties.

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which is, you know, we've got Big Brother, we got Little Brother, and we got Pop, all working again. you know, so we got a family business. What is that like? I mean, clearly you guys don't get along very well. Well, I threw Philip off on the property management. And so, I mean, that's kind of, I think it's a little bit of a lot of yet. He lets you come in and manage the business.

Exactly. Don't forget that. He let you. Yes, yes. I permitted you. You had to pull it away from me. Yeah. But yeah, it's, it's worked really well for us. I think we're all kind of on similar wavelengths. I think we're all pretty even keel. We're not going to jump down each other's throats. We all have a good relationship outside of work. It's worked great for us and it's worked for quite a while. I don't know if that's always going to be the case. I think it really depends on kind of your situation. And you can have a very good relationship with your brother or sister or father, mother, or whatever, and it just not be a good fit. You're just kind of different people. You do different wavelengths. You have completely different ideas about how the business should be run.

I think it really, you need to have a good relationship, one, and a two, you need to kind of fit in a certain way personality. It's not that you have the same strengths and weaknesses, but that you just kind of are on the same page of. And you need to define your roles. I mean, that's one of the things we've done really well. Our father is in charge of financing. We help him with financing, obviously, but that's his role of the company. He's the best at it. He's the best person I know at it, and he does a really good job.

Andrew's in charge of acquisition and rehab. He finds great deals all the time. It's amazing some of the deals he finds. and then he fixes them up. What I do. Typically on budget, we can make it works. And then I have to focus

on making sure money actually comes back to us in rent. So I'm focused on the management and I'm kind of zeroed in on that. I help with the other stuff. Actually, Philip has mastered tenant relations in a way that I have not seen ever before. I try to.

I mean, he's like the aristotle. Okay, I'll let him tell the story. But we had a tenant who was suing us. I would say sort of legitimate. Like, we made some mistakes. It was before Philip took over a property manager. Phil Boshy went into property management and went out, then it came back. Long story, we'll skip that.

But while our previous property manager was there, a lot of mistakes were made. And she did a bunch of things wrong too, but she had some case. And she was suing us for $3,500. In one conversation, she was begging to re-rent from us. That is kind of true. So the important thing to know with property management is you always have to be on the residence team. You always need to be on their team. There's always a bad guy, but you are always the good guy.

The bad guy could be the lease. It could be the law. It could be fair housing. It could be the owner or your boss or whatever. I mean, I try to be truthful in everything I tell people, but there's always a bad guy, but you're the property manager. You are never the bad guy. You're always the good guy and always on their team. I love that.

That is awesome, man. That is gold right there. That is absolute. Probably, you know, if you're listening to this and you manage properties, you know, You know, or you're a landlord. That's probably one of the most important things that's ever been said on this podcast. No BS. That is amazing and true and true and true.

So, yeah, I mean, you have to do that because, you know what? Being a renter sucks. I mean, it really does. And you always feel like the decks are stacked against you. Even when they're not, you feel that way. And the property managers against you, too. Yeah. Oh, yeah.

And I've been there, man. I've had some horrible property managers and property. that I've rented. And, you know, if they had just been there and kind of made me feel like, you know, I was, I was the guy, right? You know, I wasn't the problem. It was somebody else. Because I wasn't. Well, maybe a little bit, but not really. Then, you know, it would have made a big difference. Yeah, it was back in the day. I mean, whatever. No, no, no. But seriously, that's awesome. Thank you for saying that because, I mean, I thought it was amazing. Well, to get into the story a little bit, what happened, basically.

So this lady was suing us over, you know, some damage to her property because of a maintenance issue that she didn't feel like was dealt with correctly. So she stopped paying rent because of that. And so we ended up evicting her. She did get evicted. We won the eviction case mainly because we had tried to fix the problems, but she put extra locks in the doors and we couldn't get in to fix them. So she lost that. She got evicted. But then two days later in the mail, I get, oh, you're getting served for a small claims court for $3,500.

Well, you know, we have no guarantee of winning that. I have to spend a lot of time preparing for it. I just want to get this out of the way. I'm trying to call this lady. She's not responsive. Her phone's not working correctly. She just walks into the office one day. And she actually, she's obviously not very happy because she's suing us.

She's telling us when she's going to be out of the property. Comes in with this huge dude. Like this guy is just massive. And it's like, I don't know who he is. He might be the boyfriend or husband. I don't know who he is. The rock, maybe. I don't know.

It wasn't very. He's not looking very first. Yeah, he's not looking very friendly. So, like, I have to remind myself, I'm the property manager. My job is to fulfill the lease, but as long as I'm fulfilling the lease, I'm trying to find out the best solution for this person. It's not necessarily a good solution that you're finding, but you're always trying to work towards the best solution for the person you're dealing with. So I bring her into my office. We talk for her.

I figure out that she stopped paying rent because she thought her stuff was damaged and there wasn't good communication going on. She stopped paying rent because of that. Then she paid it all back when she's getting evicted, but she didn't pay the charges for the eviction that she still got evicted. So really, where she was, she got an eviction on her record, so now she can't rent another place. She has a judgment for the charges still owed. And she just wants a new place to live and move on.

If I can jump in real quick, one of the things that is critical is to find out what does the person actually want? You get that listening to them. It's so, like, Philip could have just sat there and been like, you put locks in the door. You wouldn't respond to our phone calls, blah, blah, blah, you know, it's your fault. There's nothing we can do.

But instead, you listen to her problem. Did she even bring up the property that was damaged? It was almost like her concerns were finding a new place and the eviction was making it very hard to do so. So, like, the property wasn't even the problem. And that was what we would have been thinking had, you know, just sat down and listened. And talk to her.

And then I figured out what she wanted. What we wanted was to get out of the suit, get the property back in good condition. So we basically just made a quick settlement. We'll reopen the case for like $100. Get rid of the eviction on your charge. I'll write a little. letter explaining exactly what happened so you can give that to a new property manager to find a

place to live. As long as you leave the place in good condition, you get your deposit back and you go move on with your life and you'll drop the suit against this. And by the end of the conversation, he said, well, what do you guys have available? Because she was so happy that I actually was on her team. Yeah. Yeah. She just wanted to stay renting from someone who actually cared about her and tried to figure out a solution with her instead of making this combative relationship, which you're never going to win. You can never make someone do something that's not in their best interest. So why try? Just follow the law, follow Luis, and be on their team.

Love that. Everything you said there, I feel like we could have done a whole show on just that one conversation. She definitely could. Property management is so big, you can do that, definitely. We'll be having Philip Sirius, Dad. What? Sorry, buddy. We're going to do a quick little bit of self-emotion on that.

You're done. All right, anyway. We're done. All right, so we're moving on. That was awesome. And I do love the idea of having the bad guy. We do the same thing, right? The lease or the law or whatever is always the bad guy.

And we're just doing our job. And that works pretty well. And we want to help them out. So I love that. What are your goals with your business? I'll kind of wrap up here before we go to the fire round. Where are you guys headed? What do you want to do with your business?

Right now we want to keep growing in Kansas City. Eventually, we do want to probably start a new city as well. We have been playing around with different ideas of how to do that. It's still a little ways off. But right now, we're trying to just continue to grow at a fast but sustainable rate. We're not trying to get ahead of ourselves, but we're trying to get, you know, somewhere between, or probably about 40 properties a year and maybe, maybe an apartment complex. That's our goal right now.

We're probably opening up into a new city sometime in the next couple of years. We're still trying to work on a way to do that. You can come to my town. You want it. I got some properties. Yeah, I got some good properties. Get us out. I'll get it.

Yeah. So we'll buy all 40 properties there? Everything. We'll buy the whole city. You can own this town. By the whole city. My personal goal is really like, I want to be able to have control of my life. Like I don't, I want to have a family grow family someday and I want to be able to, you know,

if it's a sunny day outside and, you know, I have a couple little girls or something one day. I want to be able to go. It's a great day. Let's go to the zoo and have a lot of fun. I don't want to be tied to have to do something every day. And so we're trying to build a company that can sustain that wealth for us where really it's just we're creating opportunity with the wealth we're building. And we want to create that opportunity for ourselves. We're going to create for our employees, for our lenders who are making their return.

We want to make it for our residents who are renting. We're just trying to create opportunity for everybody. And for myself personally, it's about having the freedom to do what I want to do in a given situation. That's great. But what if you have two little boys? Then I'll go play basketball with him or something. I'll have my... Just checking. I would say that exact same thing. When I do a bigger pockets webinar, which we try to do every week, which people can sign up for a bigger pockets.com slash webinar. But whenever I do, and one thing I talk about a lot on those is like the importance of having that goal and not necessarily like I want to have a million dollars. I mean, that's a fine goal

if you want to have a benchmark to get to. But I understanding the why behind that. And so what I always say is my why is because I want to sit in the front row of every basketball game my kids go to some day. I don't even have kids, but I want to be that guy that's always there. And the little girl, you know, in her ballet recital or whatever, like I want to always be that person and working a nine to five job or eight to six. whatever, you will never get that, or at least is very, very difficult. So I love that, guys. Good job.

That's right. Moving on, let's get to the fire round. It's time for the fire round. No, no, they don't know what's happening. I'm shooting you. Guns, guns are blazing? Are I supposed to say something? No, no, no, that's all right.

We just want to have, you know, that's a fire round. All right. All right. Damn. The fire round. All right, the fire round. These questions are asked. directly from users on the site in the BiggerPockets forums.

So you can, if people are listening, want to check out the forums, biggerpockets.com slash forums. And these are just some of them. Number one, is it a bad idea to use your own money when it comes to buy and hold? No, I don't think so. If you want to use, there's a story in a book I like a lot, the millionaire real estate investor and about a couple. And they would, they would buy a house, they pay down all of the mortgage,

and then they'd go to buy another one. So they have no debt. They wanted no debt. Their goal was to have just a bunch of free and clear properties. I think they finished with 25 or something. They retired, which is great. It's not a very aggressive strategy. But if your goal is to do it in a safe way, yeah, absolutely.

It's perfectly fine to use your own money. If you want to be more aggressive and buy more properties, then yes, you're going to have to use either creative financing or private money or something like that. There's no problem with using your own. Great. There you go. Great question. Great answer.

Hey, speaking of the forums, I noticed something today. here's a little plug for bigger pockets. We had a record yesterday. We had a record day on bigger pockets, yet another one. But it was kind of cool. First time that I've ever seen that we broke 2,000 foreign posts in a day. Not only did we break 2,000, we were at like 2150 foreign posts in bigger pockets. There's a ton of activity.

So if you're a listener and are not participating and getting active and getting involved in those conversations, you're missing out a lot of what's, you know, the energy that's happening on the site. anyway, let me jump back to this. Would you do a buy and hold as a rental property on the same street as your primary residence? And, you know, that's almost like saying, would you house hack? But, you know, because if you're renting like, you know, a multifamily and you're sitting in one of the units, I think it's kind of the equivalent. But I'll say, I do currently. So, yes, I definitely would.

There's no reason to do that. I mean, be the manager, be on their team. There's no reason it has to be a combative relationship. Just keep the distance. If you have rules, stick to them. If they're not supposed to call you for a maintenance issue, make sure they don't do that. Just stick to your rules and you'll be fine. Yeah, well, I think one of the best ways to get started and buy and hold is to buy like a fourplex with an FHA loan.

Yep, I love that. One unit and run out the other three. So I don't see any problem with living close or, you know, right next to the people that you're renting from. Just make it clear, you know, what the rules are and be fair but firm. Yeah. I agree with that, actually. But just a counterpoint to that. So my wife and I talked about our next door, like, neighbor moved or they were foreclosed on and then the house went into it.

It was an REO and it was fairly reasonably priced. And we thought about, I asked her several times, should we just buy this thing? And she was actually adamantly against buying it because she said she wanted a mental break from our properties and not have to drive by every single day all the time, have to see it when there's the lawn has gone long. It's always just a drain on you're like, oh, now I got to deal with that. It's a good point. Yeah, I mean, so I fully agree with that. So I think a lot of it is personality. I think part of it is also like, you know, we're all young guys and like, you know,

we can handle that stuff. We got this. But, you know, she's wiser and more mature. Yeah, exactly. Well, with me, the people that we're running from don't even know I'm part of the company. So which is kind of the way I like to keep it. So I'm fine. But I don't have some problems.

Nice, nice. All right, cool. Next question. Do you suggest living in a residence that you are flipping or doing a flip in or a live and flip, however you want to call it. I don't think I put a lot of thought in that. I think there are cases where it might make sense. I've heard of people who like buy a house and it needs, it's okay to live in and they need

some work and they do the work themselves while they're living there and then they flip and move on to the next one. I think there are cases where it makes sense. If you're going for any sort of volume, I think it would be very challenging or if you're trying to have a sort of trying to settle and, you know, plants and roots that could be very, very just bouncing from one place to the next. the next. So there are some instances where I think it makes sense to others, but generally

speaking, I probably want to. Cool. There you go. There you go. All right, guys. Last question. What is the best way? The question is, what's the best way to avoid being scammed in real estate? And I know that's really like vague and broad. So maybe we'll change it to what's the best way of being scammed by

a tenant as a The best way to be scammed? To avoid being scammed. Oh, okay. Please. I would say the most important thing in property management is who you let into your properties and doing screening up front and getting the right people in. Your whole, how a residency is going to work with residence, it's all going to be determined

up front of who you accept and who you do not let into your property. So doing really thorough screening is the best way to do it. And then after that, it's having rules, having a bulletproof lease and sticking to those rules. And if you let go one rule, they're going to think you can go through. through another rule. Do you guys have a rules list? We basically put all the rules in the lease. So even if it's a Missouri law, we put that law in the lease and then go over it with them when they sign the lease so that they know this is the law and I'm going to enforce it on them. That's great. Nice. Awesome. Yep. Love it. Nice. All right. Let's end this thing with the world

famous. Famous for. All right. Number one, what is your favorite real estate book and why? And you can each answer this question. Didn't they answer that already? Yeah, my book. Oh, yeah. Is it going to invest in real estate with no? That's all the answers. All for. All the answers. Thank you. My favorite book, other than Brandon's, is the millionaire real estate investor by Gary Keller.

That one was sort of the first book that I read on real estate that really just hit home. What we're trying to do. It goes over both flipping and holding. And that one, I think it's a great overview. It's a great first book. And it's also a great book for intermediates or even people who've been doing for a while. Yeah, I read that book. and loves it too. I tried to go with

the book that I really help me with management. It's from Jeffrey Taylor. It's the landlord's survival guide. It really turns property management from it's not a drudgery anymore. It's about partnering with your tenants coming with creative ways to run your business and it takes property management not to just be a business that you're running

and makes it turn into something that you're trying to create value out of and improve property management. It's more creative and trying to create a business out of it rather than just something you have to do. And it really helps you partner with your residence by reading that book. I just got a lot out of it. It helped me with how property management works.

Cool. I've not read that one. What about business books, favorites? Why doesn't, you know, what doesn't Philip go first? I mean, you always like to go first. I mean, if that's a big, man, whatever. I don't care. I don't mind. I actually have two really quick I have to go over. The first one, getting things done by David Allen, which you guys have talked about a lot.

It just, it focuses you so much. I'm probably 10 times more effective because I follow that system. Otherwise, I'd be stressed at all the time, not know what I have to do. The other one, the only book better than Brandon's book is How to Win Friends and Influence People. I could recommend that book to every person, every day in my life. It is great for every situation. It's just how you deal with people, and it's a textbook on how to do that, and that's every part of your life and your business is how to deal with people, and just follow that book as a textbook, and you will have much success in life. Nice. Cool. All of Jim Collins'

his books are great for business. His most recent great by choice has really been influential. I think it's one of my favorites. It's probably my favorite right now for sure. It talks about all sorts of things about how you want to, the shiny object syndrome, how you want to focus, how you want to start. If you're going into something new, shoot a bullet, not a cannon ball. Don't jump from thing to thing.

You want to have consistent growth versus either stopping and hunkering down. He calls a 20-mile marching or going crazy. jumping ahead and trying to go from A to Z right off the bat. So that book I found very, very helpful. Cool. I read, I just got finished with good to great. Yeah, that was a good book. That's a great book, too.

Yeah, cool. Nice. All right. What about hobbies? What do you guys do for fun? Who is starting this time? Whatever. I'll start.

I like long walks on the beach. I like to get. Yeah, you like having your dog lick your neck. I know he was looking, yeah. You know, he's a, I got to take a bath somehow. Oh, he's friendly. I love playing the guitar. I've really gotten intuitive late.

What do you have? What do you have? Yeah, what can I get? I just, oh, what did I just get? I just got a new guitar sitting right over there. Put you on the spot. He just put me on the spot and I completely forgot what my new guitar was. That's all right.

And I need to go get it fixed. And so I haven't really played it much yet. So it's really, I'll put it in the show notes. All right. I'm going to put it in the show notes. Yeah. And then I also. I love to travel.

I have not gotten to do so recently, but I do want to start traveling again here in the near future. I have lots of different things I like to do when I have time. I still like to play poker when I get a chance. I love to play video games with my younger brother who's not pictured here or you're not listening to

but I play video games with him over online. I love to go dancing with my wife. All sorts of stuff. This guy listens to the cheesiest music. He isn't the company. He's just not Kansas City. Oh, he is in the... You guys don't like the Kardashians.

All we hear about is like Kim, and I don't know what other card actions they are. But there's like these like other siblings that you never hear about. I don't know. There's another one too that's older than us. There's like a third William's sister. You got this one's and he's got Serena. And then there's this poor other Williams sister who nobody knows about.

Yeah. Well, he's a brother. All right. All right. All right. Final question. And you can each answer this if you want to. What do you believe sets apart success?

investors from those who give up fail or never seem to get started. You want to do this one simultaneously? No, I got this one. I think the honest answer to this question is making money and having success because you've never seen someone do real estate for 30 years who's lost tons of money year after year after year. So, I mean, honestly, success builds on itself. And if you're working hard and you're having success, you're going to want to do it more.

And making money is kind of what keeps people involved in it. I call it the Goldilocks zone. you need to be always pushing ahead, always confident, always, you know, proactive, except if there's going to be challenges, there's going to be failures, you got the people who can persevere through that. At the same time, you don't want to go so crazy that you're not doing your due diligence, you're not going, you're trying to buy way too much, way too quickly. So you want to fall on the Goldilocks zone.

Be always persevering and pushing ahead, but not going so crazy that you skimp on due diligence. Like 200 properties in six months. You know, my dad started the company in 1981. ones. I'm just, I'm just asking. Awesome guys. Well, listen, really, really great stuff. This has been a lot of fun.

Great show. Lots of great stuff, including one of the best nuggets we've ever had in the show, at least I think. And that came from, from Philip. So just, you know. Way to go, Phil. Good job, Phil. That how happened?

I don't, we'll go with that. I've been busting Andrew's backside the whole time. Come on. All right. So, Andrew, answer this. Where can people find more about you guys? Where can they find you? Well, I write on Bigger Pockets.

You can also go to our website at stewardship properties.com. We just gave a presentation on buy and hold. Every part of it, we're not selling anything, but we'll have the videos up. So if you want to also post it on my never blog at Bigger Pockets.

So if you want to watch those videos, it goes more to what we do and how we do it. And yeah, those are the two best places to find me. The Bigger Pockets are stewardship properties. I do Twitter. I have a YouTube channel. I do all that kind of stuff. Andrew's great at writing about real estate stuff.

I like to talk about it more, so I do videos and stuff like that. You are a little more personal than he is. Just like Brandon is more than you, Josh. Yeah. I've had your back the entire show. And then you just went. Family, you forgot, Josh. They got each other's back.

Ouch. All right. It's done. Nicely done singer. Wow. All right. Well, we'll link to all that stuff in the show notes again at biggerpockets.com slash show 121.

and I'm going to stock you on Twitter. Are you following me? Are we following each other? I don't know. I have no idea. I don't think I have a Twitter. I'll tweet for both of them. What are you like a 20-something guy or something?

Come on. Everybody has Twitter. I've got the Facebook. Okay. All right. All right, all right. Listen, it's been a lot of fun. We thank you so much for being on the show.

All right, before we roll out of here, guys, this is show 121 of the BiggerPockets podcast. Definitely make sure to check out the show notes at biggerpockets.com slash show one to one. And of course, if you are not a member of our community, please jump on. You get to meet and hang out with guys like the serious brothers and learn from them and connect with them and engage with them.

And we hope to see around the community. We hope to see you on our social channels, Facebook, Twitter, Gplus, LinkedIn, YouTube. We're all over the place. So definitely follow us and keep up. And with that also, if you have not yet left us, us a rating or review. Guys, ratings and reviews, please leave us one on, not Amazon, please leave us one on iTunes. And actually, if you're a reader of Brandon's book or Jay's books. The best book ever.

Yes, or the two books from Jay Scott, jump on Amazon and leave us reviews for these books. If you've read them, they are amazing and please help us out by doing that. That's all I got for you. I'm Josh Dorkin. See you next week. I'm signing off. You're listening to Bigger Pockets Radio. Simplifying Real Estate for investors large and small. If you're here looking to learn about real estate investing, without all the height, you're in the right place. Be sure to join the millions of others who have benefited from biggerpockets.com.

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You guys know it was awesome. No, seriously. Thank you. Thank you. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer.

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