BiggerPockets Real Estate Podcast - 291: How to Build a Business That Helps Find Deals Before Anyone Else with Neal Collins

Episode Date: August 9, 2018

Are you struggling with finding deals in today’s market, where the best properties go fast? On today’s show, we interview Neal Collins, an investor in the red hot Portland Oregon who has figured out a way to find deals before anyone else even sees them! Neal shares the brilliant strategy he’s created to build a world where the best deals find him. In this show, you’ll learn how Neal was able to find a 4-plex to house hacked—and how he made an additional $8-10k a month, as well as how he built a property management company and real estate brokerage (hint: he created an army of deal finders that get paid to make him money and find him deals) where he does none of the work but reaps all of the profits, and his brilliant, simple strategy for raising private money than anyone can replicate (he really hits the nail on the head with this one). If you’re looking for a solid, profitable, and step-by-step process to make money and build wealth with real estate, you won’t want to miss how Neal did just that! In This Episode We Cover: Neal’s journey to real estate investing How he accidentally got into seller financing The importance of being able to pivot and change investment strategies The kinds of properties he looks for His thoughts on Airbnb and short-term rentals in general How he got into managing other people’s properties His experiences managing 200 units and owning a brokerage Three things every investor looks for: returns, security, and customer service And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Webinar Brandon’s Instagram David’s Instagram GoBundance Airbnb Properly (App) BiggerPockets Youtube Channel Be a Guest on the Podcast Books Mentioned in this Show Long-Distance Real Estate Investing by David Greene Confessions of a Real Estate Entrepreneur by James A. Randel Shoe Dog by Phil Knight Fire Round Questions How do you reset for your next short term rental guests? What “extra” amenities do you provide to make the stay special? I wanted to know if anyone has a solution for reducing the time it takes to get through turning over linens in your short term rentals? I’ve read that some experts present themselves to tenants as the property manager, not the landlord. Tweetable Topics: “They talk about the numbers, but they are not talking about the work.” (Tweet This!) “You have to leverage other people’s time and experience or build systems so that you can leverage your own time to do that.” (Tweet This!) “The deals are not going to come to you. If you’re not consistently swinging the bat, you’re not going to hit the ball.” (Tweet This!) Connect with Neal Neal’s BiggerPockets Profile Neals Company Website Email Neal Neal’s LinkedIn Profile Neal’s Facebook Profile Neal’s Company Instagram Profile Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 291. And whenever you can put a buyer and a seller together and the management contract never changes hands, the tenants never know that the ownership changed. And you make a transaction fee off of that. It's like, oh, hey, this is where we can actually generate money and use our expertise and increase our management company to start actually doing this, full time and we see a path forward to grow a portfolio. 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, everyone? This is Brandon Turner today's host of the Bigger Pockets podcast, the number one real estate investing podcast on the planet here with my co-host, Mr. David Green. What's up, buddy? How you doing? Where are you been? I am doing great, Brandon. I actually just got back from your hood up in Seattle, Washington for my cousin. My cousin's wedding, Michael Green, married his dream girl, Ali Mendozona. And I got to meet her family and we got to talk about real estate. There's about four people there that were all Bigger Pockets fans. And it was the

easiest way for an introvert like me to make conversations with complete strangers, which is worse than death sometimes by talking about real estate because, you know, real estate investors love to talk about real estate. Bigger Pockets fans, there are more of them out there than you think you are passing these people on the streets every day and don't know it. Just asking people, have you heard of BiggerPockets.com? Sometimes they say no, but when they say yes, oh my gosh, their face lights up. They're so excited. They're like, you know about it too. It's this cool little secret thing. So I had a great time. We need to get T-shirts. I mean, we need to get an apparel line. Honestly, we've been talking about it for years and we just have not been able to pull

it off yet. But we need a complete apparel line. So when you're like walking on the street and you have a shirt that says like cash flow, people are like, yo, I know that guy. He's a bigger pockets guy. That's what we need. We'll work on me. We should get like burr t-shirts with like snowmen or shivering or something like that. That'd be pretty funny. Actually, so for my birthday, did I tell you that last week? Anyway, for my birthday, Alex, who's like, she's a lot of stuff of bigger pockets, like HR, social media, all the stuff is up. Anyway, she sent me a sweatshirt, a Christmas sweater that just said burr on it. And it was like an ugly Christmas sweater with burr. It was pretty awesome. Anyway, we got to move on because today's show is fantastic. You want to talk about it for a second?

Yeah, you guys are going to love today's show. This guy has got it figured out. He has it together. And he's just like all the rest of us. He's just doing it better. So in today's show, we're going to talk about how he bought a fourplex, house hacked it. So he lived in it for free and still made $8 to $10,000. every month while living there for free on a deal that anybody could find. I mean, that was just fantastic. He's going to cover basically how he took his real estate investing business and branched it off to build a property management business and a brokerage. So now he finds deals before all the rest of us ever will.

He gets first pick of all the people whose houses that he manages. And he has agents out there looking for deals for him, spreading the word when you find someone that wants to sell a house, call us first. And so he gets to buy deals that way for all those people out there that are like, oh, I want to learn how to get into investing by working for a property management company. I'm always like, God, that sounds horrible. Why would you want to do that? But if you're going to go build a property manager company, that actually starts to make

sense, right? Because we're really entrepreneurs as investors, and he's figured that out. And then the three things investors are looking for when they are giving their money to someone who is raising it to go invest. So if you're looking to work with private money, you do not want to miss this. These are the three things that you need to learn how to convey to the people who are going to be giving you their money. and you can raise money very easily and go invest in real estate with it.

Yeah. So good. So good. All right. Yeah. So today's show is fantastic. But before we get there, we got a few pieces of housekeeping to get through. First of all, today's quick tip.

You were in the middle of taking a drink when I started that. I saw you throw that cup down. Sometimes you got to adapt and overcome like a Marine. All right. So today's quick tip is if you own property or even a primary residence, you need to be looking at how much equity you have in that property. Yes, you may be getting a great ROI because you bought the property years ago. you're getting a good return on your investment.

But do you have a lot of equity in that property that is not working for you? We all work very hard. Your money should be working just as hard for you. And the new book I'm writing about the Burr method, I stress this, that like your money needs to be working just as hard or harder than you are working. And if you have equity sitting in something that is not being used, calculate your return on your equity. Look at the money you're making,

divide it by how much money you have in there, just like you'd use for ROI, but instead you're using your equity rather than the investment. If it's not a good return, consider refinancing, putting that money to work, refinancing and giving it to someone else to invest and earning a return that way, or selling your property and 1030 winning into something better. There are all kinds of methods. There is a ton of people out there that have a massive amount of equity that is doing nothing for them

and you could be accelerating your wealth building much faster. So that is a quick tip. Know what is in your portfolio, know how much equity you have, and know what the return on it is. Managing properties can feel like a full-on circus. You're juggling vendors, tracking payments, chasing approvals across multiple properties and maybe a few HOAs all while trying to keep tenants happy and owners confident. One delay can throw everything off and suddenly your day is all clean up, no progress. That's why hundreds of property managers rely on bill to streamline their finances.

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There's even a dedicated bill inbox for each property to keep everything organized. Ready to simplify your workflow, book your free demo at bill.com slash bigger pockets and get a $100 Amazon gift card. That's bill.com slash bigger pockets. Have you ever ever? lost a DSCR deal because the financing just took too long. Red flags popped up late. The lender

needed more time. The deal fell apart. Well, our friends at Dominion Financial just launched a program to help prevent that. With their new express rental loan, you can close in 10 days or less. And they still offer their price beat guarantee so you can get great pricing and a timeline you can count on. Fast, simple, reliable. That's Dominion Financial. Check them out at biggerpockets.com slash Dominion. That's biggerpockets.com slash dominion. Here's why savvy real estate investors are obsessed with bonus depreciation.

It lets you take that rental property or commercial building you own and depreciate most of the cost against your income. Legally, 100% IRS compliant. That's instant cash flow improvement. Cost segregation guys is the number one firm nationwide, specializing and

identifying these faster depreciating assets in your property. They've completed tens of thousands of studies across all 50 states from remote cabins to apartment complexes. So if you own investment property, this is a no-brainer. So visit cost segregationguise.com slash BP for your free proposal and find out how much you could save this tax season. And now we've got to get into this show. We're talking about again with Neil Collins. Neil is a real estate investor in the Portland area. He once worked in the Peace Corps. I ended up listening to the Bigger Pockets podcast,

getting involved in real estate. Now he's just absolutely crushing it. You guys are going to love it. But I'll let him tell his story. And let's jump into it. All right, Neil, welcome to the Bigger Pockets podcast. Good to have you here. Thank you, Brandon. Thank you, David. It's great to be here. Yeah. So you and I connected, the three of us actually connected in Austin at a Gobundance event last year. People have probably heard us talk about Gobundance from time to time. It's just a, you know, a group for people who like to live epic lives. But, you know, you have a pretty epic life from the things that I know. So can you share with us a little bit like how you got into real estate? Like how did, like why did you even go that path? What did you do before it and walk us through

that transition? Yeah. And I think that's that's really the unique part of my story is that I was not real real estate was not on our radar. You know, I grew up in Louisiana and at 21, I decided, yeah, I need to see the world. I need to get out of here. And Peace Corps was the route that I took. And that just led into a life of more adventure and international travel. I ended up going to graduate school and living in the Maldives after that and doing whale shark research, which is pretty awesome. I mean, great lifestyle. Think Maldives and coconut studded islands and crystal clear water and getting to swim with the world's largest fish every day. So awesome lifestyle, really meaningful work.

But then it got to a point where I was like, you know, we're living in on. on an island in the middle of the Indian Ocean, where's our career going from here? And so I went to my boss at the time and I was like, you know, I really like the work, but I don't really like the pay. What do I do next? How do I get paid more money?

And he said, you know, you need to go get a PhD. And that's six more years of schooling minimum. Yeah. That didn't sound like fun, but we plowed ahead. We went back to the United States, got married in my parents' backyard. This is me and my now wife. I was making a road trip out to the West Coast where I had applied to a PhD program in California. And I needed something to listen to on the road trip.

And this is right whenever bigger pocket started the podcast or maybe a little bit after that. And I got addicted to the idea of passive income. And I think a lot of people in real estate get addicted to that idea. And so I started thinking to myself like, hey, you know, maybe I should get into real estate. What do I need to do to do that? we landed in Portland. I knew that direct mail, a lot of people are going to do direct mail. And so I was petrified. So I sent out a couple hundred letters with my wife's name and phone number on it, saying, you know, hey, we're Neil and Alyssa. We want to buy a property. Give us a call. And so her phone

started to blow up. She was getting a ton of really angry people calling her. And I just said, look, we're going to fail at this endeavor if you don't do anything. And so what it ended up happening is we got a house under contract. It was not a deal, very evident. It took us a lot of effort to get to that point. And our very first deal was we went through, did an inspection, realized that this was not the right place for us. But as luck had it, we looked across the street. And we saw it, you couldn't even see the house across the street. It was just covered in blackberry bushes and trees. And we did a lot of research on the property, found the owner of it. She was about to lose it to tax foreclosure. And she said the craziest thing. She said, look, I want to sell it to you, but I can't.

Because if I get a lump sum of cash above a certain dollar amount, I'm going to lose my benefits, Social Security benefits. And so she floated this idea that I had never heard before. But why don't you pay me monthly? And I'm kind of young and I want to get paid for the next 30 years. I really like cash flow. And so why don't you just pay me a couple hundred bucks a month for 30 years on an amortized loan? And that was like great to me. Just like, I have no idea what you're talking about, but that sounds great.

And that was the beginning of how we got started. We did somewhat a complicated seller financing deal and made more money on that deal than we knew what to do with and just started the ball rolling. That's awesome. All right. So a couple of things. First of all, I had no idea that your story started with bigger pockets, like listening to the podcast. So that's super cool.

Anyway, that just makes me feel super awesome. But I want to go through that. The first deal, I mean, you sent out those direct mail letters. You know, you threw them out there. Do you remember who you threw them at? Like, who were you mailing them to? And also, what went wrong with that first deal? Why wasn't it good?

You know, what we are looking for is we are just looking for absentee owners. And whenever you pull a list of just absentee owners, you realize that there is a ton of absentee owners. So you realize that there is a ton of absentee owners out there that are not motivated to sell. It does not fit your investing criteria or they went top dollar and your phone just starts ringing. And you get a lot of angry people. You get a lot of people that are going to spend your wheels. And so the first deal or the first property that we ever looked at, it was just full retail. There was no, there was no room to run with the property.

There's no improvements to do in the properties. I was like, you know, we're on the West Coast. It's already a really expensive market to begin with. So it was like, you know, this is great. I'm glad that we got some traction, but I can't do anything with it. Yeah. Well, what I love is that you did it, though.

I mean, because like that first, I mean, we talk about all the time here. Like, just like nothing's going to happen if you don't do it, right? What's the Jim Rohn quote? Like, life doesn't get better by chance. It gets better by change. Right? So you're like, I'm just going to go,

I've no idea what I'm doing. I'm completely new. I'm going to go send out a few hundred letters and just like figure. it out. And like at the first, like that first deal, like yeah, it wasn't going to work out. But because of that, you then were able to recognize another deal when it did come up. So let's talk about that second deal then. You said you made more money than you, you know, ever knew what to do with at the time. Like, what did the outcome look like for that deal? Right. Yeah. So whenever we bought it, we, we paid $145,000 for the house. And that's really low for our area. And it, I thought it was a little too

high for the house. I mean, it was just a 700 square foot run down bungalow that had been a hoarder house for a long time and the city had come along and boarded it up. And so whenever we got into it, we had to put $10,000 down to pay off the back taxes. And then the rest, the $135,000 was on a note at 2% interest that was amortized over 30 years. So it was a, we get to pay $500 a month for 30 years for this property. And then a builder came along, maybe a week or two later. And And we were just up to our eyeballs and stuff and Blackberry bushes and garbage and a 40-yard dumpster trying to shove it all in, doing the work ourselves. And he said, hey, look, I want to buy this place and build an apartment building here.

I'll give you $250,000 for it. It's like, well, wait, hold on. We just paid, you know, $145,000 for it. That's a really nice profit without having to do anything. But the problem was, is I couldn't go to our seller. and cash her out because she didn't want to receive a lump sum of cash. It says like, well, you know, this sounds really interesting. I don't know how to do it.

I don't know if you're blowing hot air my way. And so we were constantly getting letters at the house of, you know, I'll buy your house for cash. And so I called a couple of those guys. Like, one is this guy for real? What would you guys pay for it? And then I was getting prices of like $100,000 and $110,000. I'm like, okay, well, I'm going to try it,

but I've got to talk to somebody that knows. knows what they're doing. And they said, why don't you go buy another property with the funds that the builder's going to give you and then re-collateralize the note that you have with the trustee with your seller onto that one. And so seemingly kind of complex, but if you boil it down, it's a really simple two-step process of we just said, look, seller one, we are going to secure your trustee on another piece of property and we're going to buy it using the funds from the for sale. So all of a sudden, I didn't just have $100,000 of profit. I had $135,000 of debt at 2% interest for 30 years. So for the first of my life, you have a quarter million bucks hit your

bank account. And we had to, before it hit the bank account, we had to go out and find another property. And so we sent out a lot more letters. And we got a little bit more strategic of, Hey, I really like the idea of multifamily. I really like, I didn't know the city that we're living in at the time. So I really wanted to stick to one area that I knew, which happened to be one of the most expensive parts of town. And as luck had it, there's a lot of landlords out there that are really tired of landlording.

They've got an equity problem. And they also went to seller finance properties. And so we found this gorgeous A plus property in a A plus location. It needed a little bit of cosmetic work. It needed to be turned around. So what we did is we took the 250, use it as a down payment, fixed it up with cosmetic fixings and worked a little bit on the systems. But this is at the time that Airbnb was also starting to get pretty popular.

And so we moved into one of the units and furnished the other three. And this is when the concept of real estate was like a wildfire. because we're getting about $8,000 to $10,000 net a month without having to pay living expenses on our second real estate deal. And it was like, oh, my God, jackpot. You know, this is what we're going to be doing. Passive income, sure, it's not that passive right now. We're doing a lot of work doing that. But that's what really got us into the game.

And that's what just got us addicted to the thought of we can build something out of this. That's awesome. So you basically transitioned this amazing 2% loan that you had. You moved it over. So now that instead of her holding the mortgage on the one property, now she's holding the mortgage partially at least on the second, the new one, which is just a really cool strategy, by the way, for people. If you didn't fully understand that, maybe rewind it, listen to it again. But it's super cool. You're just moving the collateral from one property to another, keeping the loan at 2%. And then, you basically now your house hacking a fourplex living for free and making eight to ten thousand dollars a month in profit like not bad not for a second deal it it does come crashing down later on in the story but at at the very beginning it is you know the lifestyle is great and it made a lot of sense and so for us it was like how do we go get more of these properties and that that's whenever we started to boil it down to who fits the criteria that we want to go after, that I love multifamily properties and having multiple units, and can we Airbnb more properties?

That was literally my thought process at the time. And then where it starts to unravel is that the city of Portland started cracking down on short-term rentals. And we got a letter saying, hey, we're going to find you between $1,000 to $5,000 a day if you're going to continue to operate these Airbnbs illegally. It's just like, oh my God, this is a really great run, but can we use it as an operational expense? And you quickly realize that. Even if it's $1,000 a day, a $30,000 operational expense and fines just is not worth it.

But we still were able to convert it over to long-term units, live in it, substantially cut down on our living cost if we were to go find another place. It rented well with long-term tenants in there and we're cash flowing. And it's just one of those properties that's a back row property. You never want to change or you never want to sell it just because it's gorgeous. I mean, you look at it and you're like, this is the kind of real estate that I want to be buying. That's cool. So how did this change your strategy moving forward when you realize you could no longer do the Airbnb thing? Yeah.

So what we started to do is we started going two different directions that at the time seemed like it was a coherent strategy. we started looking for owners that had multifamily properties in close-thin locations where we knew the demand was going to be high for long-term rentals and short-term rentals. And we started looking for value add opportunities at the same time. So we really like the fact that we could get in there, change the rent role, work on cosmetic things. And so we started to go after that. And on the Airbnb side or the short-term rental side, we were looking for something that we knew there was. opportunity in that niche, the problem was the city wasn't allowing this in residential zones. And so we found a little bit of a loophole and we started going after properties that were in

commercial zoning, but were being used for residential uses. And there's actually a ton of houses out there that are in commercial zones. They just happen to be on a commercial corridor and it's a house or it's a duplex or whatever it is. And so we bought properties like that or we're going after properties like that where we could really skirt the whole short-term rental laws in our city. And that proved to be a really good niche. So just for clarification, if it's in, can you automatically, because it's in a commercial location, if it's a property in a commercial zoned area, it's good for short-term rentals then, at least in your area, or there's like special licenses you still have to get or anything like that. It may be different

across the country, but at least in our area, what we're looking for is you're going after the commercial zone. So you're looking for retail and office and things like that. Industrial areas, it's not going to work for us. And then it boils down to what's the use of the property. And this is what the city defines as the use. And so if you are trying to go from a residential use in a commercial zone to a commercial use, you've got to add things like exit signs and sprinklers and do a couple upgrades to the property. It's mainly for ingress and egress type of safety concerns. If the property is on fire. Can your tenants or guests get out? And so if you make those upgrades, then you are fully legally compliant. If you still have it as a residential use, they may come down

on you, but it's it's not prioritized. You're a commercial use and a, or doing commercial activity in a commercial zone. So why go after them instead of the residential people in the middle of the neighborhood that all the neighbors around there get upset about. I got a buddy right now who's, they went to like the commercial. commercially like the hotel area of their city. And then they booked out an entire, like they rented on like a 20 year lease, the entire floor of some skyscraper, like some like high up floor in an amazing area. Then they went and converted and they're in the process.

I think they're probably done now. Converting them into like 15 different Airbnb like short term rentals. And they opened a boutique hotel. So it's not violating any short term rental things. It's just a boutique hotel that you happen to check in on on your own and use Airbnb to facilitate the whole thing. But it's a way to like side, step the entire, you know, anti-short-term rental sort of thing because they opened a hotel.

So, again, I just, I like the creativity in that and I like that you guys did that. Is that continually still working for you? Have you still done that or have you shattered away from that now? You know, if, if you're in a lot of cities, if you're in a location where affordability is an issue like it is on the West Coast, you're quickly going to develop a pretty bad reputation if you take an entire floor of a new development and turn it into a hotel. And developers in Portland, at least, they've done that and they've been skewed for it. And we've really looked at this model of like, should we continue down the Airbnb path and doing

short-term rentals in these properties? And the cash flow is great, but man, is it a lot of work? And that's what a lot of people don't understand is that like you're going to have a ton of operational cost. You're running a hotel. So you're going to be getting calls in the middle of the night. You're going to need to set up systems. You're going to have to replace linen.

and coffee filters and all kinds of other things that for us, it always seemed like something monumental, a big screw up would happen whenever we were on vacation. And I was just like, oh, man, I don't know how we're going to get out of this. And so what we started to do was say, you know, Airbnb is great in the background if we run a couple of units and we systematize that. But how do we go out and get more long-term units? Because that's what we are after is we are after passive income. We wanted to go back to Maldives in Southeast Asia and go travel more.

And so that's why we started looking for more strictly traditional rental models. And continued on the path of, you know, is there more property owners out there that have problems that they don't want to receive a big lump sum of cash, but want that annuity payment of seller financing? And so that's what our compass was set towards. You know, Brandon talks a lot about the scale of passivity that he has. It's a cool idea that he's come up with. Yeah, he likes to say it like he's Zeus and he's like a huge scale. Yeah, as he measures and judges the world. But it has to do with like, it's true.

There's this spectrum where on one end you see a lot of profit and on the other end you see a lot of work. And most things in life work that way. Life is not always black and white. It's a spectrum and you have to decide where on that spectrum you want to be. Can you tell me, Neil and also you, Brandon, because you guys have both done the Airbnb thing. How do you feel about the return you're getting for Airbnb when you have to factor in the work you're doing, the constant fact it's changing all the time, the worry that you're going to be fine? Like there's more work involved at this. Is it still worth it to do it? I'll let you start.

Oh, man. Yeah, it really depends on is the juice worth the squeeze on on Airbnb? Me personally working in that job or having my wife work in that job is not a long-term solution. you're going to get burned out. It's novel at first to be accepting bookings and dealing with all that, but it quickly gets tiring. And unless you can bring that in and you really need to figure out your lifestyle design, like, I want to move to Hawaii, but I don't want to afford a mortgage, or pay a mortgage the whole time. How do I get short-term cash flow in the interim? It's perfect for that.

And a lot of people try to go down that route of can I scale up an Airbnb operation? and if they're successful at it, congratulations. That is a lot of brain damage and a lot of energy that goes into it. Yeah. I think, I think people oftentimes, yeah, they look at Airbnb the numbers or, you know, we say Airbnb, right, but vacation rentals that, and they look at these huge numbers. They're like, oh my gosh, there's so much money to be made there. But yeah, I had, I'm sure a lot of you guys remember years ago or two years ago,

I bought a property. I turned into an Airbnb. I called it the great Airbnb experience or experiment. And it was an experience. And at the end of it, I thought, no, I'm not, I'm not going to do this. Unless I wanted, like, I believe there are people, and we've had them on the show before, that is their business, just like flipping houses. It is a, like, in my opinion, Airbnb or vacation rentals, that's a business.

And if you want to run that business, great. And eventually you can even hire people to oversee the business and fine. But yeah, that was not my business. And Neil, it sounds like it wasn't yours either. And you know what, it, for the people that want to manage an Airbnb property, you're on call 24-7. It's not just, oh, no. maybe the plumbing's going to go out and I'm going to get an emergency call from a tenant. It's like, hey, I'm locked outside.

It's two in the morning. How do I get in? And you're like, punch in the code that I gave you. And they call you back and they're like, oh, yeah, that worked. That's funny. That's actually exactly what happened to me. Maybe I've told the story before, but I'll tell it again real quick. Like the day I decided to quit my Airbnb was the day that these people, I was leaving town.

It was on vacation day, like, even for the airport in like, you know, half hour. I get a call. We can't get in the house. The code's not working. tried it, walked them through every single thing I could think of. They couldn't figure it out. So I sent my assistant over there. She couldn't figure it out.

Like, ah, so I'm like leaving town. I sped to town real quick. Go over to the house. I punch in the code, you know, whatever. It was like one, seven, five, three. And the large, huge unlock button right in the middle of the, the keypad, right? It has a little unlock icon. And it opens right up.

And they say, oh, I didn't know you had to press the unlock button. And I was like, I'm done. Like, I'm not doing this anymore. And that was the day I like, yeah, I quit Airbnb because I was like, yeah, you are on call 24-7. Oh, I get it. And then if you want to hire somebody, it's really expensive to find somebody that can do that to the level of a detail that you want. Brandon, did you just give your Airbnb code to every single listener of the Burger Pockets podcast? Every single lockbox.

I couldn't remember. I couldn't remember what it actually was. So no, that was. Okay. Good. But I guess the good news would be if you didn't tell me. to hit the unlock button, no one would have ever been able to get in, even if they had the code. You know, I've always looked at Airbnb like it's a business. And if I was going to get into it,

I would hire an assistant to run it for me. I would not consider that passive investing. Because a lot of investors are like, oh, no, I'm doing Airbnb. And I'm getting a way better return to everyone else. And they talk about the numbers, but they're not talking about the work. Right. And the minute that work gets involved, I start looking at how can I leverage that onto someone else. And I just pay someone and say, here's the standard. Here's how you advertise. Here's a check. list of all the answers to questions people I answer. Every time something comes up, I want you to make a note of it and let's figure out a way to put something in the house so that they can get their answer on their own. Make this as less work for us as possible and then you can scale it.

Brandon, you look like you're chomping at the bit to say something here. I was just going to say that works great unless your assistant can't figure out how to press the unlock button either. Anyway, that's a whole other topic about assistance and how they get them to help you. All right. So that's good. Neil, where, Where are you at now? Tell us a little bit about your portfolio, what you scale to and what the majority of your investing is like. Yeah.

So what we did is whenever we meandered away from short-term rentals, we started going after small multifamily properties. And it was really looking for what's going to be an in-demand location that we know that we can have a value add component to it. And that's been the most critical thing is getting into these properties, being able to fix them up because we're trading at really low-cap rates on the West Coast. It takes a lot of money to get into them and it's got to be financially worth it to hold on. So what I really like is I really like to hold on to these properties,

but there's not a lot of multifamilies in general in our cities. You know, it's mostly single family zones throughout our city. And so we like to buy them, fix them up, hold on to them. And we got to a point where I got busy with a handful of tenants trying to do leasing. because if you're fixing these places up, you're going to be doing a lot of leasing. And a leasing takes a lot of time. And so we had more than a handful of tenants.

I was just spinning my wheels. And I had to go out and hire an assistant. And that's, I wanted her just to do leasing of our properties. But then whenever you take on an assistant, the overhead goes up. And you realize, well, I'm, I freed up some of my time, but I still have a net drain on our bank account trying to, to have. an employee do this. And so that's whenever we finally relented to other people had been asking us, hey, we've got properties in similar areas as you. Can you manage the properties for us?

And I had had property management experience whenever I was younger in college and it was more like big apartment buildings. And I was thinking to myself, you know, property management is not that hard. Like if you have a work order, you just submit it to the maintenance guy. And then the leasing coordinator will tour people through the complex and that's how you you do property management. And so naively, we went into managing other people's properties as well as our own. And it was really, it was an easy, it wasn't even a pitch at the time. It was just, hey, this is how we run our own operations. I understand what it's like to have a vacant property or a property that's not performing. I know what it's like to get ripped off by

contractors. So yeah, if you want us to manage it in the same style, then sure. And so that turned into what's now a full-fledged property management company. We've got several hundred units that we're doing. We really are hyper-conscious about managing properties in one specific area of town just so that we're not having to drive all over creation. And so the property management, as a lot of people know, it's got really thin margins, but it gives you a lot of credibility. And so we built this system.

And for me, it felt like a ton of work. It still is a ton of work. But in the eyes of the community, bigger investors and more serious investors started coming to us saying, hey, look, I loved what you did on this place. Can you manage mine? Or, hey, if you ever want a partner on a deal, if you come across anything, can you let me know? So for the first time, it was, wow, we're actually getting solicited for our expertise.

We're getting money. We're attracting money to go find deals. And that was the catalyst that really started. We saw what we needed of buying and holding properties in really expensive cities. It's like a bank account. It's a huge wealth generator. But what you don't have is you don't have the cash flow of these other markets that, you know, it's consistent. You can scale up a pretty big cash flowing portfolio.

But for us, we can create hundreds of thousands of dollars in equity. But then we'll get $50 a unit and cash flow. And so we needed to go out and create cash. And that's what we found is if you're in property management, it's going to lead to brokerage. And if you're in brokerage, it's going to lead to other things. And so where we are at now is we've got property management going. We incorporated our own brokerage firm.

Mainly, it just started with our management clients of, hey, I'm ready to sell. Neil, do you know somebody that is willing to buy this place? I don't want to go to market. I don't want to speak my tenants out. And so I would put it out to my other clients and they'd say, yeah, you know, I'd love to buy this. Can you help me do that? And so we got a real estate licenses. And whenever you can put a buyer and a seller together and the management contract never changes hands,

the tenants never know that the ownership changed. And you make a transaction fee off of that. That's awesome. It's like, oh, hey, this is where we can actually generate money and use our expertise and increase our management company to start actually doing this full time. And we see a path forward to grow a portfolio. You know, one thing I really like about that as well is when you, I guess when you start the property management thing, I mean, it is a lot of work, right?

Like it's not necessarily a passive business. But it's, again, it's a business. So if you focus on it and you build systems and hire the right people, you can get more more passive. But what I love about it is that it's kind of a hedge against the economy collapsing, right? Because like if the economy goes down and all of a sudden you can't buy any, you're not, you know, buying any more rentals, people still got to manage your tenants. I mean, tenants still need to find a place to live. The landlords still most likely will own their property unless we, you know, see a complete destruction of American society. But like generally

speaking, it's a good kind of hedge and then jumping into the brokerage thing as well. Like right now is a really good time to be in, to have a real estate brokerage because a lot of people, you know, prices people are selling it. I don't want to say it called easy, but it's definitely not like 2012 trying to sell a house. So anyway, I love that you're kind of picking up these ancillary income streams as a way to both diversify, make more income and justify having that employee. And I think, because yeah, I think that's awesome. So nice work. And you realize that, you know, there's so many opportunities within that model that if you look at it just from a residential perspective, every single tenant you have is a potential buyer. Every single single.

property owner that you have is a potential seller and a buyer. Every one of those people as well, they are in the game. They know you. They trust you. You have an ongoing relationship with them, which is what a typical real estate agent, what they don't have is they don't have ongoing relationships. And so they're constantly having to hit the pavement. For us, it's really telling when people are saying, hey, you know, I've got a couple hundred thousand dollars that I need to put to work. I don't know if I want to buy a whole property or, you know, what do you think I should do with it? Like, do you want to borrow it and buy property? And it's like, oh, yeah, I do actually. And let me tell you a little bit about what I'm looking for is I don't want to be going to a bank.

I don't want to be having to do appraisals and go through underwriting. And this is why I think it's a really good deal. And the more I can communicate our criteria, the better it gets of, okay, if I'm calling, if I'm doing a capital call and I, I say that we have a property, it's, hey, we have a property and we need to move on it. Neil, let me ask you one quick, quick question. How many units are you up to you right now? We've got about 200 units that that's under management and probably about 10 to 15% our own that we've held on to.

And, you know, buy and hold real estate is amazing. It does not put food on the table sometimes. And so we've let go of properties. And that's where you're just like, well, in a couple of years, we've created hundreds of thousands of dollars on one property. And so we've naturally been looking at, okay, interest rates are going up. We've really squeezed out all the expandability out of this property. And we've increased the value and the rents.

So is this a good time to sell it? And for some of them, they are. So here's the point I wanted to make. Brandon and I interview a lot of investors. And we talk to a lot of investors. and we network with a lot of investors. And what I see a lot of the time is the real heavy hitters are doing what you're doing. They own businesses and they're investing those profits into real estate because sharp business minds recognize that real estate is probably the best investment vehicle available to the average Joe.

You know, like if you're Elon Musk, maybe you have opportunities. The rest of us don't have. But you have figured out what I like to call like the synergistic quality of investing to where I bought rental properties. So I learned how to manage properties. So I was able to start a property management company that now generates me income. I have a business. Well, now I have all these properties that I'm needing to sell and I know people that need to sell properties and I know people that come to me and say, I want to buy. Well, you could refer them to a real estate agent or you could go become a real estate agent,

which is what I did. And that was how I started that business. Now you're owning a brokerage where you have other agents that are, A, looking for deals for you and B, helping other people to find deals and C, selling deals that make you money. And D, selling your deals probably for less money when you want to exit, right? The synergy of all these things working together is making you money and it's saving you money because you're you got out of I need to find a deal I need to find a deal. I need to find a deal. That very narrow focus. And you said, okay, this is the stuff that I have learned. How can I apply this in every way possible to be able to generate income for myself? And once you learn the power of leverage, it doesn't even have to be something you like anymore. It can just be something

that makes sense and you hire someone to do the stuff you don't like and you keep focusing on what you do. That's what I want to highlight for people listening to this. Learning to invest in real estate, everybody wants cash flow. Cash flow is great. But that's like just the very, beginning, the tip of the iceberg of how much real estate can provide for you. You now are making lots of money, I'm sure, from all these different ventures that you have in 10 years from now when we talk to you, it'll be even bigger. You'll have more units under management. You'll have more agents working for you. Think about all the people that are going to bring you the deal before they put it on the market. Hey, I know that Neil buys property. Let's just see if he wants to buy it, right? You're going to get first

pick of all that portfolio you have before any of those people put it on the market. For all these people that are saying, I don't get it. Where's the deals? I can't find a deal. Well, Neil's soaking up a lot of the deals before they ever hit the MLS because he has those relationships someplace, right? So that's what all of us should be doing is we should be looking for opportunities like that. How do I hit it before it gets to the marketplace where it's like out there for everybody to get? So I love that aspect of what you're doing. I want us to be talking about that more on bigger pockets and learning how you've taken the things you've learned from investing and incorporated that into your business.

And it's kind of amplified the returns that you're able to make. With that being said, how do you guys feel about going into the deep dive and finding a little bit more about what Neil is looking for in a deal that he wants to buy. Yeah, let's do it. Sounds good. Hey, everybody. I'm really sorry to interrupt the podcast, but I have news that I cannot wait to share. We have just added a significant amount of perks to our pro membership. We've negotiated discounts for a variety of services, including various discounts on closing costs from several lenders, monthly savings on landlording tools, and even a discount for converting your retirement account to a way to fund your real estate investments. Check out these perks at

Biggerpockets.com slash perks slash pro. And we're not done. We're negotiating even more discounts to make the pro membership even more valuable to you. All right. Now back to David and Brandon. All right. It's time for the deep dive, the part of the show where we dive deep into one particular deal to ask you seven very specific questions about that deal. Neil, do you have a deal in mind? Something you bought recently that we can just dive deep into. I do. It's a it's a four-plex deal that we purchased in 2016, and it's actually on the market right now. We went under contract two days ago with a 30-day close. And it's a great deal. I really like the fourplex model because it's the most amount of units that you can have in a residential property and get that

really nice long-term financing, but have as many units as possible. All right. So let's go into it. So first question of the seven, how did you find it? So we found this one off market. It was a long-term landlord that was pretty burnt out on landlording and you could tell right away whenever you pulled up to the property. It just looked like it needed help. You walk in the front door, a smell was just coming down the common hallway. One of the units, there's a hoarder in there that there's just, it was a flee infestation to boot. And so we, we kind of skipped our two diligence on that unit on our inspection. The other units were in decent shape, but it just, it needed some TLC to come in there. And so what we did is we, we're hitting the absentee owner list, looking for people with lots

of equity, long-term ownership in the neighborhoods that we really wanted, in the kind of zoning that we were really looking for. And this is a guy that really fancied himself as a great landlord. He was boasting that he was a commercial agent for a long time. And he's a guy. just knew how to manage real estate. And we ended up coming to a price of $450,000. At the time, it was a little on the high end that I was thinking, but we paid it. He definitely got the price that he was looking for. We got the kind of product that we were looking for. But it was one of those scenarios where you just cannot do the work that you need to do on a property like that and turn it around with tenants in the property.

And the fortuitous thing was immediately we had two tenants that just they vacated whenever they found out the property ownership had changed. And so that gave us two vacant units to go address. And then we had a really challenging situation with a tenant that was the hoarder. We did have to pay relocation fees, which was essentially a gesture of goodwill. We really wanted to help this lady move on to. the next chapter of her life in a cleaner space that was a little bit more conducive for healthy living. And so we went in, we were able to put a lot of sweat equity into it at the time.

I had just hired an assistant and he was able to go in and clean up a lot of the property. We had our contractors lined up. And so we're all in probably another $50,000 in terms of materials and probably a little bit more for labor. And so, We took the rents from about $600 a unit. They're five, between $550 and $600, put in new tenants. They've been fantastic tenants. We re-rented them at $1150 to $1,275 is the last rental turn that we've done. Wow.

We've been able to find a tenant for the garage, which wasn't being used, and they're paying another $150 bucks. We added things like laundry and storage, and we started to build water back to them. We added a garden outside so that tenants could actually appreciate the space that they're in. And we got it appraised shortly after that for $775,000. And now we are exiting very close to that price. So what did you do to negotiate this deal? So what was very interesting is that the seller actually brought a real estate agent to the transaction.

It was one of the neighbors from across the street. He had no marketing into it. He was just there to pretty much push paper. And that was actually really helpful because we were able to play to sensibilities of some of the property owners that you end up negotiating with. They want an exorbitant about a money that is not based in reality. And so we found dealing with a representative of them that knows the market and knows how escrow works and knows how the programming works.

we are able to negotiate with the seller and the agent at the same time. And we definitely hit some snags all in the way of the, the owner was there for all inspections and was always just talking about how this was a non-issue. Oh, no, don't worry about that. It's fine. And if you've ever gone through those walkthroughs, everybody does that of, oh, don't worry, they're fantastic tenants. Don't worry about the fleas.

And that's how we found it is just hitting an off-market list. he called us and then he brought the agent in later. So when you say off market, I mean, would you send him a direct mail letter? Is that pretty much how it worked? Like you sent him a letter and he called you? Or how did that, like how did you get in touch with them?

Yeah, we sent him a direct mail letter. And for us, our direct mail is always, this is who we are. This is what we want to do. It's not flashy marketing. I'm really looking for the marketing that we're sending out.

Can it be congruous with our personalities whenever we get there? You know, if Neil and Alyssa, show up, I don't want to have sold them on fast cash and four days and, you know, the closing of your, of your choice. So yeah, so what does it look like? I mean, your letters, are they typed?

Are they handwritten yellow paper, white paper? Like, you know, at the beginning, we did a lot more handwriting. But as you get busier, you realize you have to leverage other people's time and experience or build systems that you can leverage your own time to do that. And so a lot of our marketing started off very tailored, hey, I see a house or see a building. I'm going to handwrite them. And that's always really good for us to have.

But if you look at overall, just backing out the numbers, you've got to be sending quantity. And you just can't do that handwriting. Yeah, that's really tough. So cool. All right. Well, next question or next part of the deep dive here,

how did you fund that deal? So before you answer that, You said $4.50 is what you paid for it. And then how much did you say you put in for repairs? We put about $50,000 into repairs and, you know, a lot of sweat equity, you know, on top of that. Okay. So how did you fund all that? So the funding, actually, this one came from a conventional loan that we had on the property where we went at, we went to the bank.

We showed them our track record, which is really helpful. We, we had them do an appraisal on it. And it came in just barely above the purchase. price that we're looking for. But those loans are pretty much gold if you can get them. What other loan product is out there that you can get four units at a 30-year fixed interest rate? And at the time, the interest rate was like 4.1%. And every single month, it's like a savings account by clicking down on equity. Yeah, I love that. So we had funded it conventionally, and then we put in our rehab funds from a private lender.

that we had negotiated, hey, this is the interest rate that we're going to pay you. This is the security that you're going to have. And this is how we're going to refinance later on and pay you back. So that brings us to the next question. We like to ask what you ended up doing with the property. Did you refinance it and then pay back your investors? Did you keep it and you haven't refinanced it yet? How did you end up?

Yeah. And that deal, we refinanced out. And whenever we bought it, we knew, you know, $450,000 dollar purchase price, 50 down into the rehab. A couple of months later, once we had stabilized the building and put in new tenants, that's whenever we did the appraisal. And it came in at 775 and got a loan to value that essentially just exited out our lender on it. And we still had a really big chunk of equity in there.

Yeah, that's awesome. Yeah, that's why we, I love, I mean, this is classic burr in a way. Well, actually classic burr, typically in a burr deal, which we talk a lot about burr here on the podcast. But burr is usually, yeah, where you buy the property, you rehab it, you rent it out now. You know, it's nice new tenants. And then you refinance it, getting your money back. Typically it's done. You use a like a hard money loan or a private money loan or a home equity line of credit or something to buy it because typically they're in such bad condition when you buy a rental.

In your case, it was actually able to be purchased with a conventional loan, which is even better. Because it's like this, you're not down to the wire like, oh, I got this hard money a six-month loan. I got to get a refinanced right away. So that's awesome. I love that. And I love the fact that you took those rents from like the $500, $600 range and almost doubled them. That's tremendous value to add.

And then billing back water to them. That's one of my favorite strategies in the world for increasing cash flow. So that leads us to what was the like outcome in terms of you said that it appraised at $775. What did your cash flow look like? And then did you just say you were selling it? Is that, is that what? We are.

Yeah. We are under contract to sell it now. So they've got their. What's a cash flow like in the meantime, like since then? And then what are you selling it for? And why did you decide to sell it? We're cash flowing about $375 a month. And that's really where, you know, it's a little bit of cash flow. It's a four unit property. Yes, I do like to hold on to those kinds of properties. But what we're really looking at is where do we want to go from here? And the more we get the experience of being professional managers and investors of properties, the better that we can really crank on, the forced depreciation lever and not have to worry about, okay, we're going to be buying a property that is now valued based upon comparable properties and not upon the income that we can generate on the property. So that's why we're exiting is we can just take those funds and

put it into a bigger and better property and create more equity out of that. You know, I know you mentioned you're making almost $400 a month in cash flow, but how much money did you leave in that property? In terms of equity? Yeah. Roughly $275,000. So you're probably looking at an ROI of like 20% or so. Is that about where you are? Right. Okay. That's something I talk about all the time is it's not just cash flow because you can make anything cash flow if you dump enough money into it, right? But what you're able to do is take the equity that you had, pull it out. You've improved your ROI now on the property because there's less I left in. there's less investment and you can go buy something else. And I wonder how many people there are

out there with just hundreds of thousands of dollars in equity in a property that's making $500 a month that they could be making $5,000 a month if they pull that money out and they went invested in something else. In my book, I talk about comparing the return on investment versus the return on equity. When you first bought a property, your ROI might have been stellar, but it's appreciated so much that now if you calculated that on the equity instead of what you originally put down, it's actually a horrible return. Your property's not performing well. And for those people, if you're thinking, well, I have a ton of equity, but I don't want to

go through the hassles of being a landlord again. Well, you got to find a guy like Neil, pull your money out and give it to him and let him give you a return this much better than what you're getting or partner with another investor. There's all kinds of options out there, but don't let it just sit in an investment just because that's what you've always done and you're comfortable there when you have a ton of equity. It's not making you any money. Yeah, just to jump in quick with some math, like just quick and dirty stuff, right?

Let's say you were making $400 a month in cash flow times 12 is, what's that, $4,800, right? Yeah, $4,800 a year in cash flow. On a $27,000 in equity sitting there works out to like a 1.7% return. So when we talk about return on equity, right, you're basically in cash flow making like less than 2% on your money. So what you did is you're like, we're going to sell this property so that we can take that equity, dumping into another property that will be getting way more, hopefully, than 1.7, or at least, I mean, maybe you'll get in the,

the same cash flow in the next deal, but you start that appreciation climb again, you know, so you can start back low again and bump up a couple hundred thousand dollars more and build it up. You know, it's just different styles, different types of investing, but, you know, I love that. I love that you were at least making some cash flow, but you bought an awesome property in an awesome location that you had forced appreciation in. It's just, yeah, it's an awesome game to play. Yeah, you can you can really analyze it from the return on equity. And it is a great, holder of wealth, being able to have a property that you've got several hundred thousand dollars. And for some people, it really makes sense to say, I'm not going to sell. I'm just going to

depreciate the property. I'm going to receive the income on it. I'm going to let it coast. But if you're really looking to scale a portfolio, you've got to be analyzing what your return on equity is. And if you're starting to just trade up into bigger properties using 1031 exchanges, then it's great. But for the landlords that they are. tired and they're not really making a good return and they're just letting their properties slowly degrade, that's the people that I think they really need to make a decision here. Agreed, agreed. All right.

Last question of the deep dive, lessons learned. I mean, we've been talking about a few lessons here, return on equities up, but anything else that stands out, you're like, oh, man, this is something I learned that maybe went really well or didn't go so well in that one. Yeah, I think it goes back to the marketing and the properties is that we spend a lot of time at the very beginning doing direct mail. And you can easily go find properties like that, just knocking on somebody's door or going around a neighborhood that you want. A lot of people ask us all the time, how do we find a property like this? And how do we raise money for it?

And so what went right is that we knew what we are doing. We knew the kind of owner that we wanted to go after. We knew the kind of property we wanted to go after. And then finding the financing to go do something like that. It's actually quite simple of their investors are looking for three things. You know, they're looking for a return. They're looking for security and they're looking for customer service. And so that's what I really liked about the deal is that it was a win for the property owner. We paid him what he thought was a great price. It was a win for our investor because they got to put their money to work. And it's a win for us because we got a great property. We got some cash flow off of it. And now we're going to get another great property after this.

So that's a perfect setup for my next question is what comes next? What comes next is really surveying the landscape of where we're at. I really like the fact that we are positioned in a service-oriented model right now, that you just can't go out and buy a property every other day in our market. And we are hyper-local. We don't go to the other side of the river. We don't go five miles out. And so for us, where we can really gain a lot of value is by sticking close in,

sticking to know, or knowing what we've done before in our bread and butter. And so what we're looking to do is leverage our service side of businesses. We did incorporate a brokerage where we've got 16 agents with us now. That's a great source of clout in the market and being able to leverage other people of, hey, how can we help you to run a successful business? And at the same time, if you find anything that we might like to invest in, or if you need help funding a deal, or if you need management help on it, come to us. And so now we've got a lot of other people out there that they know what we do. They know what we're looking for. And now it's how do we consistently generate cash? And we don't even have to be the

quarterbacks anymore. How do we give it to somebody like you guys that are in? different markets to go place into bigger deals that, you know, you get to a point where if you're in, if you're a landlord, you get tired of being a landlord. And so let me go give it to other people that want a landlord and they know how to do it better than we do. Yeah, you know, that brings up a really interesting point about, you know, when when you're first getting involved in real estate, you're like, I need to borrow money from somebody. I want to get private money. I mean, that's a big huge thing, right? And we talk about this all the time on the show, but I'll say it again, we oftentimes think we're asking for a favor when we're raising money.

It's like, I need a favor from this person, which, yes, they are giving us money. But at the end of the day, this is just part of the investor lifestyle. Like, in the beginning, you're typically the one using borrowed money. And later on, you're the one looking for opportunities. In fact, I get hit up almost every day from people like, yeah, you know any deals out there I can invest my money into. Like, you know, you want to, you know, you want to partners. Because people don't want to do it like at that stage, later stage of they're investing. They want to put their money with somebody else.

And I love that you talk about the three things that every investor. needed that, you know, is looking for. What was it? They're looking for a good, uh, you're looking for return service. Yeah, return. Security and customer service. Yeah, I love that. I think that's fantastic.

I'm going to totally make an Instagram thing and share that and steal that from you. But anyway, no, this is fantastic. Again, I love that. And I think, uh, I think you're right on. So I'm kind of looking forward to seeing where you're headed. But before we get out of here, we're not quite done with today's interview. We want to go and move over to the world famous fire round. It's time for the fire round.

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sponsored job credit to get your jobs more visibility at Indeed.com slash rookie. Just go to Indeed.com slash rookie right now and support our show by saying you heard about Indeed on this podcast. That's Indeed.com slash rookie. Terms and conditions apply. Hiring Indeed is all you need. All right. Let's get to the fire on. These questions come direct out of the bigger pockets forums and we're going to fire them at you nice and quick. here, Neil. Number one, how do you reset for your next short-term rental guest? And if you don't have it anymore, I'm not even sure, do you have any rentals in short-term anymore? We're running three of them right now.

Okay. So how do you reset? In other words, what they're asking specifically is like, like, how do you schedule cleaners? How do you check thoroughness? How do you refill or replenish things? Like, give any like just quick tips on how you run that part of your business? Find a good cleaner, pay them well, systematism as much as possible. Have a checklist. Make sure you've got more towels and linens and coffee than you know what to do with. And I, I fortunately don't have to to work in that side of the business very much, but it's tough. And you've really got to boil it down to what's your process. I love that. Systems checklist, like they're lifesavers. Like my whole life life is about checklists now. You know what's so cool is that you can actually have, get an app and take a

picture of a unit. This is what I want the finished product to look like. And then the cleaner has to take a picture and it'll send in your app so you can see, oh, this is what it is now and this is what I wanted to be. And it's pretty cool. Is that in the Airbnb app or is that something else? No, it's a different app. I think it's called properly. I could be wrong about that, though.

We'll put a link to it in the show notes on this. But yeah, that's cool. What's awesome about that is you, because it's just a pictures that look at, you can have a VA in some other country who compares the pictures and sees right away if it looks like it should and gives the actual green light, like, okay, you're good to rent it out or No, no, no, you need to go pick up those socks that are in the corner that haven't got fixed and doesn't have to be you. This is why we need to hang out more. Getting that kind of information and just a push of, hey, this is how you can do it without having to actually do it yourself.

That's the kind of mindset that I want to be around. That is my whole life right now because I am a real estate agent who doesn't love being a real estate agent. I love real estate, but I don't love all of the tiny little paper cuts of death that come from being an agent of all the tiny details you have to handle. So I've been learning to systematize and push that on to other people. That's funny because it looks. Last week we were recording the podcast, whatever the last week's show was. And my internet was just acting so bad because my wireless router wasn't good enough. And I was just having so many problems with it.

And so afterwards, I'm talking with David. And I'm like, my internet is just horrible. What I need to do is I need to plug it in directly and I need to go get a. So I told David, I'm like, I'm going to head to Staples right after this and go pick up a like a converter box that I can plug a, anyway, Ethernet into my computer. Anyway, he's like, well, isn't. Chris there. And Chris is like my video editing assistant. And I'm like, yeah, he's editing a video. He's like, send Chris to Staples. And I was like, oh,

I guess I could do that. So that's what David's really, really good. I mean, David here is good for a lot of things. But Chris left right then. I was like, hey, Chris, go run a staples and you pick up this thing. He came back 45 minutes later. I plugged it in. My internet worked just fine. And I didn't have to do it. And so it's good to have people in your life that kind of push you to think outside the day-to-day inside your business. So thank you, David. Because I love bigger pockets. So,

Brandon probably made a YouTube video teaching someone how to become a millionaire. And that person was somebody able to think me because I sent Chris to Staples to pick up the router. But yeah, I mean, I'm a huge opponent of it. If you hate doing something, find someone else to do it because it will kill your energy. It'll kill your vibe. You won't be as productive as normal. And most of us just have no idea how many people out there wanting a job.

Like, I want to go pick up routers for Brandon Turner because I freaking love this guy. And he's so cool. David just lost all his real estate clients. I know. You guys did kind of interrupt me before I was able to finish. I was going with that. It just left me looking like, let David sell your house and he'll hate it every step of the way. And you'll know the whole time.

It's not like that at all. I love selling real estate. There's just aspects of the job that are mind-numbingly boring to me. And I like to leverage that off to other people so that I am in a peak state and get to do my very best. I like to make. Nice. Thank you guys for actually letting me save that, not torpedoing business. I have a quarter million people right now.

All right. Next question. Before I make this any worse, I just got my first. booking, this is an Airbnb question. Oh, man. Airbnb. If they could check out four to half, four to five hours later,

then they were supposed to check out. That's not a problem because the calendar is still wide open. They want to make an exception for these people and let them do it because they don't want a negative review. That's what this question is. How would you handle this so that you don't get negative reviews from the guests if you don't let them leave late? But you don't want to get penalized by Airbnb for not having them stick to the timeline.

It's that fine balance. Every Airbnb host is petrified. of a negative review, which is one of the reasons why I hate the business model in general. Me too. If you have a flexible, if you have the ability to personalize it and look in the calendar and see if somebody's coming in on the backside, sure, stay late. But just know, you've got to then shift your entire cleaning schedule. And so it can be a big pain.

And you've got to be able to communicate that to the guest of how do I gently tell you no, 90% of the time? And it just, that's, that's really where I would take it. But again, I didn't like Airbnb management and I don't have to do that anymore. You know, that comes up a lot for me in my business as well, the real estate agent thing, because what you're describing is you don't want someone's expectations not to be met because then they're going to be upset and they're going to give you a bad review. And it's the same thing with any business, right? What I found is every single problem like that that could come up that you have to fix, like figure out on the fly, you could have prevented by preparing somebody ahead of time for that situation and telling them, what you're going to do. So as I have seen, like, oh, this keeps going wrong in every yes girl or, oh, this always happens, right? Now I jump in in the very beginning of the process and explain when we get to like one of the big problems with selling a house is that people don't realize you have to

clean it. You can't leave a complete mess for the person moving in, right? We might think that's common sense. A lot of people don't care. They just leave garbage everywhere and they take off and they're like, ah, see you suckers and this is your problem. And then I jump in, I'm trying to not to keep them from getting sued and they don't understand that that's a big problem. So now I tell them when we're first meeting about selling your house. When we get to the end, this is something you need to know. The contract says the house has to be clean. This is the way it needs to look, blah, blah, blah, so that they can't come back and give me a bad review because I got them sued as their agent or whatever. So I'd imagine.

The managing expectations. I think that's huge. That's exactly what you're doing is. You got to tell them up front, hey, if you check out late, this is what the extra fee is. And this is why I have to do all this extra work. The next person is going to be ticked off that they didn't get to come in when they wanted to. If you're going to be late, it's going to cause a big problem. So this is what you have to pay up front. And then they're less likely to give you a bad review because they knew the expectation going in.

One month to add to that, that worked for me when I had the Airbnb. I did it a couple of times. I just blame the cleaner. Like, oh, yeah, you know, I'd actually love to. But the cleaner can only come between two and three on this date. And so like if she doesn't get the clean, we just won't get it clean for the next guest. And then what are they going to leave the cleaner a bad review? Anyway, I love blaming other people for.

That's why I love using property management, Neil, because I get to blame you guys when something goes wrong. Oh, right. Can you fix the same? No, I'm sorry. The property manager said it's not in the budget. I can't go give you granite countertops and you're like horrible neighborhood. And wherever you're like, look, our hands are tied. The owners, they don't want to do this.

That's exactly what we need. We're all just that buck along in this big circle. And then eventually the tenants just get like worn out from asking and they just accept the lower expectations that we wanted in the first place. There you go. All right. That is generally not how I like to run our company. Just branded and I. Yeah.

All right. Next question. This one is going to be a legal question. So, you know, obviously we're putting a disclaimer here. Like we're not giving legal advice, but I want to see your take on it. So I'm looking at a, somebody said, I'm looking at a triplex. And the ad says the unit is only legally a duplex. What are the ramifications of that?

How do I do my due? diligence in confirming whether or not I need to remediate that or destroy a unit or just live with one that's not legally allowed. How would you approach a situation like that? First of all, what you're not going to be able to do is get appraised at the value of a dupe or of a triplex. The bank is going to say, hey, this is a non-conforming triplex. And so you have to value the property as what it legally is. Now, there's going to be investors out there that they don't really care about that third unit. They know they're hedging their bets that the city's not going to find out and make them take it away.

Maybe they're going to live in it, whatever the scenario is. But there is a risk there. You need to know that going in. And for me, it boils down to how much money is it going to take to remove the unit? What is that going to do to value? And can I get it at the right price going in? Yeah, that's good answer. I also find just to throw in piece of, some towns like are way more flat.

flexible than others. So like in like Montessano where I live, Montessano, Washington, right? Or at least did live. The town, like they wouldn't, I have a couple that are just non-confor. Like they're duplexes, but it's not really a duplexes. It's like somebody added on a barber shop and then I turn that into a unit. The town could not care less like at all. Now someone's going to go call the city and complain. But like if I was blind in Portland, like there, I would be much more worried, especially when it's a bigger city where there's a lot of red tape and things. But yeah, in my town, I just go and I call the guy's cell phone because I have the guy's cell phone number who's the, you know, city inspector. And I'd be like, hey, dude, this is the situation. You'd be like, yeah, don't worry about it.

Because so like kind of knowing your town can kind of help with that kind of stuff as well. Yeah. Yeah. Yeah. Yeah. For sure. All right. I really like this last question because it kind of touches on what we just talked about

as far as being the property manager, having blame me in on different people. So this is a newbie investor and they are saying that they've read that some experts present themselves to tenants as the property manager, not the landlord. Poor Neil is just getting hammered with like the worst ethical questions that we've ever come up with before. He's handling it's so good. All right. That makes sense to them. So they've been showing the property and saying I'm the property manager rather than admitting I own this property. Some of them have asked me outright if I was the landlord and I evaded the question. But the impression I gave was that I'm not the landlord or owner. So here's

my question. When it comes time to pay me, aren't they going to have to put my name on the check? So I think what they're saying is how do I, how do I get around this problem of telling you, I'm the landlord and you trying to figure out if I'm really the owner? Go hire property manager. There you go. It's that simple. You know, if you don't want to be, if you're having to pull all kinds of like pull the wool over somebody's face, you know, either own up to it because I don't really want, you know, I lead a very honest life of if I'm talking to a tenant, I'm not going to lie to their face of yes, I am the owner. This is what we can do. This is what we can't do. I don't need to hide the fact. But the best thing that I ever did for my investing career was we hired a property manager. I don't have to go talk to the tenants about this. And so, So now it goes back to, you know, if the property manager has a question from a tenant, they can come to me and I can make a decision that's not a pressure cooker situation in an awkward social setting. I don't want to put myself in that scenario.

And if I didn't have a property management company that I owned, I'd go and hire one. And if I had to do it all over again, I probably wouldn't create a property management company because it takes so much time. They're very, but that role is so valuable. and there's a lot of, there's a lot of reasons why you need to have that barrier between you. Yeah. You know, I've gotten, so I had a number of these discussions with people on bigger pockets because of this issue of like I, when I started, I didn't tell anybody I was the owner. I just said, I'm, well, see, I would say I'm the landlord and then the owner with somebody else.

Because when I was 21 and I'd rented these 50 year old mill workers that would scare me, I was too afraid to tell them I was the owner, right? That's changed now. But what I do today that helps is I just say I'm one of the owners. Oh, yeah, yeah, I'm one of the partners in this deal. I'm the guy that's in charge of kind of dealing with showing the units and stuff. Like, that's what I would say. Because that is legitimately true. The other owner just happens to me in my wife.

But they don't have to know who the other partners are. They're a real boss. Yeah. But it gives me that ability to always step back and go, well, let me talk to the other partners about it. Or let me go talk to my partner. Let me go talk to the manager, you know, or whatever, the other owners. It gives you that one of the biggest problems I see.

in property management is when you make decisions on the fly. Like a tenant says, hey, do you mind if I have a dog in here? Like my initial reaction is always, sure, I don't care. I mean, go ahead. Whatever. But then I, like, that can lead problems because I didn't let the other person do it. Now am I being racist because I let one person not another? You know, like, those are the issues that come up if you start making decisions on the fly.

And so by all, like, no matter what the question is, that's, well, let me check with my partners. Let me check with the owner. Let me check with whatever. So anyway, cool. All right. Well, that was the end of the fire round. Round.

But we're not quite down. we got one more section of the show, which we call our Famous Four. All right, let's get to the Famous Four. These are the same four questions we ask every guest every week. And Neil, I know you've heard them before. Let's see what you've got to say. Number one, what is your favorite real estate related book?

I was thinking a lot about this, and it was a book that I read early on, and it's called The Confessions of a Real Estate Entrepreneur by James Randall. No one's ever said that one, I don't think. Oh, really? I mean, it's probably from the recesses of a bigger podcast. That's where I get all my reading list and go abundance now. But it just, it was the first time that you could really hear the anecdotes of how a real

estate entrepreneur went out and created value doing different kinds of projects. And, you know, if you get stuck in a rut doing multifamily or single family, you're, you're constantly looking at like, am I doing this right? Can I do other things? And that book just lit my brain on fire. All right. What is your favorite business book? My favorite business book right now, I just finished it the other day.

I could not. I listened to it on Audible. It's called Shoe Dog by Phil Knight, the founder of Nike. We've had a lot of people recommend that lately. Yeah, keeps coming up. Oh, man. I should read it. It's just one of those that it reaffirms.

So you're like, yes, business is hard. You're not the only one in a scenario where you've got to figure out problems all day long. And I tell you what, I finished it in like three days. I didn't even talk to my wife or kid for, for a good portion of that. It was just walking around the house with earbuds. That's funny. I'm going to have to get it now because you're like,

yeah, you're like the third or fourth or fourth voice. In fact, Josh Dorkin the other day was like, you need to read Chuna is so good. Chew Dog. Josh Dorkin said that. What's it called? Chew what? And he's a hometown hero here. You know, we're in Portland, home and Nike.

And so just it kind of came full circle for me. That's pretty cool. What are some of your hobbies other than ignoring your family so that you can listen to business business. You know, we love to travel. As I mentioned, one of the reasons why we got into real estate was to do more traveling. We haven't been able to do that a lot because we've got a two-year-old now, but we're starting to really get into systematizing so that we can go travel, do outdoor stuff,

like hiking and skiing and fishing. And I'd like to learn surfing more. So I'm pretty jealous of branding doing that. Come on, hang out. The first time I'm surfing was with you guys in Texas in a big pool. And so ever since then, I've got the bug. Oh. My little girl, Rosie, just right over.

People can't obviously see her if you're listening to the podcast. But you say hi? No. No, okay. We're going to be shy. Anyway, all right. Next question. David, this is you.

Nope. This would normally be you. Oh, you're right. This is me. Mommy. Okay, here I go. There you go. So, Neil, what sets apart successful investors from those who,

give up, fail, or never get started. I was handing little girl back. All right, go ahead. I think there's a, there's two things. One is everybody, they get into real estate and it's like a shiny object syndrome of, well, I can do buy and hold. I can do wholesaling. I can do this. I can do that. I can flip. And without that lack of clarity of let me focus on one thing and get really good at it and then realize a lot of people that we see fall off, they're just not proactive. You know, the deals are not going to come to you. And if you're not consistently swinging the bat, you're not going to be hitting the ball. Ooh, that's another good Instagram quote right there.

That's a, I was just about to say, Brandon will put an inspirational picture on that and put it on his Instagram and then he'll take credit for it later. He's known for stealing. I'm trying to L analogy David Green right now. It's hard. Why would you? Analogize. Let me just go beat Bruce Lee in a street fight. That's what that was.

All right. That was an analogy to answer. analogy, wasn't it? They didn't realize I did that. Tushay. Where can people find out more about you? They can go to our company. It's called Latitude Realty and Property Management. You can email me, Neal at Chooselatitude.com. We're on LinkedIn, Facebook. The Instagram thing, I'm sure we have an account. I just don't check it. And so I feel like if you want to get a hold of me, an email or going to our company page is going to be the best spot to do that. All right. Neil, You are an awesome dude.

You have an incredible story. You are a very good real estate investor. I think I've learned a lot just listening to you here. Thank you very much for being on the podcast and sharing some of the stuff that you've mentioned. Brandon, you have anything you want to add? You know, I don't think so. But why don't we take this thing out with Neil here together? We'll do this as a three-way outro.

So I don't know, Neil, this was fantastic. And we'll see you around the show, definitely. You know, keep listening and all that good stuff. And hopefully we'll hang out again soon. Maybe some surfing. I think that would be fun. So everybody else, thank you guys for listening to the bigger. Pockets podcast, you all rock.

If you have questions for Neil, of course, you can always check out the show notes at Vigercopockets.com. So I show 291, and you can jump into the comments there, have conversations. We'll have links to everything we talked about as well. And lastly, if you have not yet left us a rating or review in iTunes or Stitcher or Google, wherever it is you're listening to this. Spotify now has it. YouTube, go there.

I don't know if you can leave a review on YouTube, but you can click the thumbs up button. Anyway, please do so. It helps us reach more people, like Neil here, who came on the. you know, started listening to the show and it definitely kind of set his life on a new trajectory. So we want to be able to do that for more people. So thank you all for helping spread the word about Bigger Pockets. And with that, it's all I got. So anybody else want to anything before we get out of here? No, thanks, guys. This is full circle for me. So it's been an honor to be on the show. Started with Bigger Pockets. And now you are a guest on the podcast. Very, very cool.

If you would like to be on the Bigger Pockets podcast and have a story that is similar to Neals, please reach out and let us know. There's a process you can apply online to be a guest. We look at those every. Yeah, BiggerPockets.com slash guest. Well, that's, I wish I could have remembered that. It's pretty simple. And let us know what you like about the podcast. Leave us some feedback. Do you like the deep dive segment? Is there parts of it you do or don't like?

Brandon and I are continually tweaking this to make it better. With that, we will get out of here. This is David Green for Neil Collins and Brandon. There's an echo in here, Turner. 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 hype, you're in the right place. Be sure to join the millions of others who have benefited from biggerpockets.com.

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