BiggerPockets Real Estate Podcast - 8: Learning to Be a Profitable but Ethical Landlord with Al Williamson

Episode Date: March 7, 2013

Being a Landlord can often be challenging, expensive, and stressful. So, today on the BiggerPockets Podcast we are speaking with Al Williamson, an active BiggerPockets member and inner-city landlord who has decades of experience dealing with tenants in both multifamily and single family rentals. Al is a pro at reducing expenses, increasing income, and dealing with difficult landlording situations – which is why we wanted to sit down with Al today. Before we get to the show, thank you again to everyone who has subscribed in iTunes to help make us one of the top business podcasts in all of iTunes! We’re up to 117 5-Star Reviews so far! Every subscription in iTunes and every review helps us reach more people – so thank you! Read the transcript of episode 08 with Al Williamson here. In Today’s Podcast, We Cover: How Al used a 1031-Exchange to “Trade-Up” to a larger property. Tips for living in a small multifamily and living with tenants. How to avoid being a slumlord in rough areas. Why simply picking up trash can transform your investing. The power of “Patient Equity.” Al’s goal of Not being dependent on the tenants’ rent to pay the bills. Ideas for both increasing income and cutting expenses. Al’s plan to revolutionize income for multifamily properties. How Al used a very small syndication to buy a rental property The biggest challenges for an up-and-coming landlord. What the “Landlord Lid” is – and how to overcome it. How to Invest in Real Estate when you have a full time job AND a busy family life at home Links From the Show: [Video] How I Quickly Analyze an Investment Property The BiggerPockets Blog The BiggerPockets Forum Al’s BiggerPockets Member Blog 1031-Exchange Resources KickStarter.com BP Podcast Show 3 with Brian Burke The National Night Out Insanity P90X Books Mentioned in the Show Rich Dad Poor Dad The 36 Hour Real Estate Investing Course John Maxwell Al’s Book The Catalytic Landlord – on Kindle Serious Creativity by Edward De Bono Tweetable Topics: “Landlord tip for improving the neighborhood: Go and meet the neighbors!” (Tweet This!) “Often times things go unresolved because no one is operating as a leader. Are you?” (Tweet This!) “Spend time getting really good with your first investment before branching out.” (Tweet This!) “Sometimes you have to pay your ‘learning tuition’ and lose money when you take risks.” (Tweet This!) “Your real estate investment should be a physical representation of you.” (Tweet This!) “Why are you building wealth? The most successful leaders KNOW this answer.” (Tweet This!) About Al AL Williamson is Civil Engineer and landlord from the Sacramento, California area. Al has invested in real estate since 1996, focusing mostly on multifamily properties in urban areas. Al’s BiggerPockets Profile Al’s G+ and Facebook Al’s Blog: LeadingLandlord.com Learn more about your ad choices. Visit megaphone.fm/adchoices

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Your home for real estate investing online. Welcome to another episode of the Bigger Pockets podcast. I'm your host, Josh Dorkin, along with my co-host, Mr. Brandon. Turner. What's going on? Brandon, how's your week going? Hey, Josh, it's going all right. I got to admit I'm a little, my butt is getting kicked from this insanity workout program, which is fun, but man, that thing kills. You ever done that? I have not worked out in a long time. Thank you for calling me out. You know that. And so, you know, you're trying to pressure me here. That I am. That I am. It's a, yeah, yeah, yeah. All right. It doesn't, hey, it doesn't show if it makes any difference. Yeah, but the listeners don't know that. But anyway, my week is going well. I actually put an offer, I had kind of a, I put an offer on a fourplex. Actually, I talked about it on the Bigger Pockets blog a few weeks ago about I made a video on how I analyzed an investment property.

And then I went and put an offer on it. They were asking 120. I offered them 80. They verbally accepted. The agent called and said that they accepted. There was four days of kind of limbo where they were just saying, yeah, we'll just say, yeah, we'll do it. Sounds good. And then I got an email saying somebody higher up the chain said, no way. We're not taking a $40,000 loss. So now it's sitting back on the market. So that's

kind of a bummer. Yeah, that's kind of a bummer. Sounds like the typical goings-on of an investor. So, you know, roll with the punches, baby. It does. Yeah. And actually, one thing I did when I did that is I submitted a piece of paper with it, a cover letter. I've never done this before. But I submitted a cover letter with my like, hey, my name's Brandon. This is my wife. We're looking to buy this property. And we want to improve the neighborhood, blah, blah, blah. And then put our picture on there, you know, cute young couple invested in real estate.

And my theory was that it's a local bank that's selling it. It's like a small local community bank. I thought, well, whoever's in charge might see that and think, oh, you know, this is great. You know, it's some emotion in that. Oh, how cute. Let's give them our money because they're cute. Exactly. That's my theory.

So I put that up on the bigger. So I asked that question on the forums the other day, if that would actually work or not. And I think most people thought, well, it's worth a try. Some people said, I don't know, probably not. But I thought it was worth the risk. But yeah, maybe it worked. And maybe it worked initially, but maybe it didn't work for the higher up. That's probably what happened.

It's possible. And that actually, you know, the give it a try attitude, you know, is definitely one that today's guest exhibits. So I think it's kind of a good example for exactly what we're going to be talking about later. But that does lead us to a new feature that we do want to do on the show here called The Bigger Pockets Quick Tip, where we're going to let you guys know just a little factoid, I guess, about using Bigger Pockets to help you maximize your investing. And today's tip is something a lot of you guys may know already. but for those of you who read the BiggerPockets blog at BiggerPockets.com slash R.E. News blog.

Did you know that there's actually a whole other world on Bigger Pockets called the Bigger Pockets forums that have over 500,000 posts or slightly under 500,000 posts? We're right at that borderline right about now at the time that the show is coming out. But hundreds of conversations, there's tons of activity going on in the forums. So if you are not aware, go and check it out. Again, biggerpockets.com slash forums, other forums. And for those of you people who know of the Bigger Pockets forums and use the Bigger Pockets forums, there's this whole other world on Bigger Pockets, the Bigger Pockets blog, where we've got dozens of authors who are writing unbelievable content every day.

We're putting out multiple articles a day. So check that out. I'm way past 30 seconds, so the 30 second quick tip is obviously not so quick. Anyway, Brandon. Let's introduce our guest. Why don't we do that? Al Williamson, our guest today, is a professional civil engineer who's also a landlord. Al's pretty active on bigger pockets as well as on his own blog, leading landlord.

and Al, Al talks about pretty unique ways that landlords can create new income streams, reduce expenses, increase their equity, which is pretty much what we want to talk to Al about today. So, Al, welcome to the show, man. Thank you, Josh. It's an honor to be here with Brandon, too. Yeah, the honor is all ours. Slightly less honorable with Brandon. It's definitely good to have you, man. We get to have you. All right, man.

So let's jump right into this. You are a civil engineer turned landlord. Tell us a little bit about your civil engineer-ness. Okay. Well, I always was a tinker. My father kind of was a mechanic, and he made me watch him, and then I just kind of got into it.

I loved fixing things more than blowing them up. Nice. I had to pick a major, and if I wanted to be an adventure, which was the goal, I figured I better just do something in general. Let's do civil. That's how that came about. And what's the focus in civil?

Well, civil structures. I oversee bridge construction, roadways. I did the solar installation, solar PV system on Alcatraz, all kinds of fun stuff. I have a fun career. Wow. Okay. So you're the guy we could yell at when our bridges are falling apart. and you're the guy that gets to light up Alcatraz.

Very cool. That's it. That's it. Now, that's awesome. All right. Well, so what made you then get into real estate? Because you kind of have every young boy's, like, fantasy job of, like, building and playing with things. Yeah.

You know, I wasn't even thinking about real estate until I got married. I was getting ready to get married. And I went to a church picnic. And an older gentleman was giving me all kinds of advice. And one of them was, hey, you should think about moving into a church picnic. a duplex instead of a single family home, why don't you guys move into a duplex? So that, that triggered everything. That was, that started the explosion of me reading everything I could get my hands on and, and making the numbers work, and I could see it unfolding before my eyes.

Nice. Yeah. So it was, it's, it's, it's really good to be able to share things with other people because if no one would have put that in my ear, I wouldn't be here. Okay. Now, that's great. Well, So I'm assuming then that you listen to the sage wisdom of the unsolicited advice of the gentleman who told you to go ahead and buy this duplex, yes? You know, I did one step better. I was able to have a great wife and she was cooperative to whatever, whatever you want to do, honey, type of thing. That was awesome. So I went for a fourplex instead of a duplex. Nice.

But we ended up with a threeplex that worked out. really well for us as was a Victorian and we just loved it. So we bought it, of course, and we moved into it and we did that play, renting out the other units to offset our living. Gotcha. Yeah. I started. Oh, sorry.

Go ahead, Brad. Well, I was going to say, I started kind of the same way. I bought a, I mean, after my first single family house, which I sold, my wife and I bought a duplex and moved into it. And the other unit offset the living expenses. So we were living for free for that year, and it was awesome. And yeah, it's a great way to start. It is.

It's like the best piece of advice for someone who wants to do a little bit more, especially wealth building while you're young. That's an awesome move. Yeah, I agree. Because I mean, now that I moved out of that place and probably the same for you, you know, we have that fixed rate, low interest rate, owner occupied mortgage, you know, but I don't live there anymore. I just get to keep that.

I think I'm at like 4 or 5% on that one. And I'll have that for probably the next 25 years. There you go. It's a great way to step in because you step in with a low percent down, right? Yep. So that was great, but I don't still have mine. It blew up on me. It quadrupled in value, and I did 1031 exchange.

Oh, nice. Take a little bit off the top there. Nice. Yeah, that didn't happen to me. I think mine's dropped 20,000 in value, but it doesn't really matter because it's fixed rate mortgage and that cash flows. There you go. That's it. That's it.

Hey, what, Al, is a 1031 exchange for? those people who are not aware? So that's how you can move your equity without having to pay taxes. So you can move into, you have to take out a little bit more debt than you currently, whatever your mortgage is has to be bigger. And you can exchange your property for something that's larger, has more debt associated with it without having to pay that 25 long-term capital gains. Gotcha. Gotcha. And of course, anybody who's hearing this and wondering about 1031 exchanges,

please seek the advice of a professional before trying to go ahead and do one of these things. And there's plenty of information about 1031's on bigger pockets. But, okay, so you got into real estate. You bought this multi. Now you're living with your tenants. Let's talk about that because, you know, for me, I never did it because that was a huge fear. I did not want to live next to my tenants. I didn't want to bang on the door at two in the morning. I don't want my tenants to know where I live.

I don't want to deal with that headache. What are the pros and the cons of living next to your tenants? It really depends on your personality and how you're going about it. Because I definitely understand how you feel about it. For us, I was learning the business. I fixed everything myself at the time. And I like to, I enjoy fixing things so that they don't break against. If I touch it, I'm going to do it once, and it's going to last me for 10 years.

So I ended up working all the problems out, and there was no issue with my neighbors, my tenants. In fact, it was a small, I don't know how it turned about, but I realized that I was able to kind of create a little community there where everyone was taking care of each other. And when we moved out, we were able to bring someone to replace us into our unit that also fit into that little community that we had. And it was great. They ended up not even wanting us to,

they just sent the rent. They really wanted to take care of the place themselves. They wanted to take care of each other. So they had a big stakeholder type of mindset. So that's, in my case, that's what happened to, in my case, here in Sacramento. So I don't have any cons at all. Gotcha. And, you know, that's one of those things that, you know, I definitely wanted to talk about with you.

I know you tend to, I guess, preach is maybe the right word, I don't know, about. That's a good word. Okay, okay. You know, preach about the community and building a sense of community. community and taking care of your tenants and, you know, being a good landlord. And, you know, that's, that's phenomenal. That's, you know, we're all about that. You know, we want, we want more people to be doing that because, you know, anyone who knows me will know that, you know, I'm really big on, we as an industry need to work better. We need to try harder. We need to really do our best to

build a better image. And not just for PR's sake, but because we need to do better by one another. And so, you know, I think that's awesome. Why don't we talk about that? Why don't we talk about, you know, what's your philosophy on, you know, just what what landlords need to do to be good landlords? What's a good landlord in your mind? Okay.

You know, I think most landlords, especially the ones I follow on bigger pockets, are great with their tenants and taking care of their units and their properties. They're not, they don't fit into the slumlord thing at all. What I really get passionate about is beyond your property line. As soon as you step off your curb, you got, you're part of the rest of the neighborhood. There's all kinds of interconnections there. Everyone's depending on you as the property owner to participate in the civic activities on that block. So if you check out, your tenants check out, and the community has lost a great opportunity to grow and to strengthen that block. So it starts a downward spiral.

If the landlord is not interested, if the landlord has an ATM philosophy about the property, it doesn't care, as long as their roof is not leaking, they don't really care what's going on around their property, then that sets the stage for neighborhood decline. I agree with you. It's funny, I had some property in the inner city, and, you know, I ran a nice property, and of course, the properties around mine started to kind of decline. And, you know, it was it was horrifying to see this because, you know, I'm doing my best. I'm trying to, you know, keep this up. I was not, I was an absentee. I was long-distance landlord. But what I had zero control over was what was happening in the community. And so, you know, unfortunately, no matter how hard I tried, no matter what I did, to be a good landlord, if the other properties are falling apart and the landlords aren't involved in what's going on, that's exactly what's going to happen. And I had a bail. I had to get out before I was bleeding, you know, you know, so much so I was broke. You know, I couldn't do that. So I had a bail. And it was

unfortunate because, you know, there was an opportunity for this to really turn around and become a, you know, a great area and a great investment. But, you know, I totally agree with you on that. That's a great philosophy. Let me add a couple more things. I think if you're in the inner city, what I'm talking about, talking about as inner city things. If you're in a middle class or a fluent neighborhood, then disregard everything I said. Those guys are not close communities are taking care of themselves. You know, it's a healthy environment, especially as you go to an affluent neighborhood. They don't really care about landlords. They can live without landlords. But if you move to the inner city, they are dependent on landlords. That's where the owner occupancy rate is low. And the

renters, percent of renters is really high, and landlords have all the levers at that point. So if landlords are who have all the biggest stakeholders, if they're not interested in the community, guess what? It's all kinds of disorder, and that's going to attract all kinds of things you don't want to happen there. Okay. So how does a landlord make sure they're not a slum lord then? It's one of those like, hey, if you don't know who the slumlord is in the room, you're him.

No, that's not what I'm talking about at all. I think generally all landlords are taking care of their tenants and they're fixing things. It's very few of their slumlords. I'm talking about talking to the landlord that's the property right next to you. making sure that you guys are watching out for each other. Making sure that litter doesn't stay on the ground for a long time. I mean, you don't have to spend all day picking it up, but you're responsible for making sure it gets up.

Oftentimes, and I'm talking about inner city, things go unresolved because no one steps up as a leader. And things languished because no one's operating as a leader. Okay. Yeah, yeah, no, I agree. I think in my own investing, I think I've seen that as well. There's a neighborhood where I have an apartment complex, and it was a pretty rough neighborhood to start with. And it still is, I mean, it wasn't the worst, but it wasn't real great.

And so by buying the apartment and fixing it up and trying to make it look good and painting and landscaping and just garbage duty, like you just mentioned, was huge. Just trying to take into leadership in the garbage pickup in that neighborhood. I mean, the entire neighborhood has increased in value because of what we've done so far just at that one property. And I'm pursuing another one on the same street so I can try to take over the whole area. Absolutely. Yeah, it's not a bad idea. But I like what you said. You and I talked once before and you mentioned, yeah, like, and you just brought it up again is talk to the guy who lives next door.

Like that's where you need to go. And that's something I have not done. I've never really gone and talked to the landlord who owns the rental property on that street. So that's really, really good advice. I'm also wondering, was your first deal, when you started out, were those all inner city? No. I started off in the, well, it was kind of a seedier part of Sacramento, which is now one of the best parts of Sacramento. It's called Midtown Sacramento, right next to downtown Sacramento.

And now it's filled with coffee shops and great cafes and great places to eat. But at the time I was getting in, it was just going through a neighborhood revitalization process. And it was okay, but no one was giving it credit, the neighborhood credit. There's always a lag time before the outside community recognizes what's going on. So I got in at the lag, and then I caught some wins that helped out the property values. Okay. But now you probably do a little bit more with the inner city, it sounds like. Yes, yes.

So as I put everything together, I start reflecting about what was happening, I saw some trends and I saw, hey, if I want to buy low, I love exercising. I like being a leader, especially in places that need some type of someone to step forward and be a crosswalk guard. They say, hey, you guys can go, you guys can stop, come on. That helps everything flow. and that creates value, and I'm all about creating equity.

So that's what it's about. It's an equity play that's very cost-effective. That makes a lot of sense. I want to take back to the point about talking to the neighbors. You know, as a landlord, I've actually found that absolutely, you know, even as a homeowner, first of all, you've got to, you know, when you're going to buy a house or you're going to buy a property, Before you even buy it, talking to the neighbors is absolutely at least what I found, the single most important thing that you could possibly do in terms of learning about this potential property that you're going to be purchasing, learning about the neighborhood. It's funny.

Neighbors love to gossip. Neighbors love to talk. So if you could go and knock in the door and say, hey, I'm looking at the property next door. I really love this neighborhood. I love the property. Here's what I'm looking to do. What are your thoughts? What do you know about the property?

property, what do you, you know, it's going to give you so much insight so that, you know, hey, maybe you're going to end up picking up, you know, these tenants that you might have to, you know, dump as soon as you get in because they're doing bad things or whatever else it is. But I just wanted to mention that because it came to me and I was like, you know, this is, is so important as dealing with these neighbors. Yeah, absolutely, absolutely. So let's talk about that first, the first deal. What lessons, I guess, did you learn in that first deal?

The lesson was learned with there was it really pays off to know everything about your property, knowing all the components. That was really helpful. I ended up having a pipe leaks, and I learned about the restoration process from a flood restoration company coming in. So that was good. It was good also that I spent some time on the first one to do some learning instead of running out and grabbing three properties because I could.

And that was great about that. Also, I let the equity build up on this first one. So that was really nice. I was able to, under the economic conditions at the time in the mid-90s to 2000, it was just building up. So I was able to exchange into an even nicer property than if I try to take skim off the top right away. So patient equity, I learned the power of that for the first one for sure. Okay, okay.

And so you said mid-90s sounds like you've been in the business for a little while, including the bubble. Yes, yes. Did you experience the crash firsthand of the bubble popping? Were you protected? Oh, you did? Okay. I did.

I was, so in like in 98 or 2008, yeah, I was laid off. I was working for a, I had stopped working for this state of California as an engineer. I was doing some nonprofit work just because I wanted to give back a little bit. And I got laid off from that job. and also my tenants at the time of my A-Plex and also my other units were having issues as well with jobs and income. So I ended up with big vacancies and also functional vacancies where people living there but are struggling to pay. And so I end up with some of those. So that was very painful.

That was very painful. going through your savings just to keep it afloat, you know. But it ended up working out. But that was tough. That was tough times. I guess from there I learned that I didn't want to be dependent on tenants for my rent. That's kind of shaped my philosophy in general. I started looking for other sources of income,

giving me the thinking, hey, I shouldn't be fully dependent on rent. Even though that's what landlords do, but there's so much more that you can do, we think of laundry and okay, great, we can do laundry. But what else could I do to make some income working with the tenants? Does that really open my eyes to that opportunity, mother necessity, right? Yeah, no, definitely. Well, what are those things? I mean, you know, off the top of my head, I think laundry, I think vending machines, you know, what, What other income sources, I guess, a garage storage? Yeah.

What are you doing in addition? I started collecting those. So I started collecting ideas to see which ones I could use. And you're right, garage storage, there's, you know, your parking spots. You can rent them out during the day to local businesses, things like that. There's also working with your neighbor. If you guys are both neat your lawns mode, then go for some. group discount on your landscaper.

So you're lowering your expenses. If you need snow shoveling, you know, things like that, going with groups. And, you know, I actually tried it out an experiment. I was working through with my blog, and I saw that the opportunities for Wi-Fi, that people were paying like $70, $70, and everyone works in their silos with Wi-Fi.

So I started to try to crack that code of how can we, work together, save each other, you know, $50 per person. And so I tried an experiment, which failed. I couldn't get my Wi-Fi signal out far enough to do a premium or collect enough customers. Now, I was using a, I'll be real quick here, I was using a coffee shop model where you can give your Wi-Fi complimentary in exchange. If someone comes to buy a cup of coffee, they can use the Wi-Fi. right?

Yeah. So that's how that works. So I was actually giving them a newsletter and providing complimentary Wi-Fi. So that's how that all work. And I was going to grab a bunch of customers and I was going to cover my mortgage for my rental. So it had a lot of potential that just didn't work. Interesting. But as you guys talked about before, you've got to pay your tuition, your learning tuition, right?

Yeah. I end up going a whole, just about $3, almost $4,000. But I'm still going to do them again. I'm going to keep doing experiments until I figure out how to pay for my mortgage for my 8plex without relying on the rents that come from it. That's kind of cool. And if you can succeed, I think a lot of people are going to listen. I will tell you, I am absolutely 100% skeptical.

I don't think it can be done. However, man, if you can do it, you're going to revolutionize the income for multifamily. That is my goal. You just said it right there. Yeah, that's cool. Yeah. You know, I'll go ahead.

That's what I'm devoting my career to is to figure that one out. That's cool. You talk about it on your blog, I read something the other day that said, you call it the $100 expense reduction challenge. And I know you just touched them that a little bit, but I'd like to talk a little more about that. Because, you know, it's oftentimes landlords look at ways to increase income. And we say, well, we can raise the rent a little bit or we can, you know, charge late fees or we can, you know, whatever, rent the garage out. But I really like that you talked about the expense reduction.

So can you talk a little bit more about that kind of challenge and some of the ideas you've come up with? Well, I'm just starting this challenge. But, yeah, I'm going to look through every piece of my expenses and try to, try to brainstorm ways that I can reduce them. And basically the goal is to find $100 of savings. Now this is the flip side, I did a $100 income challenge for alternative income. Now I'm doing the expense reduction to see what comes out of it.

I don't know, it's like the beginning of a math problem. I don't know what's going to fall out. But I'm putting myself out there and having my, people hold me accountable to put the pressure on. That's when I'm the most creative when I'm under the gun. So you will know, I'm going to keep it up in my bigger practice blog of what comes out of it. Oh, that's great. That's great. Hey, Al, let's talk about financing a little bit.

What type of financing are you using? It sounds like you're mostly a multifamily guy. Are you also doing singles? I have one single. I had to buy because it's right next door to my multi. You had to. Well, for defense, yeah, I didn't want the wrong person. The wrong person moving there would have emptied out my eight unit.

Yeah, so I bought that one. So it's a mixture of family loans. I have some families with a little bit of savings at low interest rate. I can give them a much better rate. So they're really happy with that. So I do that. And then, like for the single house that I have, I had a little chunk of change and a bunch of friends with even less

chunk of change. So I took, make the promissory notes for them, for friends, and secured by the single family house, and we just bought it outright. Oh, cool. So it's a combination. I pay them. Now that you have online bill pay and things like that, you can have hundreds of, you can pay hundreds of monthly interest payments per month to different people. And they're happy with that. I've seen a check come to them every month. Yeah. And it's just a matter of using what the new technology to manage all those things. So this is all, I mean, this is all private money at this point that you're using that. Yeah, for that house is all private money.

Small amounts, you know, $5,000. Right. Of those and things like that. Also, you know, when people know that they're a part of, but they don't have an equity stake in it, a part of that house, they drive by and take a look at it and they keep an eye on it and it feels good. So how much more accountability? How many partners do you have on my house?

house. There's 10. 10 partners. Wow. That's... Small loans. Small loans. Yeah. That's kind of cool. I can buy them out, anyone out at any time. So I haven't overextended myself. I'm still the biggest

cash lender in there. And how does that work? Because I've never heard of anybody doing this on a small scale like this. Obviously, on large scale projects, you know, you'll hear syndications and things like that. But, you know, with folks you know,

pooling together your friends to finance a deal. I've never heard of it, again, on such a small scale with so many people. What are the challenges that you face in doing that? Beyond just like managing 10 people. Other personality problems? There's no problems whatsoever. I did it so that I have a track record that do larger things. You guys talked about your shows before. Now I have five years of experience when I go, you know, I'm planning on making a jump in a few years for now to a much bigger property, but I have this track record of making payments to these people and 10 investors that are happy. Also, I got them the degree to, when a place is vacant, no payments go out, and I would catch them up later. So that's key. That's key. If you

can get your investors to say, hey, especially in small places, if it's vacant, I'm going to hold off a vacant payment, and I'll catch up down. the line. Interesting. Man, you are twisting me up, man. This should be the Al Williamson. Like, you know, how to do a landlord, what's the word? How to hustle.

It's not a hustle. The unconventional landlord, I guess. I don't know. That's exactly what I would love to be considered that. Yeah, that's cool. That is interesting. You know, okay, so I can totally see that on a small scale. You put out like five grand.

Okay, cool, no biggie. But like, you know, now when you're talking about larger scale, and it sounds like you haven't yet had the opportunity to test this on a larger scale. I'm moving there. I'm moving there. I, again, I wonder on the success rate that you're going to have on people saying, yeah, no, you could hold off payment until you got a tenant in there. If it were me, I'd say, you know, that's not happening, man. You know, the mortgage payment is due on this date. Here's the deal.

I mean, I get it, and I think it's cool. And shoot, I wish as an investor, you know, I could find people to agree to it. And it's astonishing that you've done it. And I guess it's worth trying, you know, is worth, is I guess the advice that I'm getting from this is, you know, you don't know until you try. Now, Josh, I'm going to push back on you just a little bit. Because you have all kinds of credibility and you've been in this game and people have people around you who have watched you. do things and struggle and make it and continue to climb, they're going to make that type of loan for you,

especially if they have a little chunk of change. Well, you're talking about, no, but you're talking about, you know, let's not take me out of the equation. This isn't about me. This isn't about me. This is about like, you know, the thousands of people who are sitting, listening to us debate this here. Yeah, this is about them. If they have a track record, if they have a track record,

that's the key. Yeah. And people, and they work with integrity, and people know that. And if folks are having 1% interest rates in the bank, it sounds like a pretty good option to me, especially if they say, I'm going to buy you out anytime.

Interesting. Hey, Brandon, what's your take on this, man? Get in on this action. Come on. All right. Well, what it brings up in my mind is Kickstarter. You know, the website Kickstarter, we're crowdfunding and all that.

That's it. Yeah, it's like a small version of that. And I know that there's rules being changed right now. And I don't claim to understand all of them, but I know that the government is becoming more and more open to this kind of thing for real estate investors. You know, before it was syndications were a real complicated thing. And you had to get SEC, I guess regulations. I figured out and it was a mess. But I believe that they're opening that up.

So I'm interested just to see, you know, how that's going to turn out for you. And if you can do it on a bigger scale, I mean, Brian Burke a few weeks ago, I think it was show three. I mean, that's what he did. He went in with, what did he say? He got half a million dollars. Yeah, police officers. He went and got 20 police officers or whatever, and they raised half a million dollars just like that. So kind of a, I just, I love the fact that you're willing to try this stuff and kind of make yourself the test dummy.

Hey, take away dummy. He is no dummy, that's for sure. I'm off the test. You know, I actually had called Brian before your show a few months ago. So he was generous enough to give me some advice because I was, you know, I'm thinking about exchanging my Aplex before I'm 50, you know, in three years. I want to switch styles. And he gave me some great advice.

I'll share that with you guys. Because there's going from eight units to really need 30-some units to kind of get a good management company, good on-site management company to keep up my level of integrity and what I want my rentals to look like. I have this thing in my head about it's a physical representation of me. So I can't just have my rental look any type of way. That's me. So I'm going to need to have to pay a quality management company or on-site management company.

So one thing he said is to start interviewing management companies well ahead of time. Before you actually go make that purchase, before you're into that 1031 time zone, you know, build a relationship with that management company, get them looking for properties for you, and take a look at how they handle their portfolio, and then go from there. So that's kind of where I am now. In the next three years,

I'm finding out who's the player for that 16 to 32 unit, who specializes in that. That's great. Yeah, definitely. And you said 1031 time zone, just to clarify for people who don't know, when you do a 1031 exchange, there is a set period of time in which you actually do have to do the exchange. Otherwise, I don't know the exact legal behind it.

Something bad. Something bad happens, yeah. And the other thing I want to bring up also is it's really important for anyone listening who's thinking, hey, I can grab, I could go out and put out ads and say, hey, guys, you know, give me your money and all, you know. and let's put all that money together and buy a house. There are SEC regulations, and you definitely need to know what you're doing before you start putting people's money together. Al did this with folks that he knows, which basically gives him, gets him kind of under the radar, so to speak.

But this is not legal advice, so definitely. No, no, no, no, no. Definitely jump in and talk. A engineer, not a lawyer. And nor are we. So, you know, definitely talk to an attorney who can advise you on these matters because you definitely don't want to get in trouble with the SEC. That said, transition.

So you're currently managing your properties now, right, Al? I am. Right now, I am. Okay. It's been real easy for me at this point. Yeah, everything's easy with you. I don't know. Now, it's like,

Al, what about this? What are your challenges? No challenges. It was easy. What about this? It was easy. It is now. It wasn't always.

All right. So what were the biggest challenges for you as an up-and-coming landlord in terms of property management? So it was learning to be tough but fair. I'm a pretty nice guy, but you got to kick some people out at times. And I end up, I hate the eviction. process is just painful for me to take off work and go to the court and all that. I didn't want to hire anyone. So I've come to now just buying people out.

Yeah, cash for keys. Cash for keys. I want you out of my place. I also have some pretty strict lease clauses about, hey, if you're, if you got anything shady going on, if you're disturbing the other tenants, you know, that's breaking our lease. and here, here's some money. I bring them boxes. I rent U-Hauls for them.

Well, that's cool. Just get out. Really? That's not a bad idea at all. I really don't. Maybe I take it too personally. But my children have to be able to live there at any of my units at any time. Otherwise, I don't really want to be a part of that.

So if I need to get someone out quick, that's what I do. So what does that look like? You know, an eviction is going to cost you. How much? It costs like $500. So if you're lucky. All right. With legal fees and filing fees.

And that's what do you do yourself? But, yeah, if you do yourself. But, you know, the lost income, because the tenant's not going to pay during that time. And they may thrash your place. Frash your place. Blush things down. So I, you know, I'm happy to pay people out and put on a smile. Hey, what's your buyout?

Because I want to move into a unit and stop paying the rent. Yeah, hopefully your tenants don't listen to this and get any ideas. You know, that's funny. I do the same thing. Yeah. I feel like I failed a little bit if I let someone get through my screening. Through all my, I have a lot of deterrence and things like that. Like I have signs that say smile, you're on camera, different things like that.

Now, is there an actual camera or you... I don't talk about that piece. I bought the sign. Look around. It's a deterrent. It's a deterrent. And I try to stack deterrents on top of each other, letting them know, hey, I'm the neighborhood watch captain here on this block.

You know, when I'm screening people, they know that. Wow, that's great. And, you know, we put together on Bigger Pockets, this ultimate guide to tenant screening, which anybody listening can check out at BiggerPockets.com slash tenant's screening and it's got tons of really, really awesome information about screening a tenant. But let's, you know, I'd love to hear from you. You know, what are your, particularly because of the demographic, what's the biggest challenge in screening tenants for you?

You know, you want to, for me, I want to make sure they have three times the income, their income be three times the rent. Yep, I do the same thing. And I'm also looking for assurances that they're going to be able to make that, into the future. And I'm maybe a little lenient. If I hear their problems or what happened and things have changed, then I'm going to work with them a little bit.

But lately is where I am right now with the place or how the neighborhood is going. We're getting a much better quality of tenant. So all those excuses and things I really don't have to deal with anymore. During the lean time, it's like 07, 08, when everyone was getting laid off and housing was going down and jobs are going away from Sacramento. Sacramento was hit pretty hard, so he had to deal with the gray market a little bit more. Well, and I think another part of that, Al, probably is the fact that you've improved your properties. And you kind of build a reputation, right? I mean, people start to know in the neighborhood that you run a tight ship and this is a good place to live.

Have you noticed that as well? It is. in our neighborhood's better. You know, one of my, I have this thing called the, the landlord lid where other landlords kind of keep your property values down.

That's the lid they place. But working with, working with other landlords and working with my neighbors and doing the community building things like a national night out. And always being the, you know, the crosswalk monitor, telling people,

hey, hey, you've really got to clean up. Or this is not, You know, I need to talk to your landlord about what's going on here. You know, I don't have a problem putting myself in that position. It has made our neighborhood better and it's nicer. And it's so more people are attracted to it.

It's also become, it's so nice that it's become a political football where they're trying to redistrict my neighborhood into another person's district. They're kind of fighting over the section. That's what's happened. So it really works. talking to your neighbor saying saying hello it works that makes sense you know i can hear your uh is that your daughter in the background now yes it is i have a two-year-old two and what's a two-year-old two and what three months or so right now she's exercising her independence and nice it's learning

how to talk and becoming less frustrated so okay well actually yeah why don't we go into that a little bit about you've got a family, obviously, and you've got young kids at home. So a lot of our listeners, I'm sure, have kids at home, and they think, well, I got a 40-hour a week job, and I got kids and a family. I can't invest in real estate. I don't have time. Maybe we can talk about that a little bit of how you balance that. You know, I kind of end up juggling with them more so than balancing it.

When it's crunch time, like when I'm flipping over a unit, I let them know, hey, I'm going to, I got to get on this and stay on this. So daddy's going to be not here this weekend. So that's kind of focus. I don't really try to balance it. I'm poor balancer. Yeah. Juggling is good.

Juggling works. I do the same thing. I focus hard on one thing at a time and move things around. And tell people what's going on. Like I'm trying to get this project done. I'll be with you at this time. That seems to work for me. Well, I could speak to this.

Brandon, shut up because you don't have kids. You got your cats, you know. I do have my three cats. Listen, kids make for a challenge. That's for sure. And anyone who's got kids knows that, you know, I mean, there's work and then there's kids and then there's the gray in between. And you do what you can.

I mean, I think that's kind of the bottom line is, you know, when you got to get to work, you got to get to work. But, you know, I don't know. For me, my family is number one. And Brandon certainly knows that we work every day very closely. And, you know, when my kids need something, at least for me, work stops. Everything stops, work stops. And I go and I take care of my kid.

That's my philosophy. You know, I will give up being Uber, Uber successful to have a better family life and to make sure my kids are taking care of. And, you know, I think anyone listening probably, you know, would agree. that, you know, you got to put those kids first, period. And obviously, if there's, you know, things that you got to do, like what you're saying, Al, you know, you got to go and do it. But, you know, when the kids come crying, something's wrong, I guarantee you're back at home taking care of it, right? Yep. We're violently nodding my head with you. And we're watching your head

violently or not. Hey, so I know you and Brandon talked about something that I'm, I'm curious about and Brandon quoted this thing in my notes here. It's the term magnetizing a place. So what is that? What is magnetize a place? There's a lot to it. There's some nerdy side to it. I'm going to try to keep it interesting because a magnet,

it works when these electrons are flowing and the crease of the field. I want to talk about that. I will talk about being, when I grew up, say, I went into a very problem. that was how I did my A-Plex and how I'll do some other things is I go in and I'll buy the most problematic

and largest property I can as close to the edge of the good and bad neighborhood. And then I'll spend time there to get my personality to magnetize the place so that people

know what my standards are and they know I'm not going away and they know I'll say this is not acceptable. and I will monitor, you know, there's, it has to reflect me. And then what happens is it repels people who don't want to go with the program. They'll naturally, they won't feel comfortable with people watching me putting up signs and saying you're on camera and keeping the place clean and making the other neighbors look, look at what's going on and point to it.

and they don't like me walking across the street and talking to the neighbor about getting to know them. And they don't like the, you know, we're talking to the police officer as he's driving by me knowing his name and them knowing me from a neighborhood meeting. You know, so they will leave and I will end up attracting, you know, it could be still people in the same demographic, still with the same income, but with a different sense of priority is different sense of honor. So that's magnetizing you, attracting people that are fit with you and repelling those who are not with it. It sounds a lot like what we do on Bigger Pockets, which is magnetized, good, solid people who are trying to run good businesses and help one another versus those folks who are looking to take advantage of other people who, I guess, by virtue of the way the community is and by the leadership that we've said that they don't want to be there because they know that. you know, the community is going to run them off. We're not going to run them off. You know, the community is going to run them off. And that's a great philosophy. And I think between what you and you and Brandon are talking about, I mean, you know, it works. You know, when people know that

you're a good landlord, they're attracted to it. Hey, really quick, and then we got to run to the end of this thing. You had talked about buffer zones. And, you know, that to me is something I always wanted to do when I had these challenging properties, I just couldn't get to it quick enough, didn't have the resources. You see a buffer zone potentially for this big multi that you've got

with that single family that you've got next door. But now, what's the buffer between that single family and the one next to it that might potentially get overrun by somebody? At what point does, do you have to keep buying the property next to the next property next to the next one to create

this buffer zone in these tougher neighborhoods. Is there, is there a line or, or does it, you know, how does that work? Well, it's, the way I see it is, it's a relationship with the owner. If there's, the one that was next to me, it was just too close. And at the time, I had to, I just had to get it. And plus, I had, I wanted to try that group investing crowdsource thing. But I do know the neighbor next to it. He's on my speed dial. I can contact him on Facebook. When his fence gets tagged, I let him know if trash is in front. He'll see me pick it up and I'll say, hey, I know you would have done the same for me. And we have that sense of, you know, there's a lot of reciprocation going on. And same with all the neighbors to cross the street.

I know all the owners, whether they live there or not, they hear from me once a year. if not more. Especially, you know, I'm always touting this neighborhood, I mean this national night out. So every landlord that I know in my area, they'll get a note from me saying, hey, I need you to contribute 30 bucks. And I raise money for that and we have a really nice time. They invite their tenants. So I kind of manufactured a reason for me to contact them for something that's not bad. So when I do reach for them,

you have to tell them something, not so bad, it's much easier, and we can get results. Got it, got it. Hey, really quickly, what is National Night Out for those people who don't know? National Night Out, it happens the first Tuesday every year. It's run by the National Town Hall,

town town. I can't remember the name of the organization that runs it, It's also part of the Sheriff's Association. It's just an event to encourage people to come out on that day and meet their neighbor and create some type of neighborhood safety that way. And it works together with Neighborhood Watch because once people know each other, they start talking about Neighborhood Watch and things like that. Awesome. Awesome.

All right, man. Well, we are very quickly running out of time. So let's get to the big final questions we know you've prepared for. Al, first, before we get to that, I know you've got a book. Tell us about that in 20 seconds. What is it and where can people get it, get out of it and where can they get it? Well, it's live on Amazon right now. I really get it up last night.

And there's a website called Catalytic Landlord. That they can buy one for their Kindle or they can buy a PDF, a catalog of landlord. And there's a workbook that goes along with that helps you write an action plan for your community. So I basically try to transfer the questions that I wish someone would have helped me walk through into a workbook. That's great. And we'll point to that from the show notes at biggerpockets.com slash show 8. Definitely make sure people can get their hands on it.

So speaking of books, Al, what is your favorite real estate book out there? Other than your own, of course. There's so many, you know, previously mentioned. I want to say the same things that everyone said with the Kiyosaki and all the great ones out there. But do you know the one that really did it for me when I first started out? It was called the 36-hour real estate investing course. And there's just a book I got from Barnes & Noble. But that walked me through the basics, and that was really good.

So that probably has the most memories for me because I went over that one so many times. Nice. I haven't read that one, so I'll look that up. What about business book? What's your favorite business book? You know, I like everything regarding leadership, because leadership and my real estate kind of tied together. So anything by John Maxwell, I like, he's got a lot of good stuff out.

But the business book that kind of really did it for me, that really triggered me was a book by Edward Di Bono called Serious Creativity. and helping me match to my natural ability to want to be a problem solver with business and understanding you could be a creative problem solver. So that really did it for me. Nice, nice. And outside of real estate, I understand you're a bit of a geek. I think you're a Trekkie, in fact.

I know we were dropping some Star Trek references, right? Guilty as charge. Guilty ass charge. Any other hobbies or anything interesting outside of real estate? Well, Brandon busted me out about my yoga. Yes. Yoga. So I was a gymnast growing up and all through college.

And then I kept doing marathons, biking. But now for work, I'm traveling. I'm in a hotel quite a bit. And for some reason, it's kind of got thicker. I had to figure out how I could work out in a hotel room. So therefore the yoga started up. Versus Brandon doing his 30 minutes of P90 in front of the computer. That's insanity, much more hardcore there.

All right. So last question, Al, in this industry, there are millions of landlords out there. And a lot of them come and go. A lot of them fail and a lot of them succeed. So in your opinion, what do you see as the ones who are the most successful? What sets them apart? Wow. You know, really understanding why you're doing it is, I think, is key for me.

I mean, why are you trying to build this wealth and this, why are you working this method for it? So we kind of talked about before, you know, I'm involved in real estate. I enjoy helping people and I enjoy, you know, creating wealth for my kids. So that's really why I'm in it. If I was in it for some other reasons, you know, to create a fortune or to create a certain image, I think I wouldn't have the staying power that I've had. That's great. Well, listen, where can people find more about you?

You're on bigger pockets. You've got a profile on our site. You're blogging on our site. You also have your own site leading landlord. Are you, do you connect on Facebook, obviously, you mentioned earlier. So we'll point people to that. Twitter, Gplus, anywhere else? Gplus, I'm learning my way around there.

If people want to get a hold of me, bigger pocket blog is probably the best spot. Just hit me up there and we'll chat. Nice. Cool. Awesome. Well, Al, it's been very educational. I've learned a lot about the hustle landlord, right?

Very unconventional, but lots of interesting stuff. And hopefully we can explore some of that. Maybe we'll broach some of those topics on the forums on the site a little bit. it so we can get people chatting about it. But thanks for coming, man. My pleasure. Yeah, thanks, Al. And that was our show with Al Williamson.

I hope you picked up some great ideas and ways to help you better your landlording skills. If you want to check out the show notes with links to all the stuff we talked about in the show, head over to biggerpockets.com slash show 8. As always, I just wanted to remind everyone who's not a member of BiggerPockets to come check out BiggerPockets.com and get plugged into our awesome, awesome free community. Also, don't forget to hang out with us on Facebook at Facebook.com slash BiggerPockets. Until next time, this is Josh Dorkin, signing off.

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