Epic Real Estate Investing - 1031 Exchange with Turnkey Properties... A Personal Journey | 1140

Episode Date: April 20, 2021

This week, Mercedes has a special treat for you when it comes to applying 1031 exchanges to turnkey properties! More specifically, The Turnkey Girl invited Tim Ostrom and Alexander Valente, a Cash Flow Savvy’s clients, that acquired a total of 14 turnkey properties with 1031 exchange right in the midst of the pandemic! Tune in and find out more! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. So you want to be a real estate investor, but you don't want to do the work. If there were only a way where someone else could do it for you, now there is. Tune in here each and every Tuesday on the Epic Real Estate Investing show for Turnkey Tuesdays with your host, Mercedes Torres. Hello and welcome, welcome to Turnkey Tuesday, brought to you by Epic Real Estate Investing, My name is Mercedes Torres, your turnkey girl, and I am lucky enough to be partners in crime with Mr. Matt Terrio, the guy who created the epic real estate empire. I help busy professionals

create passive income through real estate investing so they don't have to work so hard and maybe even retire sooner. With that said, if this is your first time here, glad you made it, make yourself at home. If this is not your first time here, welcome back. Now, this week, I have an amazing treat for you. And the reason it's amazing is because I get so many questions about 1031 exchanges combining them with turnkey properties. Well, I decided to invite to the show two gentlemen, two very young, good-looking gentlemen, that have acquired a total of 14 turnkey properties.

with the 1031 exchange that they just completed just about two months ago, right during the myths of COVID. Now, that's not to say that these guys are go-getters. I will say that they did this with turnkey properties and with the aid of a whole lot of people involved because I think they will say that they didn't do this on their own. So, having said that, I decided to just. bring them on the show so that they can tell their story about their journey of their 1031 exchange portfolio with turnkey properties. So without further ado, I'd like to welcome to the show,

Mr. Tim and Alex from Southern California. Guys, can you hear me? Yes. Thanks for having us. You're so welcome. Gentlemen, we were talking about earlier in the office this morning, and we said, oh my gosh, we're going to have Tim and Alex on the show so they can exchange their thoughts with me about the 1031 exchange. So welcome to the show. I am so excited to have you here. So I'm going to start with you, Tim, because Tim, you and I have history together. I would love for you to tell me a little bit about you and tell me about your journey with real estate. Yeah, happy to.

Thanks for having me back on the podcast, Mercedes. I was on maybe two years ago or so. And I probably introduced myself then, but I know you've got even more listeners today than back then. So I'm 39 years old, married to my better half, Laura. She's also 39 and retired as a result of passive income in real estate. I'm sure we'll talk about that a little bit. Got two boys, a five-year-old and a three-year-old. James and Preston that keep me very busy.

live out here in southern California, Manhattan Beach, just a couple blocks from the ocean, like playing volleyball. Real estate investing is a huge passion of mine. And yeah, we had, this is the third 1031 transaction that I have done with your team, this first one with Alex that we've done together. And it's been a really good process with really good outcome. I'm sure we'll get into that some more. We absolutely will. Wow. I cannot believe that James and Preston or already, I thought they were still newborns. That's how long ago you and I have been working together because I remember Laura just had a baby

when you and I started working together. So, wow, oppressive. Alex, tell me about you. I am Alex. I met Tim in business school. UCLA Anderson is wearing out his shirt right there. Originally from New York City. I've been out in Southern California in L.A.

for almost 16 years now. I worked full-time in real estate. I work for a very large commercial real estate developer here in Southern California. And I did my first ever real estate investment with Tim about, I guess I was eight or nine years ago at this point, when we met in business school. So I've been investing in real estate ever since. and this was my first 1031 exchange, and so far it's gone, it's gone swimmingly. Very excited. I also my first endeavor into single family for rent investment, so very excited about that as well.

Yeah, I know you work for the world of commercial, the commercial world in real estate, whole different animal from real estate residential, correct? Would you agree? I would. And, like, you know, a lot of the concepts, I think, are similar, but it's just, you know, there's so many different sort of universes within real estate. And just, you know, for me personally, you know, sort of investing out of state, you know, just the level of trust required is kind of, you know, is sort of is up there. And, you know, got super comfortable with you, super comfortable with Tim and excited to see how this goes. I mean, we're at 14 now, but who knows how many will get to home.

Yeah. Oh, trust me. gets addicting, it'll get bigger, I promise, right, Tim? Yeah. We both speak from experience. I'm very curious to know how you guys connected. I know you guys were going to UCLA, go Bruins. You were at School of Anderson together.

How did the conversation of let's buy properties in L.A. together? How did that get started? Want to take that, Alex? Yeah, for me, it was really simple. I liked him. I thought he was trustworthy. I had never done it myself. I think he had done two investments himself at the time. It said going back to, you know, I think we met back in 2010. And I was like, well, I want to do one.

And then we just started looking together. I mean, it was that, it was really that simple. You know, for me, I was eager to jump into it. I was a career switcher at the time. I was in the entertainment field before that. So I was really eager to get into real estate eager to just, you know, make my own investment, just not kind of be full of it. I just hate to be someone who just talks about and doesn't do it. And Tim had done it a few times. I just really liked them, trust them. We started looking at properties together.

I just liked and trusted the process, doing it with them. You really kind of, you know, see what it's like to work together when you're looking at something together and all of a sudden, like, you know, it's wanting to talk about it versus to actually kind of jump into a project together and start talking about due diligence and, you know, how quick you are to respond to each other. And it was kind of that simple for me. We were kind of in the same place at the same time, kicked off a friendship, both had a real interest in real estate.

And I was dependent on Tim's experience to kind of guide me through the process at the time and even to this day. That's awesome. That's awesome. Knowing what I know now of Tim, that's a good mentor to have in your pocket. So Tim is not for hire, ladies and gentlemen. gentlemen, let me tell you. So, Tim, you are a returning guest, and I know I've had the opportunity to serve you and your wife, Laura, several times. So tell me about that experience, because when

you and I first met, you had zero turnkey properties. So. Yeah, see a recurring theme here. The previous properties, you know, Alex had referenced, there was one duplex in Los Angeles, one triplex in Los Angeles, just my wife and I had bought. And much like the Triplex Alex and I bought, I mean, those ones were a little bit lower cost, a little smaller, but same kind of concept. We bought them. They had pretty good cash flow. I mean, the timing, you know, we bought those were between 2008 and the one, you know, Alex and I did was in 2013. So the yields were really good, you know, cash on cash returns, even in Southern California.

Over the passage of time, equity built up faster than rents grew. So although they are still cash flowing and even cash flowing more, there's now a whole bunch of equity. you know, sitting on the table, so to speak. And it made sense to do some type of capital event. We would look at, does it make sense to do a cash out refi or sell and then go put them into higher performing, you know, higher cash flow markets? And that's essentially what we did here. I won't, you know, relive or re-talk through everything we talked to in the last podcast.

But that was, you know, with Laura, Laura and I, we did that with you for two rounds. At one time we did 1031 exchange and got seven properties. next one we did six properties, so a total of 13. 13 properties, yeah. I do remember Laura was still working when you guys were doing the exchange. So you mentioned at the beginning of this episode that she now gets to be a stay-at-home mom, a stay-at-home wife or however you want to say it. But you said it was as a result of these properties. Tell me a little bit about that. Yeah, I mean, that's kind of been our game plan since we first started buying rental properties is to build up the passive income such that it would more than cover our expenses.

And at the time, I mean, we both started off with W-2 jobs in making, you know, a good living with advanced degrees and all that in Southern California. And then once, you know, we started having kids, then it became, you know, much more, you know, real to the incentive to have extra time, especially with the kids. So it just happened to also about the time when our passive income from, you know, know, these investments and other real estate investments surpassed the income we were bringing in from Laura's job. So we use that as a, okay, check that box. And now Laura's retired. I don't know if we're supposed to use that term or not. Because I know raising kids at home is probably a

harder job than what she was doing before, but you know what I mean. Exactly. Exactly. And that's not a harder job than both of you, what you guys do for a living. Laura's work being a mom, A stay-at-home mom is harder than your work. That's very true, and I get that. Thank you for acknowledging that, Tim. Got it. So you reached that magic number. I mean, dreams do come true.

The whole goal was for her, for both of you, to create enough passive income to replace her job, and you did that. And I think you did that in two years. Is that accurate? Yeah, well, I mean, it kind of built up slowly and then all of a sudden happened fast. I mean, I guess you could say,

for when we started thinking about it, it was probably more like 10 years or so. But yeah, you know how that is. And, you know, I've got, I didn't say this in my introduction, but I've got a W-2 job also. I work for a local large aerospace defense contractor, Raytheon Technologies. And I love my job. But I also recognize maybe someday I won't or I'll get burnt out. So that's still been the master plan of build up the passive income. So I've got the ability to stop working if I so choose. Exactly. I have a couple of you that love your jobs, a couple of engineers that, I mean, I've sold them 25 properties and they love their job and they keep doing it, but they have the option of being able to quit whenever they want to. So having that option is golden. So, Alex, tell me about you guys jumped into this together. In the L.A. market, equity just, I feel like it happens overnight. And then enough equity was built. where you guys were faced with, okay, we could either continue to hold it sitting on a whole bunch

of equity or we can sell it and do an exchange. So what happened that led to the conversation that you guys wanted to or decided to sell and jump into other properties? Sure. It's funny. Tim and I, we kind of got together and just ran a few numbers last night just to make sure we were kind of seeing this the same way because it's been, you know, it's been eight years now. I think, you know, we, it was roughly kind of a, we had a good, without getting a specific number of how much these properties cost or how much income was cutting, it was kicking off. We were, we were probably clipping by like 11, 12% cash on cash. Kind of, that's sort of an average over time. It's a triplex, so we've had some ups and downs with vacancy or occupancy.

But what happened, you know, in Southern California here, we bought a property in 2013. And, you know, almost anything you bought in 2013, between 2013 and 2020 and SoCal, you probably did pretty okay on it in the L.A. market, especially the L.A. Basin. So, you know, 11, 12 percent cash on cash was terrific. But then the equity, like Tim was describing, kind of grew so much over the seven or eight years. You know, we thought that return was actually kind of like between two and three percent on the actual equity that we had appreciated or accumulated. over time. So we thought, hey, this is probably the right time for a capital event. So whether that would be just an outright sale and then kind of take the chips off the table or 1031. I think for me, part of me, party was really excited to do 1031. You know, I'd never done one before. I want to be able to say it. Cocktail party, though. Just my first 1031, no big deal. So I think, you know, and then you have the whole idea of like, hey, you know, maybe I don't want to pay taxes on all this on all this to think of them and ended up being quite a good amount of

money that you know Tim and I were happy with there would have been a large tax bill at the end of 2020 had we just not chosen to do ones we basically started looking around like hey we put it on the market we got a great offer we closed it and then you get to your 45-day identification period so we spend a lot of time looking at a mostly multifamily offer opportunities, you know, in Southern California and actually even out of state. And nothing was really kind of piquing our interest. And I think, you know, it came down to the fact that Tim had done a number of transactions with you, Mercedes. So there was a real high level of trust built up there.

And, you know, as that window of time kind of shrank on us and we had to decide, okay, you know, time to either do something or we just kind of take the check. up the table, we started looking closer at your portfolio and the timing of the closings on a number of the properties that you had. And we got comfortable, I think it was, you know, 12 transactions, 14 homes, three markets that we liked and Tim had invested in a few of these markets before. So again, a high level of trust built up there. And, you know, I think, I think, you know, I personally loved some of these videos of the houses of them being built. They're really charming houses. It's probably

the first time I've invested in real estate and not kind of seen it myself in person. And, you know, I mean, that's okay. In my mind, again, kind of working with people you trust. I think that's kind of the, in my mind, the end of the day, you know, you pick your partner and then you pick your real estate. So. Welcome to the turnkey world of buying properties without actually walking through them yourself. That's 95% of my portfolio. So tell me, gentlemen, what situation specifically were you looking to solve with the exchange?

Was it I'm trying to avoid the big tax bill and defer it for as long as I can? Or was it really because you couldn't find the inventory? What was the reason that you decided to do the exchange as opposed to just pocketing the money. Tim, do you want to answer that? Yeah, there were really like two, there were two pieces. So one was, why did we want to do some type of capital event, meaning take all that equity out? And we talked about that. I mean, the equity turned into lazy equity. It wasn't producing a yield. And, you know, I'll just kind of jump forward as a result of doing the 1031 exchange. You know, we 1031 to almost all of the equity. I think we had.

of taking out 30-some K or something like that was left. So almost all of the equity was rolled in. And it essentially doubled the yield. So, you know, our cash flow that we get each month doubled as a result of the transaction. So that was the big one. Now, for the 1031, like why at 1031, it was because there would be a huge tax bite and we would not be able to go roll all that capital into a new investment. If we had exited, sold, taken the gain, paid taxes, and then used what was left to go reinvest.

And we don't need the money now. We're not retiring now. We don't need to, you know, cash had all the chips, so to speak. So our plan and our plan from the get-go was that we would, you know, build this up and then rolled into something bigger. That's kind of been our game plan. And it's consistent with that. Yeah.

Share with my newer investors when you said, we established. essentially took our money and we now doubled the cash flow with this investment. Explain in your own words what that means. Yeah, what that means is when we sold the property, you know, it had, I think we, I think your listener audience I know is pretty sophisticated so they can appreciate that there was a bunch of equity built up. You know, we bought it a certain price. It appreciated equity.

And we're the only owner. so all that equity is ours if we do something with it. And by taking that and using it as down payments, which essentially we did 20% down on 14 properties, relevering it, taking advantage of good bank debt in high cash flowing properties, it makes it so the cash on cash return, you know, that hits our checking account every month, doubled.

Yeah. That's probably the best way I could explain it. Isn't that so sexy? It makes me so happy when I hear that. It just, you know, it blows my mind when, you know, I explain to people that if they have an X amount of dollars sitting in a bank account, making maybe 1% at your typical Bank of America, Chase, Wells Fargo, you're your typical bank. And you take that same amount of money and you buy a property rather than paying you the 1% that you, you're a typical bank, you're going. You're a typical bank. And you take that same amount of money and you buy a property rather than paying you the 1% that you. You're you, your bank account is paying you, you're now getting to benefit from a 7, 8, 9, 10% cash on cash return for the same money that's sitting in that bank account. And I just, when I educate my listener, I'm like, think about that. Your $25,000 in your bank account will pay you seven times more if you buy a property that cash flows. So thank you for sharing that. I know, Tim, that you had lots of options to find other turnkey providers.

You came back to me. This was our third go-around. What made you come back to cash flow savvy specifically? And how did you convince Alex? Let's go back to cash flow savvy. Yeah. So I don't remember if I talked about this on the last podcast, but leading up to the first one, I did a bunch of research.

I interviewed a bunch of turnkey providers. And from various recommendations and you and I talking, I got comfortable with, I'll say, taking the leap, so to speak, and working with cash flow savvy, working with you and your team. That was back then. And then now that, you know, we're faced with something, it was really simple because we had a really great outcome. I mean, that went really well on both rounds of those 1031s. You know, I'll just say, you know, without making you blush, I know most of your listeners are audio only, but there might be some video ones. I don't want to make blush too much. But, you know, some things that were really

important and I told Alex about it are that you have in place, you know, boots on the ground for sourcing the deals. So you really know what you're getting. You have a good existing team for the follow through meaning like the property management. Process is really smooth and seamless and all that. And then probably one of the most critical things is you were, I now have the hindsight of, you know, a couple of years of performance. You were really good at conservatively underwriting these properties. So they've performed at or better than what you've underwritten. So, now we have confidence, you know, especially as a, with a 1031 exchange, you know, you hear about in 1031 exchanges, people frequently will overpay for deals and all the stuff because they've got this time pressure. They don't make good investment choices. So all the more reason to have, you know, confidence that the numbers were underwriting to are good numbers. Yeah. Well, I have a bone to pick with you, Tim, because you came to me with only about 35 days to find you enough properties to fulfill. your exchange and I was about to kill you. Yes, that's true. I am sorry about that. I owe you a really good bottle of wine.

You do, and I will take you up on that offer. So, Alex, when Tim said, you know, let's go back to cash flow savvy. Let's do turnkey in another state. I know that, you know, you're in Southern California. How was it for you to grasp that? that I'm going to be pying properties clear across the other side of the country that I'm probably not going to see. What was that like? I'll be honest. Things are not that hard for me when you're investing with Tim. So, you know, I trust Tim with my life. I would invest in anything he ever invested in. Just the fact that he had invested with you in the past and it turned out well.

And I did the sanity check of kind of walking through the numbers in the underwriting. writing with him, but just like he just said, just the fact that he had invested with you in the past and kind of your underwriting, and look, I see a lot of kind of broker OEMs out here in California, and, you know, everyone is taken with like a major grain of salt. You know, you can never trust OPEX assumptions or projections ever. That's kind of like rule of thumb out here in Southern California. But with you, just the fact that, you know, all your numbers have kind of come in as underwritten, had given him a high degree of trust, which gave me a high degree of trust, and, you we, you know, again, we stressed at it, just made sure it kind of passed that stiff test,

sanity test, and it was there. But, you know, end of the day, Tim was comfortable, so I was comfortable. Yeah, I am very conservative with my numbers, but then I get happy people like you, so I love it. So tell me, what was the biggest experience, the biggest lesson, Alex, that you've learned, being that you're a first time out-of-state investor? What was the biggest lesson that you've taken away from this? Again, got to pick your partner, number one.

I think part of picking your partner, especially when you're buying 14 single-family homes, you just have to have, you just have to be organized, I think, on the front end. So getting comfortable with 14 assets, for me, I'm super, like, visual, so I've got to see it just on a piece of paper and just getting comfortable, understanding what we're doing. You know, if I can understand it, I can kind of get. get comfortable doing anything. So I'd say just, again, pick your partner,

pick your partner, pick your partner. And then just try to put some framework of organization about it around it. Just, I mean, just so you can describe it to a friend and not confuse yourself while describing it. That's probably just my own check. I call it a lesson learned. I've been having done a few of these now. Yeah.

So with that said, describe your portfolio to me. What did I build for you? Right now, you know, 14 single family, cash flowing assets in three markets, together with, you know, we did a couple loans on these projects. But, you know, I think that the worry is, you know, you don't want one one asset to take you down. You don't have a tenant paying. So I think, you know, we have comfort in that. We have, you know, one management team in each market. So, you know, if one property is not performing, we've got a few others there to kind of, you know, pay down that not every every month.

So that's kind of where I got comfortable with you and happy to invest again, you know, either on the next 1031 or the next time we've got some discussionary income to invest. I'm just going to put a little footnote on that disclaimer. Do you have to give me more than 30 days to create your portfolio? Do we have an understanding next time? Yes. Yeah, awesome. So knowing what you know now, what's something, Tim, that you will.

wish you would have known before that when you started investing this time around? Well, it's probably, it's something really small, which is I, so this was my first time doing a portfolio loan, you know, bundling the properties together with one loan around all of them. Previously, Laura and I, we have done 17 or 18 total, you know, QM loans, the Fannie Freddie golden tickets. I kind of wish I had known how competitive. competitive and easy, or I should say, and how much fewer paperwork there is for these things. It's like 5% the amount of paperwork.

Because I just had a little bit of angst going into it about wondering how competitive the rates would be and that type of thing. And on this, on this, we got 5 and a quarter percent, 30-year fixed, which is, it's better than we were assuming going into the process. I know. that's why you came to me. Yeah. There's a huge difference between a conventional loan that you personally guarantee, if you will, because that's everything short of your DNA. I mean, it's your personal name, your date of birth, your social security number,

your bank statements, your W2, your tax returns, where when it comes to a portfolio loan, they don't care about the borrower. I mean, they care that you're a law-abiding citizen, But they don't care about your W-2s or your tax returns. They care that you file them. But what they care about is the asset, what's performing. And as long as there's a projected income on an asset, underwriting is super easy. So many people think that, oh, my gosh, portfolio loans, it's so difficult.

No, it's actually easier. You just have to have a portfolio that performs and that cash flows. So I'm glad that you got to experience that, Tim, because I think to, date, Tim, you have purchased a total of 27 properties from cash flow savvy. And you've gotten like the gamut. You've gotten the personal Freddie and Fannie portfolio between you and your wife. And I remember I shared with you, I want you guys to split it up on paper and you looked at me like I was insane. And I specifically said that. It's because when you do that, you get more of a bank for your buck. And then you've got the commercial loan or the portfolio loan.

that allows you to do so much more. And then you continue to build portfolios. Awesome. So what does your portfolio look like now collectively, guys? Tell me about, you know, you shared a little bit about the numbers. You shared about, you know, the properties or how many properties are in each market. You haven't shared the markets. So do you guys want to share what markets you're in?

Tim? Yeah. Yeah, I'm glad to. So the, let me make sure I get the math. right here and all that. So the 14 properties are, there's five in Birmingham. There are six in Indianapolis. And then, if I get that right, yeah, and then the balance in St. Louis. Is that four? It's four in St. Louis, Missouri. And why do I know all of it? Fantastic. I'm a little embarrassed that I did, but I had to think through it so slowly and carefully.

No, it's okay. When it comes to more than 20, I lost count out around. 23 in my own head for my own properties. So 27, you can lose count. Those ones are just are the ones that Alex and I, we just did under our, you know, our Ostrom-Valente properties is what we have within. But prior to that, Laura and I, we've done four in Birmingham, three in Indianapolis, and six in Cleveland. Wow. Yeah. That's a pretty hefty, well-diversified portfolio. Love it. Absolutely it. So, Alex, of your cash flow savvy process, what was your favorite part of this whole process? Honestly, it was the plaque you sent us with the property in the name. There's a complete surprise, and it feels like a trophy. I just love trophies. So that was just the coolest, nice, just kind of button on the entire, what was really just a great process overall.

I think, you know, just taking a step back and, you know, what made it great from like an investment perspective was probably just the, just the underwriting and the comfort level with the numbers. And just frankly, your rents generally outperform. I think we got around a couple of units, which, you know, kind of surpassed our projections. And then on the expense side, I think you ended up being, you know, higher than what we've experienced the date on the expense side, especially with the expense side, especially with. respect to the interest rate. I think we were holding a much higher interest rate on that portfolio loan and on the insurance as well. So I think we got comfortable there. It made, you know, life much easier, especially because, you know, especially in 1031, you start, you know, underwriting these things. You pick your property and then you have a while so you close. So you start to learn a lot more

about the properties between kind of when you pick them and when you close. So it was super, you know, kind of, I guess, relieved that the numbers kind of came in where we thought they would, and actually typically better than we underwrote them. So kind of a great process overall, but having, I'm actually looking at my home office right now, so I'm looking at the host room Verlente Properties plaque with the name of the property and a few pictures, and it's awesome. It's my heart. Oh, I'm glad to hear that.

I had a really difficult time choosing what photos were going to go on your plaque. I want you guys to know that. So you were part of the whole due diligence process. You both were. And I know Tim had gone through it before. So I'm going to ask you, Alex, what was it like going through 14 inspections kind of all at the same time? Because I know that you were going through each inspection personally, as you should. So was that overwhelming? Was it helpful? What was that process like? it was probably not overwhelming because I had Tim and he'd done it before but you know at the end of the day you know we'd get a an inspection and they would identify you know call it a handful of things that weren't ready weren't fixed weren't perfect so my next question to Tim was so what now and then essentially he told me based on his previous experience with you is that basically you know your team kind of goes in there and essentially kind of checks the box on each one of the items. So, I mean, it just made life very, very simple from my perspective that, you know, hey, you know, and these inspections they were actually, I thought they were really good. I mean, they were kind of going in and looking at the age of the H-FAC system and the issues with that.

Looking at, you know, different things with the wall or the showers, the appliances, all these things that you kind of like, you know, if I was here and first, I kind of kicked the tires myself and kind of go get visited myself here in L.A., but just the fact that, you know, the inspectors themselves, it definitely didn't feel like it was a, I don't know, a hand-picked inspector. I mean, they were figuring, they were calling out things that, you know, made me trust the process, sort of a process guy in general. And so I got, I got comfortable there.

And then he had to be like, oh, you know, Mercedes is going to make sure those are all cured before we close. And that's kind of all I need is. Yeah. Would you describe it any differently? Yeah, that's great, great explanation. I mean, the first time before I had that experience, it was really helpful to know, you know, Mercedes, you, your team,

you had given some references here, some really good inspectors in the area. And, you know, they put together a great report and you can kind of just go through and identify, you know, what's kind of the punch list items. But as Alex alluded, your team, your boots, on the ground, they know they do that stuff every day. So they know what those things are to repair and they know what it is to get it ready to close. Yeah. It's also really helpful. I mean, from our perspective, you guys get a 30, 40, 50 page report on this property. I mean, everything is on that report. And it could be overwhelming. We have worked with so many inspectors,

but we really try hard to get them to do like a bullet point kind of list at the beginning. In addition to everything. So it makes you really dive into what the problems could potentially be. So I'm glad that our team were able to do that for you. So Tim, what was your favorite part of this whole process since this was your third time around with us? Yeah. My favorite part, I think, is actually in the very beginning, or I'll say near the very beginning, once we have identified, here are the 14 properties. And it was like, you know, you're sending your, I'll call it kickoff email to all the stakeholders in the different markets. Here are the people, here are the properties, here are the dates we're targeting for closing. And I think that's because I'm like a really like

structural, analytical type of thinker. And that's really clear for me because now it's like, it was really clear everybody who's doing what, the role, roles and responsibilities, everyone's on the same page. And it gave me like peace of mind that all right, now, now we're in the smooth sailing, so to speak part where it's, you know, I'll call it a little more deterministic. Oh, that just gave me the chills. Because it's true, it's a lot of moving parts. And you guys, the clients, we try really hard to make it look easy. But there's so much going on in the background.

I mean, in each market, there's anywhere from seven to 12 moving pieces per market. And so I am so glad it looked fun and beautiful and easy on the front end. Because on the background, there's like us just. totaling balls, but in a very good way. We do this all day long, but when it comes to a 1031 exchange, I mean, this is serious stuff. This is like you're dealing with the IRS. If you mess this up, we are like potentially costing you so much money. So we take it super, super seriously, because if you miss the deadline, I tell you, the IRS doesn't care. It is, the time is ticking. and if you miss it by one day, that's too bad.

Yeah, and that's probably what took a lot of the angst out of it because, and it's, I'll say not completely lost on me how much is going on behind the scenes. I know you guys are, you know, working magic. One of the big questions, you know, in our mind coming into it was, especially, you know, I know you'll never let me live this down, we came to you with, you know, surprise, we're already, our 45-day clock is already running.

Oh, and we're looking. for, you know, on the order of 14 properties. Yeah. You know, we're asking you to pull eight rabbits or 14 rabbits out of your hat, maybe. Once all the properties have been identified, then in my mind, at least, I became, it was a lot more like our previous process and I became much more confident, comfortable that this would all come together in closing time. Yeah. And then we wouldn't get stuck with a big tax bill. Yeah. That was, that was very important to me. And having done my own exchanges, I know how that feels. So I remember thinking, okay, I, I am going to be ahead of this schedule.

I don't care what happens. But one of the things that was super true and relevant for me, and you don't know this, Jim, but I have access to all 13 properties that you and your wife had purchased before. And so it was very important to me that I would diversify this portfolio in conjunction with that portfolio so that it would make sense for you. Now, of course, you didn't know that I was doing that in the background, but I just kept thinking, I was pretending I was building a portfolio for myself. Just like I do whenever I deal with anybody else's portfolio, I choose properties and I diversify them as if they're going to be

mine. Because if you don't buy them, I have no problem keeping them. But it's important that I diversify your portfolio so that in the event of a catastrophic event, it's so well balanced that you won't feel it financially. So I'm glad that you understand. understand that, Tim, because it is a lot of moving parts on our end, and more so when I'm already working with an existing portfolio. So I'm glad you felt that. So glad you felt that. So what's next in your all's real estate journey? What do I see in the immediate future, Alex? For me, actually, I just bought this house that I'm sitting in right now. So probably tapped out for a little bit.

And then I'm also planning a wedding right now. Oh, wow. A little behind him. So that's, you know, marital real estate, I suppose. But I think I like investing in Southern California. I like investing kind of, you know, within an hour or two of where I live. I just kind of like to go touch and feel it. This is a little bit of an experiment for me.

I think, so I think I've kind of got my eyes set them to like, you know, another multifamily project here in L.A. I also, I develop here. I'm kind of like, I eat, sleep, walk, talk, real estate. I'm obsessed with it. It's my favorite thing in the world. So I think I like the Southern California, L.A. market. So I think I'd like to invest in a multifamily property here, probably my gut on my next investment.

Also super opportunistic. I think something kind of piques my interest. that's the Tim kind of brings me anything to look at. Frankly, I'll probably invest. So just looking. But right now, just bought the house kind of laying down the roots here, planning the wedding, which these things are cheap. So I'm going to focus on that.

And then pretty much excited to immediately, you know, go and invest in my next real estate investment, wherever that might be. I love it. I love it. Okay. And you, Mr. Tim, what is next for you, sir? Well, I think what we will continue doing is picking up more cash flowing assets. I mean, we've been on this journey and it's pretty consistent.

Right now, I'm talking now about the Tim Laura household. We bring in more money than we spend as that money accumulates or various other things exit. We will continue to use that money to build up cash flowing assets. And we'll continue doing that at least until, you know, beyond the financial freedom number, so to speak. I love it. I love it. So gentlemen, can you finish this sentence for me? I almost didn't work with cash flow savvy because? Because we almost stuck with our original plan from 2013 that we would exit this triplex and go into a single property. after it. And then the tax bill hit and you couldn't find it, right?

Yeah. Exactly. Got it. Same question to you, Mr. Alex. I almost didn't work with cash flow savvy because? Because, Kim, almost didn't give you enough time to find it enough property. I love it. That's just giving me more ammunition for my bottle of wine.

that I'm going to be receiving anytime soon. Awesome. Okay. We'll drink a glass with you virtually. I love it. So if anyone is considering working with cash flow savvy to help build their real estate portfolio, what would you tell them, Alex? You know, I'd say to start with one.

I'd say, you know, as everything in life, it's just kind of one foot in front of the other. We had a great experience. I mean, everyone's probably, you know, people maybe listening right now. now might not know me and Tim personally. So, you know, just to start with one. If you're listening to the podcast, there's probably some level of trust already been built up. But, I mean, just started, you know, with one deal for me and Tim 11 years ago looking at it, meeting each other and just go from there. And then, you know, as you kind of build up your confidence and kind of working together, you can go from there. But we had a great experience. The homes are charming.

I love looking at them. The pictures, I love looking at the videos. I love looking at the videos. I love just the idea of, you know, more space and single family, especially right now during the pandemic. I think, you know, I wanted to buy a house. I think people, you know, there's just premium people are putting on space. If you've got to work from home, you don't want to be in a 400 square foot studio. I know Tim and I were really focused on two and three bedrooms, you know, trying to minimize that turnover on your tenants. So I think just just start with one and see how the person enjoys it. See how they enjoy the process, just the responsiveness.

I mean, that's how you really get comfortable. And then you kind of, you know, it's just great to do it over and over again once you find a model that works. Yeah. I kind of always say, you know, if you jump into one property and it's not your cup of tea, it's so easy to just sell one property. But what would happen if you were to buy one property every year for the next 15 years of your life? I mean, just think about it. So great piece of advice. So, Tim, if anyone is considering working with cash flow savvy,

to build their portfolio, what would you tell them? Yeah, this is not a hypothetical question for me. As you know, I've talked to several friends and colleagues and sent them Mirway. You know, for the beginning investor, I would say this is a fantastic way to get started because there's a lot of guardrails in place, a lot of handholding, so to speak, to make it much easier without making a large error. much, much, much easier. I mean, that's really evident to me looking back

comparing to when I bought my first property. Now, for the more seasoned, more experienced investor who isn't really concerned with that type of peace of mind or that's not a big care about. To them, I would say, well, if they have an existing portfolio, they should run their numbers.

Just as Alex and I did, we ran our numbers and we looked at, yeah, it was a cash flowing asset. that it was making us good money, it had even grown over time. But when we look at what's happened over the passage of time, built up equity, paid down principle, we can now utilize that and go expand into these types of properties with much better financial results. And I know, you know, there's a lot of, I know there's especially out here in Southern California where we live, there's a lot of folks that have invested in properties previously and this is a really good fit for what they need right now. Yeah. Yeah. You know, it's really,

interesting that you say that, Tim, because whether you have one or two properties or 15 to 20 properties, revisiting your portfolio and studying the numbers that are real time is critical, especially when it's a crazy market like this. So well said. Tim, I will say something. You have sent us a total of eight clients, your friends and family. and colleagues, and each one of them, on average, have purchased a total of 4.3 properties. And I am humbled, and I thank you. That's awesome. Thank you.

They're in good hands. Thank you so, so much. Gentlemen, you have filled us with amazing, amazing knowledge, and you shared authentically your experience, and I cannot thank you enough. That is the reason why I do this podcast is to make a difference and to change someone's financial future. And I know that you are making a difference in one person's life just by sharing what you did. So thank you so, so much for having us.

And I am going to hold you to the bottle of wine that you owe me. And I'm also going to hold you to, I would love to interview you, in about 24 months, because I would really like to visit what your portfolio is doing and how my projections have, we've already discovered that I'm super conservative, but how those projections have truly played out 24 months after. Would you agree to allow me to re-interview you? I love to. I love it. Awesome. Gentlemen, thank you so much. That's it for my listener. Thank you so much for joining us on this epic episode of Turnkey Tuesday, where cash flow is king. If waiting for your investments to grow feels like waiting for pink to drive, there's a powerful secret.

Your financial planner doesn't want you to know. You can accelerate your investments growth by two, three, or even four times. That's bad news for Wall Street, but great news for you. We're cash flow savvy, and we'd like to offer you free information that will show you how to take control of your investments and double, triple, or even quadruple their returns, and it's yours for free. For the secret your financial planner doesn't want you to know, go to cashflow savvy.com. That's cashflow savvy.com. This podcast is a part of the C-suite Radio Network.

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