Epic Real Estate Investing - Law Enforcement to Cash Flow Endorsement | 507

Episode Date: October 27, 2018

Meet Justin W., a law enforcer who does cash flow endorsement! Find out how a police officer got interested in making a passive income, what software Justin is using for his business, and what advice he would give to a new investor who is considering turnkey operations. 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 Saturday on the epic real estate investing show for Turnkey Saturdays, with your host, Mercedes Torres. Ladies and gentlemen, without further ado, let me introduce to you an awesome individual, young gentleman that happens to serve the county of Los Angeles as a police officer. Welcome to the show, Mr. Justin W. Welcome.

Hello. Awesome, Justin. Thank you so much for joining us. And, you know, we're going to cut to the chase. And why don't you introduce yourself and tell us a little bit about who you are? My name is Justin. I grew up in the county of Riverside, lived in Los Angeles for probably about the last 12 years. I came interested in passive income in college with a professor who actually a business professor

who suggested to the class that we read, rich dad, poor dad. And then I started doing a little more research after college. And buddy and I kind of looked into it together and started listening to the podcast and reading books, etc. I've worked as a lease officer the last seven years. and I guess I've been going on eight years. And that's pretty much it on my off time. I'm working on trying to build or retire early. Awesome, awesome.

You know, Justin, I've said for a very, very long time, you by far were the youngest cash flow savvy real estate investor. I know you have acquired three properties. You are now working on number four. But up until last year, you were our youngest client. So that, I don't know if you knew, but kudos to you. You know, interesting, you said that, you know, you were kind of forced to read Rich Dad, Poor Dad. I often wonder, you know, what if we substituted in our school system, a classic like The Catcher in the Rye for Rich Dad Poor Dad?

What kind of an impact would that have on our young society? There's a lot of things in our school system that we could substitute. I love the memes that talk about how, you know, they teach you how to, they teach you about parallelograms and they teach you about math and all this other stuff that most of it you don't use in the real life. But yet things like taxes are balancing your checkbook they don't even talk about. I know. I absolutely agree with that. And that's a whole other podcast. I'm sure we can discuss that. Oh, yeah. You know, as Matt and I always say, we are so grateful that we found that book. So, you know, for those who have not read it, it's an absolute read.

It's funny. It's not even that the book is all that specific. It just is a paradigm shift. It teaches you a whole new outlook. It doesn't really teach you necessarily too much specifics on what to do. You still really have to figure it out. But his book is great in that it motivates you and kind of just changes your viewpoints on things. Yeah, absolutely agree.

Absolutely agree. So after you read the book, how did you discover cash flow savvy and epic real estate? Actually, one of my college roommate was listening to the podcast, and he's always kind of been, I don't know how he came across it, but he's always been kind of interested in real estate and investing and businesses and et cetera. And he suggested the real estate, or the podcast to me. And so I started listening on my commute to work and a podcast year, a podcast there. And that's kind of how I was turned on to it by him. Awesome, awesome.

So if you don't mind me asking, Justin, how old are you now? I'm 32. I'll be 33 next month. And how old were you when you first got started in real estate investing? I think I bought my first property with you guys. I was 28 or 29. Awesome. I think it was 29.

Awesome. Awesome. Well, very good. So to this point, how many properties have you acquired with cash flow savvy? I've acquired three, and I am working. I'm in escrow on my fourth. Yeah, you're actually in escrow. And I'll have you talk a little bit about the process, but tell me about your first property.

Do you remember, I'm sure you remember specifics. So do you mind sharing specifics about that property and what it's done for you? Yeah. My first property was a duplex in a suburb outside of Cleveland, Ohio. And the economy was a little different back then. The market was a little different back then. The property that I acquired there, I bought outright. And I paid about $50,000.

It's a duplex that each level has been, the rental income's been. a little over 500 each month. And it's been a great property. There's been ups and downs, obviously, along the way, and problems. And just like with everything, but it's still cash flowing strong. Awesome. So I would imagine that that's one of the ups, that it's been cash flowing strong. Do you mind sharing what that return is at the end of the year,

since you've had it for several years? Yeah. I don't know the exact percentage, but I, after everything, the property taxes are a little bit higher on that property. But after everything, I probably bring in, I would say, like, at least $7,000 after paying everything, at least $7,000 a year on that $7 to $8. Well, Justin, that's not a bad pay day for your first rental. Awesome. So that's part of the us.

Yeah, definitely. Yeah. So share with me. you know, part of the down. You said there have been ups and downs. I like to keep it very real. With just not only our listeners, but just our clients with real estate, there are ups and downs.

So it has been an amazing run because I hear very little complaints about that. Share a down with me. With investing, there's always going to be downs with real estate. There's always going to be downs. There's always going to be problems that come up. whether it's, you know, something need, you know, there's a leak or a water pipe that breaks or whatever. But a great example of a down for that property would be my interaction with the city. The city is a smaller suburb outside of Cleveland and they have been pretty, they're pretty strict.

They have all kinds of, they're not quite, they're not an HOA, but they have wool similar to an HOA. They're very strict about the upkeep of your property, the upkeep of your house, et cetera. And so I've gone back and forth with them over several different things, and nothing has been awful except for the experience got a little rough. We read after the winter one year, there was a tree that was on my property that a couple branches had fallen up broken and fallen off the tree. and the city sent a notice to they sent it to me here in California and I think they also sent it to the property saying that the branches and there were a couple fallen branches on the property that needs to be cleared so I called my property manager and said hey I need to have a company come out and clear it and do it and take care of that so they did they hired a company and they came out they cleared all of the branches that they thought were on the property with the

The property manager didn't realize was exactly where the property line was. And I guess from where they were, it was, they thought that part of my property was actually part of the neighbor's property. And so they missed one large branch. The city sent another notice. And I called the city, the inspector, and said, hey, I took care of this. And they said, okay, if you took care of it, don't worry about it. It won't be, you know, it'll go away.

And sure enough, I got another notice. and I called them and I said, hey, I took care of this. And I said, yeah, if you took care of it, it'll go in. And then I got a notice saying that they were going to issue a warrant for my arrest for failing to follow up with this municipal code or for violating this municipal code. And so I called the inspector again. And I said, look, I need to know specifically what's going on because I'm in California. And plus I'm a police officer.

I can't have a warrant out for my arrest. And it turns out that there was a branch that was on my property line exactly on, just barely on it, that would have fallen that my property manager had, you know, didn't understand was on my property line. And so the city was trying to, trying to arrest me over a tree branch. And there's a huge deal. Finally, we got it taken care of, but it was a little bit of a headache. I get it. I get it. You know, in Cleveland, they do have something called a point.

of sale. That is exactly what it is. So basically, as you said, it's an HOA, but it's run by the subsidiaries of the main city. So although it's in Cleveland, Cleveland has subsidiaries like Brooklyn Heights and Shaker Heights and Maple Heights and different subsidiaries that way. And each one is run by their own municipality, so to speak. So one has nothing to do with the other. And sometimes they do get a little anal, so to speak. You know, a tree branch, you know, one can argue that it can be, you know, potentially a hazard. But the reality is issuing you a warrant for the arrest would be a little bit silly. They just want you to take care of it.

So I'm so glad you got that taken care of. In the interim, Justin, what was the interaction with property manager? Whereas our property management team helping you? were they, you know, collaborating with the city? What was that experience like? Yeah, the property management team that I have for that property has been nothing but helpful. I've had the actual property manager, not the owner of the company, but the property manager that I've been working with has changed people a couple different

times. But they've all been, it's been a great experience with that company. They've been nothing but helpful. And they were working as hard as they could to, to, to work with the city and figure out what was going on, especially the current property manager. She actually used to work in probation

for their local probation department, so she kind of understood my problem, my plate, and was working to figure it out. And we got it all resolved. It just was kind of a miscommunication. Yeah. Yeah, the point of sale inspector that I was dealing with, I mean, obviously I've never met him, but I kind of just picture this old crotchety, like, should be retired.

You know, man, he was like 70s who's got nothing better to do, but enforce this little finite thing, the way this little finite municipal rule the way he deems it should be. I'm willing to bet just in your description is probably 99% accurate. So I feel like I'm on the same page. Awesome. was property number one and then we acquired property number two and three so tell me even after that experience what made you confident to jump into property number two i don't even know that i would say it's confidence it's more just in order to increase my passive income the the best way for me to do that

is to diversify the properties i have so the more properties i have the less the less risk i'm going to have because that risk is spread across all those properties so just the more More you acquire, the easier, I mean, it's going to be more stressful, obviously, because it's going to demand more of your time and you're going to have more things come up. But the less, but any of that cost and the risk will be spread across all of those properties. Right. You're absolutely right. So that's kind of what contributed to property, the acquisition of property number two and three. And now we're working on number four.

And you are actually actively in escrow during your due diligence period. correct? Yes, ma'am. Fantastic. Now, when you go through the cash flow savvy process, you get a signed a personal transaction coordinator to kind of walk you through the whole process, hold your hand, answer questions, and do all the backwork that is done that is necessary to bring this investment to fruition for our investors.

What's that experience been like for you, Justin? It's gone really well. You and your team are definitely far more organized than I am, which is helpful because they can help facilitate the whole transaction and make it go pretty well. Yeah, well, your job is to combat the bad guys. Our job is to make your life easier. So a little bit of a difference there in what we do for a living here, Justin. Yeah.

So once you put the property end, contract. What happened? You chose a property after you've chosen a property through our queue. You said, I want to move forward on this property. You got a contract with your due diligence period. And then what happened? With this property, there's going to be a loan. So you start the loan process with the bank, all the usual financial documents. And they're going to want to know the background. If you don't have a loan with them for that property, they're going to want to know the background for that property, whether you own it outright or who you have a loan with, etc.

Then you're also going to start during the due diligence period. You're going to do any of your inspections. You're going to get your photos. You can go do a walkthrough of the property if you want to or if you're like me and you've never been to that state. You can have somebody else to do it. So tell me about that. Awesome.

Tell me about that. So you are in Los Angeles. This property that you're buying is in Ohio. tell me how are you doing your due diligence from you know the comfort of your own home in California well I I could definitely book a flight fly out there drive out there go look at the house go look at the property go do all of that but and and you know if this was if it was California and I was buying a house I would like the house that I live in obviously I went and I did all of that but with these houses

I really, to me, they don't really matter specifically what they look like because I'm not living there. It's just an investment. And I'm not a construction guy. I'm not a general contractor. I'm an inspector. I don't have that background. So I really would only be looking at it aesthetically. I wouldn't know exactly what I'm looking at compared to having a contractor or an inspector or somebody with that experience and knowledge base to go walk through the property.

So really I lean heavily on those people and have to trust that I, you know, the recommendations that I get for people and usually the escrow companies are going to have, or the people that you guys work with are going to have recommendations. I have to trust their knowledge base and use that, really rely on them to look at the property and determine whether or not there's anything that, or it's going to be a good investment or not. Yeah, after all, you do hire a professional that gives you a full-on inspection report that's anywhere from 30 to 50 pages. So you do get a very detailed report despite the fact that you don't fly out to Cleveland to walk the property yourself. Oh, yeah. Awesome.

If I would have walked to the property and write my own report, it would be like a page. And this is why you hired the experts to do it for you. Awesome. Yeah. I mean, even when I bought my house in California, I was, because the house I live in, I actually rent out the other rooms that, I bought a four-bedroom house so that I could rent out the other three rooms. And it, for the most part, covers my mortgage. And when I was looking at houses, I really didn't care what the house looked like. You know, obviously, I wanted it to be in the okay condition so that I didn't have to, like, remodel it. Or, you know, I didn't want it to have termites or holes in the walls or things like that. But I didn't care what it looked like. I didn't care the layout. I didn't care where it was because I care about the resale value. I care about it having decent schools nearby and access to the freeway and things like that because of either the resale value or my commute.

But really the actual specifics of the house, I don't plan on living in it forever. So I didn't care. And it's the same with all my investment properties. Yeah. You strictly just run the numbers and make sure the property is up to code, safe, and that the amount of work that needs to be done to the property in the next couple years, you kind of mitigate that with the inspection report so that you know that's not going to be an extra expense for you in the future.

That's smart. You're just looking at the numbers and you're evaluating it as strictly an investment property. And I think that's really a smart way to look at it. You know, I don't think you're going to go bad. I don't think that that is going to go bad for you anytime simply because. people are always going to need a roof over the head. So you've got the right idea. Awesome.

So what would you say, Justin, has been the biggest challenge through this whole process? Probably for me, that would be organization skills. I am not an organized person. And so keeping track of bills that don't directly affect me because I'm not living in the house because, you know, like in my duplex in Ohio, there's, like, the sewer bill I have to cover because it's not something that's split, so it's something that I cover out of the rent.

And keeping track, it's just a whole new set of things that it's kind of forcing me to become to set up systems and use programs and reminders and things really make sure that I don't miss things because I've had once or twice a couple late fees because I missed things. and it's just kind of out of sight, out of mind. It's easy to walk into your house and you've got the utility bill sitting on the counter and you see the lights on the house and it reminds you that you have to pay it. But something that's out of state is if the bill doesn't come, I just don't think about it. So it's really forced me to become more organized and set up ways to avoid problems.

That's interesting, Justin, because our typical investment, is a busy professional. So, you know, they implement programs. Some people do in on just a standard Excel spreadsheet. Others just piggyback off the property management software system that their property management is using. What are you specifically using if you don't mind sharing? I like there's a quick-in version for small business investors that I like.

And then I just use, I set up alerts and reminders in my phone. But I try to do all my paperwork on that. It makes it easier for tax season too. Awesome. I'm not, I mean, I know how to use Excel, but I'm not real. I'm not a huge, huge fan of it. Yeah. I prefer something that's a little more user-friendly.

Cool. And so being that you're in California and now you're working on property number four, how do you get your rents? How do you receive that? Actually, it kind of depends on the property. What I've actually been working on right now is I'm setting up a separate account because I have been, up until now I've been kind of intermingling all the funds into my personal bank account, but I just set out and working on setting up a business account for just for all my properties to be deposited in.

But anyway, most of them are. either direct deposit into my account or one of them they still send me checks and and uh i kind of like when they send me the checks just because i i can um it forces me to sit down and take a look at at how much rent i got and how much and what was taken out and any any additional expenses i had or things that had to be you know repaired in the in the property if it's just directly deposited on my account it's kind of out of sight of mind and i don't i don't look at it as closely or not necessarily as closely, but just as often. Awesome.

That's interesting that you say that, Justin. Most of my investors are, you know, technologically savvy, not that you're not, but they prefer to have everything automatic or, you know, automated. Then I have those investors that actually still prefer a paper check because they can't see their property, they can't drive to it, but they can certainly hold a check. known as mailbox money. So believe it or not, I still do have those old school investors that still want to get that paper check that they have to still deposit, you know, going to the bank. A lot of them probably take a picture of it. But you know, you're absolutely right, Justin.

You have to figure out what's going to be the easiest way for you. And you're now starting to get to the point where for properties, that's a lot to keep track of now. So the fact that you're finally segregating it. That's awesome. That is absolutely awesome. And you're going to find that once it's segregated, it's going to be a little bit easier for you to keep tabs on. So kudos to you.

Yeah, Four Properties is the point where I kind of decided I've got to get more organized. I think I'm even going to go the extra step and go and buy a laptop that I only use for my investment properties and just almost treat it like it's a, I mean, it is its own business. own, just a separate entity. Separate it from the rest of my personal laptop that I use all the time. Just kind of keep it separate and that'll keep the mindset that it is separate and force me to be a little more organized with it. Got it.

So tell me this. What is the biggest lesson that you've taken from this entire experience as you work on property number four? Besides, don't mess with point of sale inspectors because you'll get arrested. I would say, I mean, it's definitely, it's definitely that being at least somewhat organized is important, or if you're not organized like me, just finding a way to help with that because technology, we have so much technology available. and there's computer programs and like virtual assistants and all kinds of different things that you can use

to really help you stay on top of stuff because if you don't, it's literally just going to cost you extra money. You miss deadlines and it'll be turned late fees or you'll be issued warrants or you'll you're just going to have more problems if you don't stay on top of it. Not that it's a full-time job, it's not like every day I'm sitting here slaving away over a computer, but it literally takes an extra couple hours every month.

It's not a huge time investment. It depends. It really depends on if things are going well or if things are going poorly. I've been, I've spent my day and I've been in a court building waiting to testify and I'm off in a corner talking to either a property manager or a city inspector or whoever it may be trying to fix whatever problem that I have going on with that but it's just you just adapt and it most of the time when things are going well it doesn't take very much time and if you set up the you set up systems in place to keep things going well it's just going to take less time well said sir very well said so what advice justin would you give a new investor who's considering buying and holding properties or just considering a turnkey operation

what would you tell them well if they're mean if it's advice for the turnkey It's definitely a lot easier. I've got a buddy at work who actually, it's funny, I'm pretty well, there's 350 people that I work with at my station. And I mean, obviously I don't know all of them, but on my shift, there's like 40 of them, 40 people, 40 officers.

And we have, I'm pretty well known for having my own properties that I invest. And a lot of people that I invest with And a lot of people are interested in people always ask me about it. And when they find out about it, they usually all get new people that ask me about it. People are always interested, but very, very, pretty much nobody ever goes through and actually takes the next step. And I've been here, I've been a police officer seven years. And I've been working with a lot of these people for most of that.

And they, I'd say two people have actually taken this step in that next step. One of them was already investing. He was investing kind of just at a pretty slow pace. And he and I, we were working together one day and we sat down and we looked at the numbers. And I showed him that if you diversify and if you keep buying properties, there's a level that you really have to get to where it'll start taking off. And the numbers really made sense for him. And he took off and ran with it way. I think he was already a little further ahead.

than me, but it really gave him that motivation to buy the next several properties. And he's gone pretty far with that. Then the next person was actually the guy that I wasn't really, wouldn't have really expected, but he was looking for some investments and he started talking to me about this. And he's actually contacted you recently. I think it's starting the process from what I understand. Actually, he's already been approved and he's already looking at properties. So thank you so much, Justin, for sending your client or your partner our way.

Yeah, I mean, there's some really, really intelligent people that I, some of my friends that are really intelligent people that, that they really understand it, but they just don't take that step. And it's kind of hard to break the status quo and take that step in life and start something new. It's a, it's really just, it takes a lot of effort to break out of your. your rut and do it. But once you, you just have to do it. Yeah. Once you do it,

it'll get easier. I hear that all too often. I hear that more times than not in a day. I hear that often. So that's some great words of wisdom, Justin. Considering that you started in your 20s, you're now in your early 30s, you're working on property number four.

And the fact that you're saying it takes a few hours out of your month, you need to be organized and you're working on your fourth property. I'd have to say that less than 1% of America actually does that. So you think outside the box, you've been thinking outside the box, and it's going to certainly set you apart. You're already set apart at the station. So that just goes to say, I think you're doing something right, Justin. I hope so.

Awesome, awesome. So Justin, last words of wisdom. what's something that you know now that you wish you would have known before you got started? I know where my property line is and I wish I had known that a couple years ago. But as far as advice before I got started, I would say that I think it just, like I was saying for the last question, it just takes that first step because, I mean, I was looking at this for a while before, you know, I read that, I read Rich Dad, Poor Dad, when I was probably 21. I think I read it my senior year of college,

and I didn't start buying properties until 27, 28. And I think what was holding me back was I was, when California is kind of a difficult place to not only invest in, but even just buy a property. And I was waiting for my career to start, and I was waiting for my, I was waiting to buy my first, my house that I live in now.

And it took a, I was kind of waiting for all my ducks to be in a row. And, and, you know, it took me four years to, to find a job as a police officer, not because I wasn't a good candidate, but just because I would get through the process and then they wouldn't hire any,

they wouldn't be hiring anyone. And I would just time out on the list. And, and it's, there's never going to be the perfect time, to do something, you literally just have to do it. And there's no, absolutely no reason that I couldn't have been buying properties when I was 21, 22. And, I mean, even if that meant I was still renting a room from someone somewhere, I still would likely be in a better spot than I am now.

Not that I'm in a bad spot, but I'd be further along had I started earlier. Right. Right. Yeah. I hear you, buddy. I knew the information. I just didn't act on it. Yeah.

You know, it's fear and it's very, very common. and let's just say it's never too late to get started. So I think your words of wisdom are going to touch somebody out there and hopefully are going to make a difference for at least one person. Justin, thank you so much for taking time out of your crazy schedule because I know you do work in crazy hours as most police officers do. So thank you for serving our community. Thank you for your time, sir.

And for our audience, thank you for tuning in. I truly hope that Justin's story was insightful for you. Whenever you're ready, here I am, and here's the way that I can help. Go to cashflow savvy.com, and that is Savvy with 2Bs. Download the frustrated investors guide to passive income. Book a call with me, and I'll be more than happy to see how I can help you get out of the rat race. This is Mercedes-Torres for Cashflow Savvy, brought to you by Epic Real Estate and Terry Omita. See you next week.

Does your money work for you as hard as you do for it? If not, no worries. You do not have a money problem. You merely have an idea problem. We're cashflow savvy.com, and we'd like to share a new idea with you around income real estate that can transform your financial future and accelerate its arrival. Go to cashflow savvy.com and download a free investors package.

Cashflow savvy.com. You do not have a money problem. Merely an idea problem. Cashflow savvy.com. More ideas, less worries. Cashflow savvy.com. This podcast is a part of the C-suite radio network. For more top business podcasts, visit c-sweetradio.com.