Epic Real Estate Investing - The Secret to Long Distance “Cash Flow” Investing | 972

Episode Date: March 29, 2020

In this episode, Matt explains what are the key things to successful long-distance investing and reveals the 10 hard knock tips for selecting good property managers! Tune in and learn! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics. The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helping real estate investors do just that for more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit R-E-I-Aase.com.

Here's Matt. Hey, rock star. It's Matt Terrio from Epic Real Estate. And today, I want to share with you the secret to long-distance cash flow investing. Because I frequently hear this particular advice, this specific advice, and I've heard it more than once from multiple sources. I've been hearing it for years. That advice goes somewhere down the line of do not invest in property further away than the driving distance from your home.

I mean, we've all probably heard variations of this statement, specifically at, or especially at RIA meetings, probably heard it more than once. And I heard it again. I heard it recently from a new RIAeist client during our initial one-on-one session together. And the sentiment, it's typically expressed with conviction and seemingly wise and experienced conviction. And in this instance, it was no different. And so, you know, I entertained the idea because I know a lot of people feel this way, so I certainly don't want to shoot down that emotion or that maybe they do have some experience behind that. So I'm always kind of open to hearing more.

And so I had asked him, but what if there aren't any good investments within driving distance of your home? What do you do then? Or what if there are good investments, yet they exceed your financial reach? what do you do then? I mean, do you pick up and just move your family closer to better investments? Is that how you make this work? Or do you postpone your investing and wait for the market or not invest at all? I mean, of course not.

And these are somewhat rhetorical questions anyway. And I continue to share with them that rental real estate is the most manageable, predictable, reliable, and highest yielding investment vehicle, not to mention the fastest path to financial independence. I mean, this is the very reason that he decided to work with us because it would be insane to opt for lesser and riskier opportunities just because, you know, you don't live within driving distance of a good investment property. He wanted to embrace and grasp everything that real estate promises,

everything that real estate has to offer. And so that's why we're working. working together. And here's what I would say. And I think Mercedes says this frequently. And I totally agree with it. Live where you love, but invest where it makes sense. Live where you love, but invest where it makes sense. And if you are one of the lucky few where these two places are one of the same, hey, God bless you. Good for you. Knock it out the park. But for the majority of people where this is not the case, here's what you need to know. The two places where real estate investors lose significant amounts of money are one bad

contractors and two bad property managers. The distance from your primary residence does not even make the top ten as to why investors lose money. I mean, there's no doubt in my mind that the people that have advised other people against investing in property further away than driving distance from their home have had bad experiences with long distance investing. I've not doubting that at all. But I assure you that the distance had nothing to do with their bad experience. The distance, that might be the symptom, but it's not the cause. It's like in the days, if we go back to the days of the bubonic plague,

and there's probably a more current metaphor I could come up with, but this was the first thing that came to mind. You know, if you go back to the days of the bubonic plague as society was trying to find a cure for the plague and trying to treat these flu-like symptoms of the plague, it wasn't actually eradicated until the streets were cleaned up and they got rid of all the rats and the fleas. That was the cause of the plague.

So they fought forever and lost many lives fighting the symptoms where if they would have just focused on the cause, then they could have saved a lot of time, a lot of headache, and probably a lot of lives. And I'm willing to wage on my own portfolio. I've got 102, I believe, not in my state income properties, that 90% of the investors that lost money on long-distance deals was due to bad property management. The distance, that's the symptom. That's what they notice.

That's the common denominator, seemingly. but management is the cause, right? So property managers, if you're listening, I'm not calling you rats and flees like the plague, but it's the cause. The management is the cause, the distance is the symptom. So is good property management the secret to long distance investing? Is that the secret to good property management?

That's the secret to long distance investing? No, absolutely not. Good property management is the secret to all. all real estate investing, regardless of where it is. You know, income property acquired correctly, it's an awesome asset that no portfolio should be without. But the work doesn't end once it's acquired. As passive as we want our income from property or rental property to be, the asset must

be managed for it to produce income and continue being an asset for you. It's got to be managed and managed correctly and properly and competently. And so this fact leaves you with the choice, the real choice, not whether to invest locally or long distance, but can I actively and effectively manage my properties myself or should I hire someone to manage them for me? That's the real question. And many investors will choose to take on themselves the management responsibilities of their properties. There's nothing wrong with that. I mean, when I meet these particular investors, however, I always wonder, you know, did you be, an investor to own property or for your property to own you,

is kind of what I'm thinking. You know, and if this is you, and I'm describing you and you love managing your properties, you know, knock yourself out. Who am I to judge? I certainly don't want to interrupt with what makes you happy. Keep doing what you're doing then. But personally, I choose to hire professionals to do the job for me, even if my properties were within driving distance of my primary residence, of which, uh,

That's a decision I'm going to very soon get to make because I have changed markets and I'm buying properties now in where I live. But I'm still going to hire a professional property manager. My time and sleep just too darn valuable for me to trade it all in for showing property and collecting rent and playing social worker and fielding the random midnight. My toilet exploded phone call just to avoid a 10% management fee. By the way, I've never gotten that phone call before. I just use it because it seems to be everybody's example. So if you like to spend the most active years that you have left in your life doing what you want, when you want, and with whom you want, while your income properties foot the bill, you're going to need to not just hire a property manager, but good property managers. And I will be the first to admit that I have been far from perfect in selecting property managers.

In fact, I have made some very bad, expensive, and painful mistakes in those choices. I mean, some mistakes I made years and years ago that I'm still somewhat licking my wounds from today. However, I have learned many invaluable and profitable lessons along the way, too. As with anything, you know, as they say in real estate, you're either getting educated or you're making money. And so I lost money, but I got a great education. So as with anything, you're just never going to know it all. But based off the monthly cash now flowing into my mailbox every month, I am confident in my ability to find good property managers.

So in the interest of nothing more than your success, I'd like to share some tips straight from the school of hard knocks and selecting good property managers. So you don't have to endure the bad experiences that I have. And then you two can do what you want, when you want, with whom you want. Shoot, maybe we'll be able to even do it together at some point. All right. So here are 10 hard knock tips for selecting good property managers.

Number one, seek multiple referrals from other successful real estate investors. You know, success, it leaves clues, and a referral from a trusted and successful source is more than a clue. It's evidence. Number two, adopt the mindset of slow to hire, quick to fire. You know, regardless of how many positive answers you get from a property manager during the interview process, Sometimes the only way to find a good one is to give them a trial run. And if you notice a pattern of actions that conflict with their answers during the interview, boom, cut them loose. All right?

Number three, interview more than one. No matter how much you like the first property manager that you interview, keep interviewing. Because not only do multiple interviews increase the likelihood of finding a great property manager, you're also going to learn a great deal about the likely performance of your properties in the market. So interview more than one. Four, test their customer service. So when you're asking questions, leave some of those questions unanswered and then call back after hours and leave a message.

And it's not really how and when your call is returned. It's when they, if they return your call at all. And if they do, use the unanswered interview questions. That's just a basis for your conversation. So it won't feel weird and you won't have to hang up and say, ha, got you, anything like that. You know, ideally you want your call to be returned within 24 hours in a professional and courteous way. Placing a call during business hours, that can also give you an indication of a company's professionalism and accessibility.

All right. So test their customer service. Number five, hire investors. And this tip, this is really just a tip, it goes for your entire team in addition to your property manager. Although it's, I wouldn't say it's essential that your property manager also be an investor, but I have found the communication and the understanding of each other. It's much better when they are investors too. So hire investors when you can. Number six, read the management agreement.

Read the management agreement. And it seems basic enough, doesn't it? But it is so important that I must mention this just to make sure that you don't ignore this or overlook it or underestimate it. Because as you read the agreement, remember that everything is negotiable. So ask for more concessions than you really want in order to get what you actually want. And having said that, don't overnegotiate either. You don't want to remove the property manager's ability to support his business and earn a living. So, you know, the last thing you want is resentment in that relationship.

Number seven, drive by. Drive by the property. That's where a list of properties as large of a list as possible that the property manager currently manages. And then you're going to see unkempt properties and laundering. That's going to tell a lot about how much attention their properties are receiving and what type of activities are going on in the neighborhood. And then dirt and debris and loitering. Those are all red flags in my book as they make finding quality tenants much more difficult.

So drive by, take a look at the properties that that property manager is managing. Number eight. And this is something I'm really holding on to more and more, the older that I get. And actually, I was just having this conversation with Mercedes. It was like, the age of 20, you kind of think you know everything. And then the age of 30, you realize, wow, I don't know anything. and then at the age of 40, I kind of was like, okay, I'm starting to,

I think I know a little something, I can start trusting myself. And then at the age of 50, I'm starting to recognize, I almost have like superpowers in my gut. Meaning if I look back all these mistakes and stuff that have happened over my life,

like I kind of knew it was there before the actual occurrence. Right? I mean, you're like, oh, I saw that red flag. I should. I should have recognized this. I should have recognized that. So I think right now in any sort of new endeavor or any new interaction or any time I meet

somebody new, I am really in tune with my gut and I am trusting it. So that's number eight. Trust your gut. I mean, you know so much more than you think you do, even if you don't know why you know it. And if something just doesn't feel right, investigate, inspect what you expect. You're going to find that your hunches are not only correct most of the time, but that they can often be rather conservative.

It can be much worse than you were even suspecting it was. You know, as awesome of a business as real estate can be, there's a dark side as well. So frequently refer to tip number two, which was adopt the mindset of slow to hire, quick to fire, right? And just trust your gut. That's number eight. Number nine, be direct in your communication and document everything.

So set an example and maintain a standard of clear and honest communication with your property managers and leave nothing open to interpretation or debate. Just be really clear in the communication, document everything, negotiate everything as you're going to get divorced tomorrow, but then once that agreement is in place, then work together as you're going to be married forever.

Okay? Number 10, and I think this is, this may be the biggest or the greatest hack that I've gotten to get my portfolio to perform and to get my property managers to perform. And that is to diversify or divide up your portfolio. You know, once you acquire more than two or three properties in a specific region and your intent is to keep purchasing in that region,

it's a really good idea to start looking for a second property manager for future purchases. And maintain a nice little balance of your portfolio between at least two property managers. You want to really eliminate any single points of failure in your business. And as many times as I've said that on this show, and as many times as I've said that, you know, in the videos and in live presentations, I still kind of lose sight of it every once in a while. And it burns me every single time. So you want to eliminate any single point of failure in your business,

especially when it comes to property management. And also, keep no secrets about working with a second or third property manager. You know, when your property managers are aware that they have competition, this is why I think this is one of the greater hacks that we've come up with. and we almost discovered it accidentally. I mean, we had this intent for it to be in place and make things better, but it worked far better than we thought. And what you're going to find is when your property managers are aware that they have competition

and that you're diversifying and spreading out your portfolio and you're sharing the work with others in their market, you're going to find that your expenses have a tendency to drop and your performance has a tendency to improve. So divide up your portfolio with regard to the team that you're working with, property managers. All righty. So, you know, watching investors really place limitations on their investing because of a few bad

long distance experiences. That really saddens me. And it saddens me when people stand up and they're holding court at a Ria meeting or something like that. And they're just talking about how terrible long distance investing is. And I'm no doubt in my mind they had a bad experience. But it's not the long distance that created the experience. Okay.

So from this point forward, know that the secret to cash flow real estate investing is not shortening the distance that you live from your investments. The secret is in selecting good property management. I gave you 10 real life, real world tips that have served me well up to this point, all backed by a lot of trial and error, a lot of heartbreak. And those are the best practices that we have now in place and continuing to build our own portfolio. So that's it for today? What did you find most valuable today? and who do you know that might find what we discussed today valuable as well? Feel free to share it with them.

All righty, God bless to your success. I'm Matt Terrio. Live in the dream. Take it. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. You didn't know, home for us, we got the gas flow.

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