While starting can be difficult, it’s going through the last stretch of the race that is going to test whether you’ll make it or not. This is the same terminal disease when it comes to flips and prepping Airbnbs where many get stuck in that last 10% of the job. Back from the beach, Jason Bible is here to talk with co-host Robert Orfino about crossing the finish line and the importance of your network for accomplishing that. As they talk about their mastermind on small apartments and Airbnb, the value of learning how to count, and business success, they also let us in on their units and what they are trying to accomplish with it, along with the issues they are trying to overcome.
Listen to the podcast here:
Back From The Beach & Crossing The Finish Line with Co-Host Robert Orfino
I’m back from the beach. We immediately went back out to the beach to one of our Airbnbs down in Surfside and it looks like I’m taking possession of a house that we’re going to turn into an Airbnb. We got a contract in another beach house.
Our problem is we are in week seven of our eight-week Airbnb focus group. We are buying our beach houses in the wrong month.
This is a less than ideal time to be buying beach houses.
The one you’re dropping a check off, that is ready to go. The day after closing, we’re renting it.
It’s a beautiful house. I love the fireplace. Somebody asked me, “Why do you want a fireplace at a beach house?” I’m like, “Because when it’s cool outside, you get the fire going and you open all the windows.”
That’s a perfect house for Thanksgiving rental and over the holiday rental for sure.
Every year I read Think and Grow Rich and it’s one of those things that drives me crazy about this industry. It’s not just this industry, it’s any of the mindset literature out there, “You read this book and you’re good.” A lot of these books are not just sitting down and crank it out, “I read them, I got it.” I talked about this on my Facebook Live. There’s a big difference between reading and studying. As long as you’re functionally literate, you can read it. Have you studied it? Did you understand it? Let me explain a little bit about the first couple of chapters of Think and Grow Rich because I had missed this for nine years and I finally got it. Everyone misses it. Are you familiar with the story of Three Feet from Gold?
In the book, Napoleon Hill talks about a young entrepreneur who goes out and gets a piece of land and he believes there’s a huge gold mine. They start panning and they found some gold. He raises some money from his family. They buy some equipment and they start digging. Lo and behold, they hit on a vein of gold and they take out this claim, they get it tested. “This is great. It’s of the purity it’s supposed to be. You’re going to make a ton of money.” He buys even more equipment and he borrowed even more money and all of a sudden, the vein goes completely dry and he keeps digging. He can’t find anything. He’s like, “This isn’t working. I’m giving up.” He sells the mine, the claim and the equipment to the guy who sold him the equipment. As the story goes on the internet, he quit. He shouldn’t have quit.We learn a lot from our defeats. Click To Tweet
It’s like the Simpson’s when they dig in the ground and there are the aliens and T-Rex.
As the story is told in the popular vernacular, they’ll go out and say, “What he did was he quit too soon.” Once this guy who had bought it from the original owner started digging, he found the gold three feet away from where they were digging.
He did it and he didn’t quit.
You shouldn’t have quit because he was three feet from gold. You’ll see the little picture and the little motivational thing on Instagram where it’s got two guys digging and one is three feet from gold, and now he’s a gazillionaire. That’s not what it says in the book. There’s one sentence everybody misses. It’s the most important piece. When the gentleman buys the non-working mine from the first owner.
Did he start digging right away?
He doesn’t. There’s one sentence in there and it says, “He hires an expert to tell him where the gold vein is.” The expert is a geologist, he comes in and says, “Based off the tunnel structure and all that other stuff, I think it’s over here, which is three feet away.” They start digging. They hit it and it’s one of the largest gold finds in the world. Let’s talk about this in the real world. You’re standing here and you’re in a tunnel. These tunnels aren’t that big. You’re crouched down. What direction do you dig? Do you stay on the same plane and you dig straight in front of you? Do you go to the left or right? Do you go 45 or 90 degrees? Do you turn back behind you and do 270 degrees and go back the other way? Do you go down? The likelihood that you could find that goal three feet from that point is almost zero. They got this candle-light on, you’re standing there in his dark hole and it’s three feet away from you but where do I go? When I reread that section it said, “He hired an expert to tell him where it was.” I was like, “That’s the whole point of this story.” It’s not, “Don’t give up. It’s only three feet away.” It’s like, “You’re a geologist, why don’t you come down here? We’ve hit gold here before.”
The reason I think this is important is that I run into so many real estate investors. They buy rental property or two. They do a flip or two. They’ve got some gold and then all of a sudden it runs dry and they’re like, “What do I do? All my gurus are telling me don’t give up.” “What direction do you dig?” You’re like, “I don’t know. They just tell me to keep going.” Keep going where? Keep going for what? Where’s the real expert to say, “Here’s where the goal is at.” I did the math on what we’ve bought in Surfside alone. We’ve essentially bought a year’s worth of inventory in less than 60 days at great prices in a very rapidly appreciating market. We went down there, found a little bit of gold and then kept hammering away at it and found a whole bunch of other stuff. The question is when you’re out there as a real estate investor and you’re struggling, who is it that’s helping you to find that vein of gold to prospect in such a way that our time is spent in production, not in prospecting?
The big takeaway for me was all these people are wandering around. They’re going from one acre to the next panning and I’m like, “Put up another bandit sign. Send out another yellow letter. Make 50 offers in Cypress and Kingwood.” It’s like, “Jason, there’s no deal in Texas. I’m going to Ohio, I’m going to Cincinnati to do real estate.” I’m like, “What are you talking about? 10,000, 12,000, 15,000 houses a month gets sold in this city. You don’t have to go. Are you trying to be a billionaire overnight?” It’s right here. You’ve just got to know where to look. That’s the whole point of the story. It’s not, “Don’t quit.” Bring somebody in that says “This is where it’s at. Go get it.”
I spoke a lot about this market shifting that I thought it was probably four out of five stars for flippers. You could find flips everywhere and you’re probably back to normal. It’s probably three out of five and you’re going to have to figure out your acquisitions. It’s not coming from wholesalers anymore. Relatively speaking, there are no more flips in Bear Creek that you bought years ago. That’s all gone.
What’s so funny is I was looking in Bear Creek and I looked at the properties that are flooded. Flooded homes are going for $90,000 to $100,000.
We’re done there. You’re talking about that three feet. We’re still big believers in Baytown, Texas City, Pasadena. We’re good on those areas. For Airbnb, we sure do love Surfside down there in Freeport. We like the ones that are tight flips in good neighborhoods that don’t have HOAs. That’s a good one. That’s one up in the heights we’re going to have and those will move on that stuff, but the market shifting flippers, it’s going to be tougher. It was probably a five out of five stars for buy and hold and we’re down to four. It’s still very good, but it’s not the excellent market that it was.
If you are a buy and hold landlord for single-family, you are going to continue to see reductions in your rate of return. I’m on this secret group that I’m a member of and they’re all 100-plus units single-family owners in Houston. We had a great WhatsApp conversation. What is your real rate of return? It’s 6% to 8% until you sell it and then you capture all that equity. That’s only going to get worse. That was the big discussion because A appreciation which is also causing B and C, which is increases in insurance, increases in taxes and then an increase in the per square foot cost of make readies and rehabs and all the other stuff. In other words, stuff’s getting more expensive.
The problem is that even though we have a roaring economy here, rents are not keeping pace with appreciation. To be said a different way, if you want to put on your economist hat, rents are not keeping pace with inflation which is very interesting. A significant portion of the market here is a rentable product, but once you get above $1,200, $1,300 a month, it starts becoming increasingly difficult to rent that property. If someone can afford $1,500, $1,600 a month rent, a lot of times they could afford to buy the house, which is the problem I’m having with some of my properties in Bear Creek. Those are $200,000 houses that rent for $1,350 a month. What do you do with them? You Airbnb them and hold on for another couple of years and then you sell them when they’re $250,000.
We’re talking about getting across the finish line. We have this terminal disease in flips and prepping these Airbnbs where we get to 85% or 90%. We’re almost there and it gets stuck. We stall.
The last 5% is the hardest piece, but this is a life thing. I used to work for Bob. We’d hired a lot of people. We were in the technical medical arena and healthcare research. One of the things that was always fascinating is you get that somebody comes in and goes, “I almost got my PhD.” You’re like, “What does that mean?” They’ll say, “I’ve got all my coursework done but all I have is my dissertation.”
The two years are the hardest stuff.
You hear what people with Master’s degrees like, “I did all the coursework. I haven’t finished my thesis yet.” We would say, “That’s the other 50%.” They’re like, “I’m 5% there.” Until you go through that process, you realize, “That’s the other half of this thing.” It doesn’t matter if you’re 99.9% of the way or zero. The result is the same. You don’t have that piece of paper.
That’s why a good baseball reliever will get paid the same as a starter. You got to come in for the last three outs or four or five outs and you’ve got to be good at it. There’s only a few Mariano Rivera’s in the world that comes along our lifetime. I’ll tell you how we’re doing it. We’ve got two more hard days left at these and we’re going to break it down probably over three or four days. We’ve got someone going out and picking up some of the rest of the furniture. He’s going to get help loading it on. He’s not going to get a lot of help loading it off because they can’t get down there. I may take the dog and run down there with the cash and make sure everything gets taken care of. This is when you rely on your network. This is the part where we say, “We’re going to be down there. We’re going to be down in Dickinson. We’re going to be at the beach. If anyone can help us out, we’d appreciate it.” Robert and Jamie came over. Juan was down there.If you're not counting, then you're not even starting this discussion of repeatability, scalability, and profitability in the business. Click To Tweet
When I walked in, Juan was working.
That dresser comes in about 500 pieces. We checked that off. Lesson learned, never buy the dressers. Buy that piece of furniture we use for $150.
I walked in and I was like, “Juan, what’s the hardest part of this?” He goes, “It’s separating all the pieces out.” I was like, “This is awful.”
We have one still that’s about 10% done and then the day that it didn’t get finished, so that’ll get finished. We’ll have the other King bed, the mattresses are there. I’ll get the linens and we should be up and running and turn it over to our property manager. Let him bring us bags of cash. We rely on our network and we’re doing it again. We need a little more help to get us across the finish line. We’re close. In turn, we’ll help you when you get to that 90%, 95% done.
I don’t know what we would call them, outfit or onboarding party.
We call it a fit out.
That’s very Jersey term. We could have ten people out there helping slap stuff together.
If we put one person on the dresser, one person on a day bed, one person on the linens and back to the kitchen, we’re done.
I tried to explain this to people when I was driving to Surfside when we were going from Texas City. They’re like, “What’s the big deal? You are just setting a couple of things up.” I said, “You are moving into a house in which you don’t own. It’s all new stuff. The only differences between what we would have moved into our personal residence or to an Airbnb is we didn’t bring our clothes.” We moved into three houses. That’s the analogy I came up with. You’ve got to have all the plates, utensils, the coffee maker. All that stuff has got to get set up.
The stuff that no one ever thinks about like shelves. Where does the laundry detergent go, on the floor? All those little things are happening. We’re wrapping these things up and we’ll have a nice product for Surfside. The couch might be delivered a little late, but I don’t care. I’ll still put that out without a couch in the living room. I’ll throw two chairs in and we’re good to go.
I was chatting with the neighbor and she’s very nice. We may end up buying another one. I said, “Come on over and take a look at it.” They said they want to come over and look at the house when we’re done with it. It’s important for those families in those beach communities and they’ve owned them for 30, 40 years.
She grew up there. I can imagine her and her teenage friends there and college coming down by herself with her friends. It’s a lot of memories.
They had the grandkids there. She was telling me all this stuff they were doing. They had all them in town. She said, “Mom’s getting a little bit older and I’m not sure if I want to turn this into a vacation rental.” I said, “You can look and see what kind of stuff we build and go next door and take a look at it.” I think once they see it, they’re going to go, “We want it to look like this.”
I’ve been to the beach a lot in my life. I had three very simple goals. In high school, what do you want to do? I want a job where I can wear jeans to work. That was one of them. Number two, I want New York Giants football season tickets. I got the first two. The last one was I want a house where I can see the ocean, a bay or a lake. I rent them, so I don’t have the final product, but I’m close. Once Corpus is done, I’ll be relocating. I’m close in my life to getting those three goals. I spent a lot of time at the beach, always visioning all this other stuff, but I’m finding this weird thing here in Texas.
We would go to the beach and we take those low lawn chairs. You sit and the waves come up to over your thighs and you’re getting a tan. I’ve seen people skip the lawn chairs and they’re lying flat face down sleeping as the waves go over them. I’m like, “What’s going on? Are you okay?” I drove up to Galveston because I had to go back to Texas City and I’m driving up and you can see the beaches. You drive up along the way and there are people lying flat out. I’m like, “What are they doing? When did that happen?”
When did that become a thing?
We didn’t bring the blanket. We don’t have a beach umbrella. We just lay right in the water.Many people are focused on having the right vocabulary and looking cool at real estate networking events that they're missing a big picture. Click To Tweet
I was out at Surfside and I got down there early. I was going with Secret Weapon to go look at all these properties. I was waiting for the film crew and something else. I changed to go for a run. I’m going for a run and you know how you could drive on the beach out there? There’s literally this gal who’s sunbathing topless but she’s laying on her stomach in the middle of the road. You could tell she started at high tide because she’s in the middle of the road and everyone’s driving around her.
It’s a little freaky with the people sprung out of the beach and vehicles on the beach. Here’s the thing in Surfside. We have an outdoor shower. If you guys want to come and hit the beach, I’m totally okay with that. Help out a little bit. Go up to the beach. You can shower off underneath the house. It’s fine. Our tubs and stuff got reglazed. They look perfect. I prefer you not to be ruining my glaze with your sandy bottoms because you rolled around on the beach for some reason. I don’t know why you did that. Anyone who helps us out, if you want a couple of nights during September, October, let us know. We’ll hook you up. We’ll give you two nights and you’ve just got to pay for the maid.
Come on out. We need some extra bodies.
It’s a little bit of love. I bought all the shampoo and body wash. I need all the little containers in the shower topped off. We’re going to go back and create our checklist per room. That will make things a little bit easier for everyone. I bought these nightlights and I didn’t even realize what I was buying, but I dropped $600 on all these nightlights. I have way too many but they’re cool.
Those are the ones that you can pick up in their flashlight. I’m standing there in the bedroom and I’m like, “This is cool.”
My guess is they’re going to be souvenirs. We’re going to put in the book, “Please help yourself to the coffee, the tea, the oatmeal, the hot pockets,” which is what we do. The things that are not complimentary are the flashlights, the makeup towels and the umbrellas. Bring the umbrellas back.
If you guys are interested in learning how small apartments work, we offer an eight-week class. It’s a whopping $1,000. If you want to be a part of that class, I teach a class on Sunday nights. Just send a text message to (281) 401-9008. We can get you signed up there. Our mastermind, which is small apartments and Airbnb. We take about ten at a time. Any more than that, it gets to be too cumbersome. Our mastermind is a group of peers sharing where we’ll sit down and say, “Here are the numbers for our Airbnb, our small apartments.” The people in our mastermind get first dibs on our deals. I see that the Mr. Texas Real Estate team is buying some properties. They are getting stuff under contract. They are blowing and going. We’re getting to the point down at Surfside where we’re probably not going to buy too many more units. We’re almost done down there for the portfolio size that we want.
We have a wholesale deal down there. If we get the at the number, we needed that. It’s going to require some love, but that’s fine. It’s a tough time to close, but if you gave it 30 days or pushed, it’s probably going to take two months of rehab. It will be tough but it’s a good deal and the numbers work. You’ve got to suck it up November through February.
If nobody buys out, I’ll buy that one. It would be a great deal. We are getting deals from all these different sub-markets that we’re in, Corpus Christi, Surfside, Baytown, Texas. We’re getting them all over the place. We offer those up to our mastermind members first before we send them out to the ARM club members. If you’re interested in joining that and working with Robert and me and then also getting a heads up on all these deals, send us a text and join the club. It’s a whopping $7,500, (281) 401-9008.
Let’s go through our price structure. We’ll do a one day. You need to probably do a one day for apartments. Do the differences. It’s a big thing. It’s closing time in financing. That’s $97. From there, you can buy into the focus group. There’s single-family, small apartments and Airbnb. Those are the three focus groups. There’s $1,000, usually about eight weeks of classes. Once we’ve recorded them once, we’re not going to keep doing them live. You just go and watch all the videos and then we’ll do a follow-up. “We’ll do an open Q&A.” That will get everyone caught up.
Each of these classes are an hour to three hours. There’s a lot of stuff in there.
For the Airbnb, we started with eight videos and we’re almost at sixteen. We keep adding content. Those are $1,000. Our mastermind is $7,500. If you have a $100,000 as an individual, $40,000 in the bank, good FICO, you’re good for the mastermind. If you’re a couple making over $150,000, the same thing, $40,000 in the bank, good FICO and you’re good for the mastermind. If not, join a membership for $1,000. I think it’s your knowledge. It’s definitely your network. I don’t think a lot of people do it, the plan it, work it, review it, adjust the plan. We learn a lot from our defeats, but even when things go well, you should stop and review and say, “I flipped this house in the Heights. It took me 22 months. I want to figure out how to shave some months and review it.” People don’t go through that improvement loop. I don’t think they’re ever taught it.
I think that’s exactly what it is.
I don’t ever see a guru saying, “We’ve done one wholesale deal. Stop, sit back, spend a little money, go out for dinner. Go back and figure out how you got that deal.” A lot of people are flipping homes and was like, “Where’d you get the deal from?” I don’t remember.
“I got it from a real estate agent’s, cousin’s, sister’s best friend twice removed. That’s how I got it.” You’re like, “How do you scale that?” I think the problem in our industry, and it’s not just our industry because Bob and I made much money out in a bunch of different industries teaching people how to count. You don’t realize you’ve got to measure all this stuff. If you’re not counting, then you’re not even starting this discussion of, “How did I get this deal? Is it repeatable? Can I scale it and profitability? Do I grow a number of units?” There are all these different ways in which you can measure these things, but what are the ones that are going to drive my business forward?
I think that’s what made us so unique when I used to do the big real estate classes. What is it that’s driving your business? You could start asking the question, “Are the things we’re doing driving our business in the direction in which we’ll meet my goals?” That’s such a higher-level discussion. Most people are like, “I hate my job. I just want to get a couple of rental properties.” I’m like, “That’s why you’re not going to be successful long-term.” It’s the three-year cycle. In some cases, it’s eighteen months where people get in and they get excited. They sign up for the guru, got the $20,000 backpack and they’re gone in twelve months. I see it over and over again. It’s so funny because this is so much more tactical than why. What’s your why? I don’t care about your why. What are we trying to accomplish? “I’m trying to buy fifteen houses.” Why are we buying fifteen houses? “Because I’m trying to get do this and that.”
Let’s build a plan around that that makes sense where you can achieve that goal. You’re not driving to go look at a house in Texas City and another one in Woodlands and another one at Freeport. Maybe I’ll do some stuff in Ohio. You’re not doing any of that nonsense because you know what your goals are and you’re working in a specific market to achieve those goals. That’s where the real power in some of this management stuff comes in. Many people are focused on having the right vocabulary and looking cool at a real estate networking event. They’re missing a big picture. It’s like, “Let’s get on Facebook and talk trash about gurus instead of, ‘What are you trying to accomplish here?’” It’s much easier to do that than it is to be accountable. That’s what it comes down to and that’s what we want to count.
Your business will be successful once you understand that people in the loop are going to be accountable. That’s one of those big shifts going from running it like a hobby or a mom and pop to running it like a business. Being accountable, making sure you know who’s responsible for what. We’re figuring it out. This is the first stuff we’re putting up here in Texas. There’s a little too much downtime in the morning and not enough productivity. We’re still getting things delivered. We didn’t quite have the best checklists in place because I thought we could get everything done. It didn’t happen. It’s up to me to get some stuff in. I realize the TVs I bought were too small for the wall. We’ve got to get back three bigger ones. All these little things we were making adjustments on to get you across the finish line. At the end of it, we’re sitting down and saying, “How do we make this better? What tools do we need to make it better?” We need a room by room checklist so that someone can come in and say, “TV, clock, couch, two chairs and table. We’re done. We’re ready to go.”Real estate, even single-family rentals, is not passive or risk-free. Click To Tweet
I don’t think many people bring ten Airbnbs all at one time.
We’re pushing it. It is a reaction to Maslow’s laws. We need the cash. This is survival here. We’re going to push and get what we can get those three. We can get those four. We can get two more. If we can have two, three, four, five, six, ten of these going, throwing off at least a $1,000 maybe $1,500, I can breathe a little easier here because we’re still acquiring. We still got appraisals to pay for, that you keep paying on your credit card, which it’s hard. We’re trying to get all that stuff cleaned up. I think everyone’s going to have a good picture of what we’re doing. We’ll make a few more announcements and everyone will understand. We’re still looking to hire some more people. Get involved in that so you can understand, but that’s how we’re going to get across the finish line. We’re measuring what we’re doing, who’s accountable for what, setting up the team and then calling out to your network when you need help. That’s how you get across the finish line. It’s not sheer will of the type-A personality.
I think what you’ll find is no matter how good your checklist is, how good your team, the first couple of deals you do are a little messy. I’ll get on this rant of passive income, which is complete and utter BS. When someone starts with passive income, go ahead and check out. There are only two ways to do passive income. Real estate, even single-family rental is not passive or risk-free. That’s another of my pet peeves. Everything’s going to require a little bit of work. Is it 80 hours a week of work? No, but everything’s going to require you to check in from time to time.
There was a guy on one of your threads who posted, “Such and such real estate is classified as a moderate risk and not a high risk.” I said, “Yes, tell that to the SEC.”
What was funny is this guy was a stockbroker. I was like, “Your series seven and series eight just melted off the wall.” In fact, he’s no longer a broker. I’m like, “I can’t imagine why.”
I saw that and I’m like, “That is dangerous.”
This is all risky.
Everything we do every single day is high risk. If it wasn’t for the fact that I know how to drive a forklift amazingly, I wouldn’t be doing this. That’s my backup. I think four vacant and then three more coming vacant and that should be the last of it. Those seven, it’s not hard. The electrician has been into all the vacant ones and then the next three vacant, we’ll send them back. What we do is we change out all the outlets and make sure everything’s wired and grounded and make sure that everything is done. The exterior electrical cleanup has been done. Boxes were cleaned up. A couple of them were mislabeled, I took care of that. Exterior lights are on. The houses all should be done painting. The roofs are done and some of the interior drywall has been done.
As soon as those other people move out, we’ll go in and do the demo. We should finish up demo and drywall. All the exterior work should be done on the houses. I’ve got to submit into Jet about $60,000 draw so we can get all the texture done, all the drywall done, and the plumber is going to redo the inserts and some of the valves. It’s cabinets painting and we’re done. They’re 800 square foot houses, so they should be able to run through them fairly quickly. I’m hoping they’ll have all those units on the market. We’ll have seven units on the market somewhere between $850 and $950.
I got the impression talking to Dan that he’s pretty much got people ready to go.
It will be cashflowing for us, which is great. We’ve got to go meet with our banker lady and get her refi that stuff. We should probably pay for our own appraisal because if it comes in over $1 million, then we’ll go to that guy. If it comes in less than $1 million, then we’ll go to that woman. We should probably pay for our own appraisal and get that taken care of, but that carry cost.
It’s $9,000 a month.
$8,800, so I’m like, “We’ve got to make this thing work. Let’s go.” We hit rain and all this other nonsense and a couple of big storms came through. That’s moving along. That’ll be a fun little case study. Corpus Christi is moving right along. We will be ready. The architect should be done. The Heights house, then the nine units in EaDo that will be big.
That is going to be a wicked deal. I can’t wait for that case study. I get a shot at one of those once a year and it is one of those standard case studies that blows everybody’s mind.