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Getting Started: If You Have A Little Money with Robert Orfino
I’ve got bad news. Recession is canceled. You probably should look at that Airbnb and small apartment model. I’m just saying you should look at something. I did the whole mea culpa thing on multifamily back in the third quarter of 2018 and I love telling this story. Donald Trump comes out and he tweets, “The Fed’s raising rates too fast. The rate hike is too bigly,” and whatever he says. The Fed goes, “Based off the Ph.D. you have in economics and finance and your breadth of knowledge in currency markets and what the Treasury should do and the Fed and all that. We think you’re right, Donald Trump.” They come out and say, “We might raise rates once in 2019.” That’s when I knew this is over. This whole idea that commercial real estate is going to collapse and multifamily is going to collapse that we’d been saying for years is not going to happen.
You go to the next FOMC meeting and they come out and say, “We might even have a rate reduction in 2020,” and I’m like, “Back on, boys. Party is back on.” We’ve got another seven to ten years. That’s my prediction. There’s a bunch of shock jocks out there on Newstalk, “Private payrolls surge by 275% in April, blowing past estimate biggest gains ever.” I read a report, the GDP is up 3.2%. They said if we didn’t have the government shutdown, it would be almost 5%. That’s absolutely bananas. We had a president for eight years that said, “If we get GDP up 2%, it’s going to be historically good.” Everyone’s like, “What?” Trump’s good for one thing certainly.
Here’s what I knew back in 2017, 2016. I was like, “The next person who is going to be the president is going to look like a hero because we’re in that upside of the cycle.” I didn’t know Trump is going to run like that. You can only mess around with the cycle for so long and it was going to come roaring back. If it was her, then she looked like a genius. If it’s him, then he looks like a genius. There’s a cycle and they hate that cycle. This is the thing why you can tune most of this stuff out. This is what we talk about. We’re talking about beginners in real estate. You need to understand importantly and quickly what market am I in? Am I in a buyer’s market? Am I in a seller’s market? Am I in a stagnant market? Where am I?
Of those three, I will tell you the worst one. It’s not a buyer’s market. It’s not a seller’s market. It’s when it’s stagnant. When nothing is moving, that’s when stuff gets scary.
I felt that way in November and December. When you showed me the chart of the cyclical sales, I was like, “This is seasonally adjusting.” It’s Texas, I could see it in Maine like no one wants to buy in January.
I like to call it the breathers. It’s the school cycle. There’s a big swing in real estate during the school cycle. We’ve sold a ton of stuff in November and December. It’s like, “Don’t worry about it if it’s slow.” What’s crazy is it starts kicking up in February and March, right after President’s Day. All of a sudden, you get a whole bunch more open houses, you get a lot more showing. I’m like, “What’s going on?” It’s like everyone gets out of that malaise from the holidays and all that stuff. The people that are selling doom and gloom are selling doom and gloom nonsense.
It’s like you’re in that room and someone comes to stands on stage and talks about, “I’m going to show you how to buy foreclosures or tax liens.”
That’s like, “Jason, I’ve got my special HUD foreclosure class.” I’m like, “That’s great. Welcome to eight years ago.”
There are deals on HUD and you can go to the HUD store every day.
I go right to MLS and say, “We’ll take that one. We’ll have this one.”
We’re in a market that is clearly looking like a seller’s market, except it’s not. A few years ago, we had a big natural disaster, which is put the rains. This is why New Jersey was so good for four years after Sandy and people lost their lives, jobs and it was absolutely hard. I prayed along with everyone when that stuff happened. A few months later, there are still houses out there that we’re buying that are gutted or the sheet rock’s gone. They are still in that market. We’re in a driving booming economy across the country. In these little micro areas, because they’re getting smaller, we’re still finding deals where looking for your hand and looking for an investor is special. There are still a ton of investment specialists on the MLS. Back in 2013 when California market turned, they didn’t have a natural disaster. It was a rush to the street to buy all that stuff.
Flippers are feeling it for sure. We talked about at some point you’re going to need to get to 75% ARV hard money. Someone needs to come out and say, “We’re doing 75% deals because they’re getting tighter and tighter.” What you’re also seeing is that you’re going to get a lot more people like me coming from California where the market is not good, but the economy is fantastic. If you are in Orange County, there’s a ton of people down there who are going to be uber wealthy. As this job and marketing, everything rises and rises and there’s nowhere to place their money there. They’re looking at, “Do I want to go to Indiana? Do I want to go to Chicago? Do I want to go to Phoenix?” That market is almost turned and the eyes will be on Texas.
It’s been the market to play in for the last 40 years.
A lot of them have already done deals here. I owned homes in San Antonio. We did a little owner financing. I had 40 of them and sold them off. Now, I’m coming back. If you don’t think there’s a wave of at least 10,000 investors that are going to be coming out of Southern California, Northern California, Seattle, New York City, Miami, Atlanta, these big, massive and wealthy cities. If you don’t think they’re going to be coming and putting their money here, you’re fooling yourself. If you think you still have time, you’re in trouble. You’re already behind.
My favorite is like, “Rob, you don’t understand, real estate is expensive.” Relative to what? I was like, “Bob used to always say, ‘As compared to what?”’
Building a private rocket to go to Mars is cheap if we’re comparing it to that.
That is a great example. Elon gets all kinds of flak for SpaceX, “It’s over budget and what’s it worth?” I’m like, “I don’t know. Why don’t you compare it to the other guy that went to Mars? No one else has done it.” He’s the one that’s building the ruler in which everyone else will measure. That’s a completely different thing. If we’re talking about going and doing real estate, as compared to what? Is real estate expensive now? One of the things I love to say, “If you think it’s expensive now, just wait ten years.” It’s amazing how fast these markets are appreciating. It’s not, “Jason, it’s like 2008 all over again.” How? Explain to me how that works. That’s one thing I ask. “There’s a crash coming.” “You tell me why there’s a crash coming.” “The prices are going up.” “A crash is coming? What does that mean? Where’s the crash coming from? Are we building too many houses? Are people buying these houses that they can’t afford them? Are we giving out free money?” We’re not doing any of that stuff. You tell me where the crash comes from.
You have a rising economy across the nation. It’s not based on oil. Most of those jobs were service sector and that’s great. I’ve got a lot of jobs where you get middle managers and managers above them and so on. You have money that can’t find a home on the coast so they need a place to put it. You have 862,000 people moving to the state every year. You have demand on housing. You have demand on investments and you have an economy that doesn’t look like it’s slowing down.If you think you still have time, you’re in trouble. Don’t be complacent. Click To Tweet
You have an extremely limited supply.
You are already here. You drive by your investment deal every single day and you think you have time, “I’m going to get to it. I’m going to sign up for that class.” I get a lot of those, “You had that class on Saturday. When’s the next one?” It’s too late. We just taught a whole bunch of people how to go buy this. Those people were out there on the street and they’re doing it.
We’re going to host a webinar talking about our first commercial real estate deal. I’m about to send an email out and you can register for the webinar there. We’re going to share with you how we did the deal. We are officially commercial real estate investors. Let’s talk about getting started for folks who’ve got less than $50,000. Let’s say you’ve got $10,000 to maybe $50,000. What would you do, Rob, if you were that person?
Here’s what I wouldn’t do. I would not spend more than $5,000 on education. Even though we have a mastermind for $7,500, which is going to absolutely blow people away, I wouldn’t buy it. I would wait. I would buy our $1,000 mastermind, hang out, do all that stuff, work really hard and suck up all the knowledge I can get for free. We’re always giving away free answers, just find the opportunity but I would not spend more than $5,000 in it.
Join the American Real Estate Meetup, that’s our mastermind. Don’t go out and sign up for the backpack. You’ve got $50,000 in your checking account, “I need to get educated. I’m going to spend $25,000 for a mentoring package.”
The other thing is I wouldn’t spend any money to buy houses. There are a couple of places where you drop $5,000 to buy houses.
What do you mean?
There are some organizations that say, “You want to learn how to buy trailers? We’re going to show you how to do trailers. It’s $5,000 and we’re going to teach you all this stuff.” I wouldn’t do that. I would find some agents. I would probably spend a lot of my time working with agents. We’re talking about buy and holds here. I would absolutely go out and find some agents like we have Mr. Texas Real Estate Team powered by Keller Williams Platinum. I would look for people like us and there are others in this town. There are a lot of good agents that work with investors and find deals. I would lean on them. I would go and look at our vendors, our sponsors, the lenders, the title people and property managers. I would start interviewing and talking to those people and start putting a team together. I would start making offers within 60 days with the wisdom of a seasoned agent, knowing that your first offer is probably not going to get deals. I’m not hiring a twenty-year-old agent. I want a 40-year-old seasoned, I’ve been in this town through different cycles, I know what we’re looking at.
I want an agent who’s also a real estate investor. If you could do us a huge favor, we have a YouTube channel, Texas Real Estate Radio Network. It’s where we post our videos doing silly stuff. We post a lot of our stuff there, but we need 100 subscribers so we can get a custom URL and a couple of other things, and we’re short by two. If we can have two of you, go out there and subscribe to our YouTube channel. It would help us out big time. I would appreciate it a whole lot. Search it in YouTube, Texas Real Estate Radio Network, and it should come up.
You’ve got $50,000 and you spent $3,500 on some education, some forms, some checklists and stuff. It’s fine. You hooked up with one of our buyer’s reps from Mr. Texas Real Estate Team and you’re figuring out the financing. We’re going to direct you to one of the five people that we work with pretty closely. We’ll say, “This is probably the best for your model,” even though all five will say they do everything to help people and direct them and then you’re ready to go. In 60 days, you should be out there looking to buy your first duplex, which is probably the easiest one to start with. Get a duplex under your belt. There’s a couple down in Richmond. There’s a couple over here. They’re all over the places. You can find them. They make money. They’re going to appreciate not as well as the single-family, but they will appreciate and the rents are going to move quickly. You’re going to have a good little five to seven-year investment and you’ll need $30,000 down. You’ll probably need another $7,000 or so for paint and some other little handyman stuff.
If there are tenants in there already, they’re going to come to you with a list of stuff that they’ve always asked the previous owner about. Some of those are going to be legit like, “The bathroom floor is sinking.” You better fix that but not, “I’ve lost my third garage door opener.” I have a solution. I’m going to take the garage door opener out. You’re going to meet with guys like Jerry and Mindy. They’re going to sit down and say, “Get ready for the turn. What do you want to do? Let’s look at the lease.” They’re going to guide you along. There are a lot of professionals in this world and in this city that want to do business with you that isn’t going to charge you a $25,000 coaching package.
Our partners are much better than any guru you’re going to write check to. There’s no reason to hire the real estate guru to coach you up. You’ve got all the expertise right here. You don’t have to fly. You don’t have to go to the mastermind, “I’ve got to go to this mastermind in San Diego.” I’m like, “Why?”You have the opportunity. You just need to start doing things right. Click To Tweet
I went to a two-day mastermind in San Diego, and the guy got on stage and said, “For the last three years, I’ve been giving a lot of technical advice but this year, I want to work on mindset.” I was like, “You’re killing me. I came here for the technical advice and dropped $3,600.” That was a waste.
The reality is that you have all the expertise you could ever want in our partnership and in our network. When you get down to it, where’s the real value in joining an organization? It’s in the network.
Let’s go back to what we’re trying to do, 200 millionaires in the next five years. We want to make sure that people are getting off on the right foot using the folks that we’re using. You’ve got to go find your own private lenders.
When we started all this, this is how we did it. We’re sharing with you exactly how we do it.
We’re not coaching.
We’re not going to spend six hours on mindset, “Are you ready to be successful? Are you stretching yourself?” and all that. It’s buying a couple of houses and a couple of little apartments. This is so much easier when you’ve got a team of folks. We’re doing this battle on our 27 units. We have everybody that’s telling us, “You would be absolutely insane not to do this deal.” Are you sure? The appraisers are like, “This is a pretty good deal.” Property managers are like, “This is insane. This is a great deal.” We’d do the same thing that we would tell you to do. All the experts are telling us, “Do the deal.” At that point, all we have to do is operate the asset and raise the money, get everything fixed up, get to work with a property manager and make sure we get them turned. That’s as complex as it gets. The hardest part is finding the deal.
Finding the deals is going to be hard. Getting that first loan is going to be hard because you don’t understand the questions that are coming back to you. I got an underwriter question. I’m like, “I know what they’re looking for. They’re testing us to make sure we’re not lying.” They’re asking the same question three different ways to make sure that what we provided them was the truth. A lot of people that are in that getting started and I have some money, if you only have $50,000, that’s a lot of money and you don’t want to blow it. It’s the loading order that becomes confusing, “Who do I talk to first? Who do I talk to last? When do I get this person involved? When am I supposed to be doing this?” The reality is as soon as that contract gets signed, your world explodes and you learn the loading order very fast. Agent con, insurance guide, you get this, get that. Everyone wants to see that deal close because now they’re financially invested.
I’m doing my first Texas Real Estate Discovery. I’m not going to tell you who the special guest is and we’ll make sure everyone knows it. I have a little sideshow that I’m doing. We’d love to have some other guests on. There’s a person who took this little niche market. He knows everything about this market and we’re going to go and do a little interview. It will be about 22 minutes long, in case someone ever wants to put it on TV, but it will be there. We’re going to spend about three hours talking about the neighborhood, figuring things out and grabbing a bite to eat. It will be fun.
This is the LA, New Jersey guy moves to Texas and started investing in real estate. They’re going to be interviewing these.
I want to meet all those successful or struggling real estate guys, but I want to do it in a very Texas way.
Going back to getting started.
You’ve got that $50,000 and you’re going to drop about $5,000 on education. You’re going to spend a little bit of extra for some other things. You’re going to have to put about $30,000 down for your duplex. Now, you’re $35,000 in. That duplex is going to run you $1,500 in mortgages. You’re going to need $9,000 in reserve. You’re going to need that $9,000 of that last $15,000 that you have leftover and then 6,000 you’re going to have to do to paint, carpet and a couple of other little things. When we say rent ready, we mean I can go to Home Depot with a credit card and get it all done. I don’t need a contractor. I can go and get some services there and take care of it. That’s what you’re looking for. That’s how you’ll start with $10,000 to $50,000. If you don’t have it right now, if you only have $12,000, keep saving.Get off the right foot by making sure to always provide the truth. Click To Tweet
It will probably make you $700 to $1,000 a month.
$8,000 a year. Not bad at all. In five years, you’ve paid back your investment.
That’s the least time commitment too because you’re not putting together postcard campaigns, yellow letter campaigns and calling people.
We get a lot of people who are close to that and because they’re close and they’re anxious, they want to get started, they think they need to do wholesale. That’s not the way it goes.
Let’s say I bought that first duplex. I’ve got $50,000 or $40,000 sitting in a checking account. I get that first duplex and got a cashflow in it. It’s doing well. Is there any way for me to get out some of that money I put into it?
In about nine to twelve months.
At about twelve months, I can refinance it. Take a little bit of money out and cash out.
You won’t get the full $30,000. You’ll probably get $15,000 to $20,000 out. By that time hopefully, you’ve saved another $10,000 and you can rinse and repeat. That will become quicker as you grow. Once you have three duplexes, then it’s going to be, “Every six months, I can buy another one.” When you have ten to fifteen doors, you’ve got to stop and re-evaluate.
At that point, you’re buying these things. You’ve got great little 30-year mortgages on them at 5.5%. You’re making $700 to $1,000 per duplex. In over five years, you can pick up five of them and you don’t have to quit your day job. You don’t have to figure out, “How do I do this with 100 doors and big multifamily?” Track it along, just buy one a year.
If you’re getting fifteen doors, you can seriously consider lightening the load a little bit. Fifteen doors and you’re producing $5,000 a month or $4,000 a month here in Texas, that’s pretty good.
That’s not bad. It’s a good little supplemental income. When do you get into something like Airbnb?
I got into it because I was a failed flipper. There are a lot of us in this town who are trying to do it. Airbnb is going to be perfect. If you pick up three Airbnbs and you can manage the managers, I wouldn’t be cleaning it myself or putting out the candy and all that stuff. I’d be managing the managers and still being able to pull in $6,000 to $7,000 a month. That’s a pretty good part-time retirement. I know the guys knock us. I talked about the hospitality suite. That’s what it is but the hospitality industry is not responding. We as investors that are always looking for other ways to expand our markets, we are responding. If you’re seniors, part-time, early retirement, you get three or four of those and you manage the managers, you’re in good shape.
Let’s talk about twenty hours a week. That’s all you have. Would you rather wholesale and make $5,000 a deal or would you rather own a couple of Airbnbs? You buy a couple of Airbnbs and you bring it in five to six a month. That’s giving you additional seed capital.