Post Game: Super Investor Meeting with Guest Co-Host Robert Orfino

TRE 36 | Value Of Passive Income

 

When you start being an entrepreneur, coaches tell you that you’ve got to have your big WHY. With real estate, you don’t need to have a profound reason – you just do it because it is so easy to get into. Jason Bible and Robert Orfino talk about the lucrative value of passive income such as the Airbnb market. They discuss pro buying tips, renovation know-how, and why you should not freak out with high tax rates. They also touch on how to become a massive success without being a genius.

Listen to the podcast here:

Post Game: Super Investor Meeting with Guest Co-Host Robert Orfino

It’s going to be our wrap-up show of the Super Investor Meeting. The first thing I want to say is big thanks to the audience. We have an idea of how many are in the audience. It’s amazing to me. I think you said it best, Rob, people come up to you and quote you and you’re like, “That sounds pretty smart. Are you sure you read that somewhere and think I said that?” We’ve got a lot of guys who stay tune in every day.

We appreciate that.

It was a great time. I had a good time. You had mentioned, Rob, I’m seeing a lot more deals getting done there, which is good. That’s the whole point in networking.

I was eavesdropping on a few conversations and talking about deals. I think it becomes that realization that this is happening and you get past the, “Can I do it? How fast can I do it?” I think there’s a lot of that going on in the room, which was nice. I met some guys that did some ground up, guys doing smart stuff. He’s building for unit grounds up, but he’s out near the Kemah Boardwalk and they have water sewer issues over there. That water districts got to figure some things out so he’s stymied. He’s doing Airbnb and he’s crushing it.

Did he share with you any numbers?

No, we don’t get into that. With Airbnb, most people are dumbfounded on their first one that it works. It’s like, “I’m making $2,000 a month.” I’m like, “Yes, that’s pretty good.”

They’re making $2,000.

It’s like, “Why do you guys want to get five Airbnbs each? They should net $10,000.” That’s a nice little passive thing. That’s all going well. Anthony came.

Why don’t you explain who Anthony is? Because we’ve talked about it before like, “Who’s this dude?”

Anthony is our partner in the Airbnb management company. I know a lot of people will ask me, “Will you manage mine?” The answer is no. We don’t have the capacity because there are some people we need to hire. We’re building out. He had a really great day. He probably brought three people on the team. It’s almost done. Anthony came out of the northeast where he lives and he manages a lot of properties. We have another partner who’s in California and he manages them across the country. It’s his first time at The Redneck Country Club. He was like, “What is this?” I’m like, “This is the RCC. This is the Super Investor.” He said, “The biggest REIA club I’ve ever been to was John’s. There were 250 in the room.” I’m like, “There are a lot more than 250 here.” He was very impressed with it all. He was getting peppered with Airbnb questions. A lot of people are curious about it. I think he’s definitely coming back, but the heat is something that he’s not interested.

It’s not helpful that we brought him down to Surfside right off the plane with all the mosquitoes.

I have this dream that I’m doing all this crazy real estate and building out this massive portfolio, but for some reason, it was this tropical jungle with all these mosquitoes. I kept thinking to myself, “Who would want to live here? Why would people rent here?” I woke up and I was like, “That wasn’t a dream. It’s mosquitoes everywhere.” He sees the value and he sees it. His eyes are wide open.

It’s a lot to take in. I can’t imagine if you’re doing business in another market or you’ve got some real estate experience and then you hang out with us for a day and you’re like, “I had no idea that there were this much potential and this much stuff going on.”

He’s working on a duplex in a town called Roselle Park, New Jersey, which is a nice town. It’s a Union County. It’s near New York City. A lot of people commute to New York City. People get freaked out over taxes or insurance. There is a number called the affordability index, which says this is how much people can pay for a house. Inside that affordability index is the PITI. It doesn’t matter if the insurance is high because it’s just a number. For the longest time, people in California could afford 490. It didn’t matter what the insurance was or the taxes because people freak out in California. Where in Texas, the taxes are so high here but it’s so affordable. It doesn’t matter. He’s working in a town with a 7% property tax. When people here say, “The taxes are high.” I’m like, “Eh.”

It’s usually the people out in Katy that are 2.2, 3.6 and they’re like, “You’ve got to be kidding me.”

It’s a nice town. It’s not like Santa Monica where the taxes support a lot of the homeless people. They have just gotten themselves into a hole that they run their town at 7%. You don’t have to take your garbage out, you just leave it in the backyard and the guy walks into your backyard takes the trashcan, goes to the truck and throws it in the truck, brings it to the back and locks up your container at 7.5% property tax.

Do they do your yard too?

Some of them do. All the tree services for sure was done. All the leaves are picked up. There’s this 1950s expectation of living that has held over. The only way it’s held over is by 7.5% taxes. We look at those numbers, we’re like, “What can we get?” All of a sudden you look at your mortgage bill and your taxes are higher than your principal. It doesn’t matter because there’s something known as an affordability index.

At the end of the day, the net number is the only one that matters.

That’s when people start getting freaked out when prices go up or taxes are going up. It’s like, “It doesn’t matter.” There’s this massive invisible force called the market. The market does what the market does. The problem in our industry is we have a lot of people that are type-A personalities. They can put their arms around the market and shift it the way they want to shift it. They don’t understand that it is that big giant boulder racing after Indiana Jones. You’re going to get crushed.

The whole point of networking in real estate is getting more deals. Click To Tweet

Were you standing there when I was having the conversation with the broker and he was talking about iBuyer and he’s like, “They’re going to buy it. Zillow’s going to do this.” I’m like, “It’s a $300-trillion industry. They could buy 50,000 houses a year and not move the needle. You don’t understand how big the market is. It is the largest asset class on the planet.” That’s real estate. It’s literally the planet. No matter how big your fund gets, if Apple, Amazon, Microsoft and all those guys get into real estate, it’s going to be nothing because it’s so big.

There’s a Chinese guy who owns most of the planet and then there’s the pope. She owns a piece of land in every single town. That market is the big thing. You can’t shift it. I think that’s what a lot of new real estate investors get in trouble with is they think that they’re going to be able to shift the market, “If I put in marble, this will shift the market. If I over rehab, this will shift the market.”

This is how the guru pitches it because it sounds more sophisticated, “We are going to gentrify just one block away from where all the other gentrification’s taking place. We’re going to push the cops because I’m going to do marble and all of this.”

That’s the Detroit plan. You could buy a whole block and then you can raise the whole value of the block.

That works as long as you have the demand, which you don’t because Detroit sucks. I know we’ve got a friend of ours that’s from Detroit. He’s very successful up there.

The two buying agents, that was their first time there. They were like, “This is awesome.” We were talking, so they found a threeplex.

I saw that when they handed it to me.

What happened was from the outside, it looks horrible but then they listed the apartments on it as a separate listing. I saw it and they’re all done. It’s at sea level but it’s clean. I was like, “Get that one.” We have a guy, Christian, who might be interested in that. He’s going to come. That will be one that goes up, and then we’ve got two duplexes and a couple of single-families.

If you want to buy something, it’s going to make a massive amount of cashflow.

If you want to be a landlord, you for sure show up. If you’re already buying, we’ve got a couple of good deals for some seasoned guys.

TRE 36 | Value Of Passive Income
Value Of Passive Income: Most people are dumbfounded that Airbnb actually works, especially when they start getting $2,000.00 net a month per unit.

 

Text us at (281) 401-9008.

If you’ve texted us, I’m going to text you back with the code for the PBC lunch and the bus tour. I liked watching Richard and Eddie when they do their Q&A.

I think the best thing they do is Q&A.

I’m like, “There’s a lot of experience up there,” because they were hammering stuff.

Between the two of them, it’s almost 40 years.

That’s 40 years of experience up there and I was like, “That is impressive.”

They’re like two marketciples.

These guys don’t understand what they’re getting.

The people in the audience have no idea. You could sign up for the best real estate club in the country and you’re not going to have those guys in a room.

Eddie made a good point that I hadn’t even thought about but he’s like, “I buy around the good high schools.” I was like, “Of course, that’s a huge thing down here. I get it.”

The problem in real estate is we have lots of folks with Type A personalities who think they can shift the market the way they want to. Click To Tweet

That’s why my house is a $400,000 house and on the other side of Highway 6 there, it’s $325,000. It’s the high school, that’s it.

We’ve got to get him to lunch and start targeting because both those guys they’ll figure out, “We’re now repositioning our portfolios, so we have opportunity to buy some of these threes and fours in these areas. We should take a hard look at that.” Richard was saying, “You just overpay for them.” You’re going to get higher rent.

They’re easy to rent. There are two sides to that. One is you find the better high school. The second one is you buy at the lower tax rate. That’s what I did in Stafford. These are the twos and I’m like, “I’ll just take them all.” “Where do they to appraise that?” “I don’t know. They’re renting it $1,200 a door. You tell me what they’ll appraise that.” We got the appraisal back on the four-unit and I was like, “$85 a door? That’s crazy for a fourplex.”

Which could be a compound at some point.

I was chatting with him about that. He was like, “I was nervous signing off on this deal.” I’m like, “Don’t worry about.” We could retire someone off that one deal.

I’ll be down to Corpus. We sent our framers and our foundation guys down there, so we’ll do a little video from there and then the drywall guys will be right there.

Two people asked me and they were like, “What’s the secret? What are you all working on?” I told them, “Let me tell you what we’re going to do. Let me tell you who our target market is.” They were like, “What?” I was like, “You’re about to see some pretty cool happening.” I looked at six houses and I met all the who’s who on the island. It was pretty funny. I met all the new neighbors on a lot of places, some of the people that are living down there.

They’re digging our rehab style.

They love what we’re doing down there. I said, “Just wait until we get the secret turned around.” Some of the people live on that same street and they’re going to be like, “This thing is amazing.” Some of those lots I looked at were cool and the house was neat. I sent a text to our secret weapon and I said, “We’re going to buy at least two of those houses and the commercial project that we’re working on.” She said okay and she said, “I think some of the pro forma and stuff are screwed up on the commercial thing, but we’re just going to put in a long closing and all that other stuff to make sure we get all the right numbers.”

I was running the numbers to see if we could repair those back in a year, if we could gross what we paid for in one year.

TRE 36 | Value Of Passive Income
Value Of Passive Income: One investing tip is to buy properties around good high schools because you can get higher rent.

 

If you can buy something and the gross revenue could pay itself off in a year.

If we buy it for $500 and it makes $500 a year, that’s a deal we shouldn’t be doing.

Everything else at that point is loose math. I realized that you could go into single-family rental properties, that’s like buying $120,000 house that rents for $10,000 a month.

Yes, which is Airbnb, so you get close.

I don’t get the question anymore, “Why are you guys doing Airbnb?” That has stopped because we started sharing the numbers and the deals. It’s like, “How many of are you buying?” I got a call from Gustavo and he goes, “Are you just getting started or are you tapering off?” He’s like, “All I see you doing is looking at property and buying it.” I’m like, “I think we’re on the upside of this thing.” You have to explain something to someone multiple times.

It takes the average person about five to seven times to learn something. This is why you get into that habit of, “Jason, I’m going to explain Airbnb numbers to you. Here’s the explanation of Airbnb numbers.” I just told you how Airbnb numbers work. Usually, smart people pick it up at around three times. They usually ask a question to make sure they got it and then they move on. The average person is five to seven and then obviously more for other people. You have to be that person in your life. You have to be attuned to certain things. There are certain things I can get on the first listen or the second listen, and there are things that take me seven and eight. I don’t care if I sound like a knucklehead, I’ll just keep asking questions until I get it.

Something just came up on Jeff Bezos. I saw a little blog on him and he said the skill that he admires most in successful people is the fact that they’ll fail and keep asking the question, “Why?” Unsuccessful people will fail and not ask the question. It’s like, “I thought I had this, so I need to figure out why.” We’re all exceptional. We’re all good and we’re all great of what we do, but there’s a thing called the feedback loop. It’s everywhere and certainly the EPA does it with all environmental standards. As you observe, you come up with a plan, you execute the plan, you look at the results and you keep going around and around. Everything is based on that. That’s what Jeff was saying is, “This is what makes successful people.” I think a lot of times, we just don’t do that at this level because we’re in that entrepreneur stage. We’re just running. One of us has got to go to Quest and sign a document so we can get some money coming in. I’ve got to go to Corpus. You’ve got meetings with marketing people. We’ve got gazillion emails to write and I’ve got two private lenders to talk to. I don’t have a lot of time to analyze how well our coordination on seven Airbnb implementations that we did.

It starts with stuff like this where it’s like, “Let’s identify the organization.” This was literally what I did for fifteen years. When people asked, “What is it that you did?” I’m like, “How impressed do you want to be with what I’m about to tell you?” A lot of times I’ll just say, “I put numbers in boxes.” Instead of saying, “I ran all this stuff and I was 28 years old, I did all this crazy stuff.” I’ll just say, “What I did for fifteen years was I put numbers in boxes.” They looked at me and they go, “Explain that.” I’ll say, “This is how we did it. We put in these double-loop learning processes and go back and change policies and looked at self-insurance and all this other stuff.” That’s when people go, “That makes sense.” When you put that numbers in boxes back into your real estate business, “How many offers am I making? How much marketing am I doing? How many properties am I walking?”

We tell that to our students on this focus group for Airbnb. If you’re looking for a fancy website, we don’t have that. That’s not what you’re going to get.

If you’re going to sign up for our mastermind, there’s not a sexy website.

With construction or renovation, think in terms of per square foot, may it be income or operational cost. Click To Tweet

What you’re going to get is a checklist, “Turn these utilities on in this order. Here’s everything you need to buy. Just click this button and it will automatically load up Amazon and adjust your numbers. These are the materials you use for your rehab. Do this type of rehab. Use this paint.” We’re already doing it and we’re in that, “Can we make it work? Is it repeatable?” We’re building systems and implementing on a broader scale and as we’re doing that, we just shared the systems with the people in the focus groups or the mastermind. They don’t have to repeat it. We can do it. They can take it, tweak it. Send me the results back and I’ll update.

We’re not going to have a conversation at a mastermind meeting about, “Why are you using a baby powder blue at the beach as opposed to a soft gray?” “Here’s the paint to use, use this.”

“Use this for the walls in the bedrooms, use this for the bathroom.”

Rob, my wife’s an interior designer. You can do whatever you want, you paint it red, purple. I don’t care. This is what we use. This is how we do it for the gazillions of these things that we own.

I see a lot of gurus or a lot of guys who dig in on this stuff. I’m like, “You can do whatever you want. I’m not getting paid to argue. You want to paint it purple, paint it purple. There’s a big restaurant down there painted purple. Go for the purple.”

“Why are you using the quartz instead of this type of granite? This is what we use. Just use it.” It seems to work in the gazillion other ones that we do.

By the way, the kitchen’s done. The client will come on. We’re going to let them know that’s ready to go. We can bring in guests.

We’ll be open for business there. I was chatting with a secret weapon down there and she’s got a handful of Airbnbs. She took me by the efficiency. It’s 420 square feet.

She grosses two-thirds of what she paid for in a year. That’s not bad.

When she shared that number with me, I’m like, “It’s 420 square feet. How much is that per square foot?” We had this meeting and we started talking about how he got started in real estate and all that. I said, “One of these things I looked at is the per square foot, what’s it operationally cost per square foot? What do I get in income per square foot?” She goes, “You are absolutely right.” The Airbnb numbers, it’s like buying a rental property for $100,000 and making $40,000 a year gross. The numbers are incomparable to any other asset class out there.

TRE 36 | Value Of Passive Income
Value Of Passive Income: You have to explain something to someone multiple times before he gets it – five to seven times for the average people, three times for smart ones.

 

I don’t have time to debate people on this nor show you my numbers or educate you on this because you’re going to need to know three, four, five, six, seven times. When I’m done, I’ll happily sit down and explain it all to you, but we’ve got seven to implement and another six to buy. On top of that, there are eight indoors we’re trying to take down. We’re going to have to get back to the private lenders. We’ve got a lot of first position loans. We’re looking to get funded on. All our gap is taken. Lo and behold, all the Airbnb joint ventures opportunities are off the board.

If you guys wanted to partner with us on Airbnb, they’re all gone.

We’ve got six more coming up and we can talk to you about that.

That’s what I was doing, poking around Surfside. I’m like, “Let’s go buy some more here.” My favorite one is the one that we’re going to end up buying one that’s literally three houses down and it’s already done. It’s beautiful. It’s got a fireplace and the cool thing is when you go to the back of the house, it overlooks the bay. When you go to the crow’s nest, you can see all the houses. It’s about four houses back from the beach. The whole time I was there I was like, “I wonder how much you cost to extend the deck out of the back and build a bigger crow’s nest up top.” I know that roofline, it starts goofing around with the roof. I was sitting there and I was like, “Build an observation deck up there.” I’m going to take another run at that black house.

I heard you do an Airbnb and I’m like, “I don’t want more work.” It’s going to take a little more work than normal. This might be a challenge. I don’t want it. Two houses back, that’s a lot easier.

It is on the beach. The next hurricane, it’s gone but it is a cool little house. I don’t know, maybe it’s $350 a night.

Guys, these properties are out there for you. We’re going to bring one to the Portfolio Builders Club. It’s going to be about $125,000 probably no more than $20,000 interior. We might have to do a pylon. We might have another $10,000 to put in.

The plumbing is a mess, but it’s a small house. It’s on still.

Those guys will be in and out of there.

They claim it’s 420 square feet. I think it’s smaller.

When is the best time to plant a tree? Twenty years ago. When is the best time to go into real estate? NOW. Click To Tweet

I don’t think they’re counting close decks. There’s a big deck out there so you could build that out.

It’s a huge deck with beach views.

It’s going to be somewhere around $125,000 maybe a little higher, maybe a little less. You’re going to be able to get $250 a night for the summer. For 100 days, you’ll be able to pick up $25,000 during the summer and then there is a winter play and you’ll be able to pick up another $2,000 a month in the winter. You can be sitting at potentially $40,000 income a year on $150,000 project. That’s not bad. That’s a great place to start for Airbnb. It’s right there. The crews are there. The managements are there. It’s a sweet little deal.

When I walked in, I’m like, “I like this.” The efficiencies are pretty sweet.

We’ll set that up for Portfolio Builders Club. We also have a three-unit, a couple of duplexes and some single-families. Make sure you check it out. It’s $50, but if you’re reading this, just type in the promo code, CASHFLOW, and you’ll get a half price on the Portfolio Builders Club.

Where do they go to?

It’s a Facebook thing, so it’s on Eventbrite. If you’re on an email thread, you’ll see at least 100 emails and text messages. Text us at (281) 401-9008, and it’s good. We’re going to have some wine. We’re going to have some shrimps, lamb, meatballs and some good foods.

You keep talking about this lamb.

That lamb was so good. She called me up and said, “Do you want the same exact menu?” I’m like, “Yes. Make sure the lamb is on there.”

Is it a lamb and they have jelly with it?

TRE 36 | Value Of Passive Income
Value Of Passive Income: Real estate is so simple you only need to use the four-function calculator. It’s not rocket science, but it takes discipline, understanding and money.

 

Yes, there’s a little mint jelly and it’s a little skewer.

They just put it on the skewer. I like that. I’m getting excited about that.

We’re going to do the Portfolio Builders Club and then we’re doing a bus tour. We already got a bunch of people coming on the bus tour, but use that same promo code, CASHFLOW. You can come at half price. We’ll have a hard money lender. We’ll have a contractor on there. It’s very exciting for us. This stuff is obtainable. If we do anything on this, we’re de-glorifying this industry at this level. There’s no big glory. There are no touchdown dances. I was watching Richard, I got an understanding of how many properties he has, and Eddie, I got an understanding of how many properties he has, how many he sold. These guys are probably two of the top five guys in this market at this level. I’m just thinking, “There’s a person in the cubicle or has a nice corner office somewhere in a Galleria and he runs a REIT with commercial properties, he would think those guys are children.” At this level, there are no great victory touchdown dances. Just do it.

A lot of people are like, “I just want to do my why.” I’m like, “Why don’t you treat it like a job, buy these houses and retire and buy some more?”

Get it over with. When’s the best time to plant a tree? Twenty years ago. It’s the same thing. You’ve got to get started. We’re no geniuses. Jason is actually pretty smart, I’m a knucklehead. If this knucklehead can do it, you can do it. If we can figure it out, then you can figure it out. It requires a little bit of discipline and an understanding that, “I can’t do it with no money.” Once you get into that point and understand there is a real path here, it’s going to take a little time. You’re not going to get your financial freedom with single-family rentals because they don’t cashflow. You’re going to create $1 million in equity over the next five to seven years. Things look pretty good. We talk about our stuff all the time. You should not interpret this like we’re talking about rocket science.

Let me set a scene for everybody. The first floor of that building was all Chase private client. It was not a bank open for everybody. In fact, in front of the building it says, “Chase Private Client.” It’s not like a regular Chase Bank. We come rolling in, I’ve literally sweat through my shirt and my shorts five times that day. I smelled like insect repellant.

You leaned against the paint. You had two stripes on your back.

I must have rubbed up against something. I don’t know what the deal was. I was an absolutely mess. I was sitting there like, “They’re going to ask me to leave.” I was waiting for Rob and nobody says anything. Everybody’s dressed nice. The lady’s got heels on. We get on the elevator and I’m like, “The security guard didn’t say anything.” We went up to the suite like, “We’re just going to meet.” We walked in and he looked at us and went, “Who’s, who? Do you guys need anything?” I was like, “I need some water. I am dying out here.” I was actually in Jimmy John’s off of Westheimer.

I went to Subway.

I got so used to the heat when I sat in Jimmy John’s, I started shivering. I went outside to finish the rest of my sandwich. It was 100 degrees out there. I was like, “Something’s wrong with me. Something’s not right. I need to drink some more water.”

The Redneck Country Club is great. There are a lot of guys doing it and they’re all doing it at a great level. In this business, you’re allowed to be a massive success in your own world without anyone ever knowing what you’re doing. If you network, you don’t have to have a radio show, you don’t have to have Facebook.

You don’t have to get on Facebook and proclaim your why.

We have an understanding of what we’re doing and why we’re doing it and how the show fits into it, so it works for us. Other guys don’t have to do that. Other guys can go ahead and buy properties.

I still get the question, “How does the show tie in all this?” I’m like, “Deals and money.” All the stuff we do, it’s deals and money. Part of it is credibility too. Someone’s like, “Who are these Mr. Texas Real Estate guys? They got a show.” We’ll send you guys pocket listings first. They’re like, “That’s worth it to me.”

There are clearly guys at the Redneck Country Club who are doing more deals. At this level, there’s no touchdown dance. Just do it. Who you do it with is up to you. You can do it by yourself, figure it out. You can go ahead and pay the big $25,000 backpack. You can come along our mastermind for $7,500, our focus group for $1,000. It’s all available to you. You just got to start moving forward.

Leave a Reply

Your email address will not be published. Required fields are marked *