Single Family Rentals: Don’t Pay $20K For “Coaching” with Guest Co-Host Robert Orfino

TRE 26 | Real Estate Investing Tools

 

Success stories in real estate investment are everywhere. They inspire you to try your luck, and who knows? It might just be the big move you needed. But what does it really mean to get into real estate in this economy? Jason Bible and Robert Orfino get down on the details of starting in the business and how to make a success out of it. They talk about the programs they offer and how they can help you reach your goals. How you use these real estate investing tools at your disposal determines the range of your success and whether you’re cut out to even take the first step.

Listen to the podcast here:

Single Family Rentals: Don’t Pay $20K For “Coaching” with Guest Co-Host Robert Orfino

You Don’t Need To Spend $20K For Coaching

We’re going to talk about single-family rental properties and the real estate coaching environment. One of the things I always found fascinating about single-family rental properties is they’re not that hard.

We had a guy who came to our event. He was for sure 100% brand new. He’s like, “This is the first time I’ve ever been in a room where we’ve talked about real estate.” I gave him my straight-up advice. I was like, “In your first six months you never pay more than $500 total for education. Read everything you can read on BiggerPockets. Go out there and find some podcasts, follow Jason and me and get your knowledge up, get the acronyms, the initializations, and understand the math. In six months, you can start having intelligent conversations. This is a five to seven-year run. You’re not going to do anything here in the next 90 days.”

There’s no reason to jump on that horse too quick. I was like, “Go to all the real estate clubs, go to all the little $97 weekends, the free lunch things and all this stuff.” The sharp folks will recognize a pattern like, “I get it. This whole business works.”

I’m hesitant ever to do a free event because you pay for what you get. In the free event, you know where that funnel leads. At the bottom of that free event is a $25,000 or $50,000 coaching package. We’re a little bit different. I talked to my sales friend and he was all over me. He’s like, “You’ve got to stop giving out the prices in advance. You can’t be doing that.” I’m like, “No, that’s how we do it. It’s $97 for an online webinar. It’s $1,000 for a membership. It’s $1,000 for the focus group and its $7,500 for the mastermind.” The mastermind includes buying and holding single-families, duplexes, threes and fours.

The way I like to look at our program is this is like an upper-level, graduate-level real estate. Let’s get brutally honest here. You can learn 99% of this stuff online. It’s not that big of a deal. 

I always say you can learn about 90% of it. The last 10% is the loading order. You just don’t know who to go to first and you don’t have the team together.

I’ve had this thought when I’m doing a couple of these bike rides. I’ve heard somebody say this before, We all have the same 26 letters in the English alphabet, but some of those folks can arrange those in such a way that they win full of surprises. Other people are functionally literate. It is loading order. Whenever I think of loading order, I’m like, “What’s the big deal with loading order? There are people who win prizes in literary excellence and there are some people who can barely write and we all have the same tools given to us.” It’s how you use those tools determines how successful you will be as someone who commands the English language. 

I started a program in California called Big Game Hunting. Mostly it was people from California who were the market was already topped down. We couldn’t find rentals and we were investing in the Northeast. We took Big Game Hunting down here. We still have a lot of the same people in the group. Our prices ranged all over the place depending on who was in the back of the room. We just don’t do that anymore. It’s $7,500 for our mastermind. You get access to all the videos and everything. I feel like I have a cleaner soul. I’m not trying to get someone to the backroom to figure out. I don’t give them a form to figure out how much I can charge them, which is what those sheets are for. Tell me what your net worth is so I can figure out what to charge you.

Everyone that comes to my events knows straight up this is the number. We’re going to go back to that single-family one, two, three, four units and show them how to do that. We’ve got some non-QM product. It becomes even better for those people. Even at the end of the day, we’ve got 30 videos of some of the masterminds and the actual twelve steps of training and the bonus videos. Even at the end of it, we’re reluctant to say, “I think what we did wrong at the beginning was we took some people in who didn’t have the resources just yet.”

You’re like, “We recognize you walking in, you’re not ready to go in this thing, but let’s see if we can get you sorted so you can start your career.”

What I’ve done is I’ve just never ended their membership. There’s never been a renewal notice for those people. It’s like, “Keep coming. We’ll keep figuring out, hang out. A couple of guys are close.”

You probably got them hooked up with Chandler, and he’s going through all that stuff.

We’re doing a lot of that. The famous story is the Uber driver. The guy just said, “I have no money.” I’m like, “Keep driving Uber.” He kept driving Uber and he got a little money together. We hooked him up with a banker and the banker said, “You’ve got a little equity over here. We can do this.” The next thing you know, he’s got five doors. He’s looking to buy another duplex and be at seven. Taking a little time to take care of his home property in California. They’re adding a pool. The Uber driver is getting a nice built-in pool.

Let me get this straight. The Uber driver’s got no money. You get him five doors and he’s putting a pool in California, which I can’t imagine. It’s very inexpensive.

No, it’s not at all. This guy isn’t living out of his car. He’s got a good family and a good support team around him. I talked to him and he’s doing great. I’m happy for him. He’s moving along in this process because it’s a three to the five-year journey. What he learned right off the bat and that everyone learns one, don’t quit the job, and two, the money comes in the appreciation, not the cashflow.

That’s the dirty little secret in single-family rental properties. There’s no real cashflow. 

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You’ve got to get to ten, fifteen, twenty.

In fact, if you were to ask some of the gurus around town, “Send me the QuickBooks file on all your rental properties.” They’ve got a real rental portfolio, it shouldn’t be hard for them to print it off. What you’ll find is even before taxes, a lot of those things are not making money. How do you make money in single-family rentals? It’s when you sell them. They’re little single-family flips that take a couple of years that may have a little bit of cashflow with them and they have a different tax treatment because you’ve held on to them longer. Can you make $300, $400 a month and cashflow them? Maybe in a good year. Where the real value is when you buy, let’s say twenty of them. Wait five to seven years, sell ten and pay the other ten off. Now they start making some sense, but when you add the depreciation expense in there, when you look at your tax returns, at the end of the day, they don’t make any money until they’re sold. 

Its single-families, which is why we start promoting twos, threes and fours. The same type of loan structure. A little bit more money down.

Easy to evaluate and to finance.

Give them over to carry over the property care and let them take care of them and you’re good to go.

The only challenge that you’ve got in the small units, a small multis, the two to four units is they have a tendency take a little bit longer to rent, but it’s not like six months. That’s not a big deal. Your cashflow is literally triple.

Usually, you’re very close to covering your monthly expenses on the one side, and certainly, two of the four usually gets you done.

Can you cover your expenses with 50% occupancy?

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Real Estate Investing Tools: The first lesson in your journey to real estate investing – don’t quit the day job just yet.

 

Yes, that’s certainly 66% for sure you’ll get it, but then there are other little things that come up. The big things we teach is the ability to identify the capex problems upfront, which is why we love working with Jerry. These guys go down the line and say, “This is a capex. This is a problem that’s going to haunt you. This one’s going to haunt you. We’ve got to do this and that.” You get it pristine. We do not have these service calls the first 18 to 24 months.

We like single-families, duplexes, the threes and the fours for sure. We’re getting a couple. We got lots of refis due in and so far so good on this stuff. They will cashflow a little bit. In Big Game Hunting, the big thing we teach is one, if you’re going to buy a distressed asset, then fix it up all the way. Don’t do the lipstick thing. When you do that and you’re going to put a new water heater and you make sure the air conditioner works and the good roof. We used a friend Travis, he put on a roof for us. I feel good for the next fifteen, twenty years or I’ll sell that house before I ever have to deal with the roof. That one’s in Katy and it’s already appreciated another $20,000 since I’ve picked it up.

We’re going to make money on the appreciation and I’ll make a little bit of money on the cashflow, not a lot, but I’ll make $240,000, $250,000. That house is going to be worth $120,000 more than I paid for it very quickly here. I’ll double my asset there. That absolutely happens all over Houston. If you’re in California and New Jersey or my friends is out in Phoenix or wherever you guys are, and you want to invest in this market, then reach out to us at (281) 401-9008. We talked to a lot of California investors. We’re going to California and we’ll be out there talking about Big Game Hunting and coming to Houston and figuring out this marketplace. If you’re already in this marketplace and you’ve yet to start, we’ve made it easy for you. There’s a $20-class on the first Saturday of every month. There are our free small apartments. We’ve done webinars. There’s a whole bunch of things that get you to start. There’s no excuse. Realistically, the big barrier is the cost. We’re telling you straight up for $7,500 for the mastermind. For the Big Game Hunting focus group, it’s $1,000.

We’ll bring you the properties.

We don’t charge you $5,000 to bringing the property. We will bring you properties. We have a real estate team. We fully disclosed that we are owners of the real estate team. That’s pretty important.

People ask me like, “Who are bringing the deals?” I’m like, “You’re looking at this guy right here and another guy in the office.”

We’re finding them for sure. I found two that are good and we’re in the process of negotiating. If we can lock them up, there will be two great deals for our group. We did the duplex, which was a fantastic deal. Its investors, he got a little confused, but we’re providing a little advice, a little hand-holding. “Let’s go ahead and do conventional and you need more time.” We’ll find more time, which is all good.

If I understand it right. This guy is the one that’s paid the $20,000 coaching packages for a couple of other guys around town and it’s like, “Didn’t they teach you any of this stuff?”

The real estate business is like any other business out there - there is no magic bullet for it. Click To Tweet

That was a big thing. We had one couple that has been through them all. At least three big price tags. The other one was a member of a big organization here and it had sat in on your classes. We get a lot of that, “I know Jason, I took the weekend class.” We get that stuff. They’ve all been looking and they’re out there. We make it as simple as possible. If you want to deal, then you’re going to be in this group on Facebook and we’re going to post a deal. We post them out 24 hours in advance, and two of the members of both the buy and hold mastermind, and to the membership, you get a 24-hour advance and then after that it just goes out to the public.

Nine times out of ten what ends up happening is Rob and I buy it if nobody else does, just so we can rub everybody’s nose in it. It’s instructive because somebody will go, “I don’t know. I’m not sure.” We’re like, “We’ll buy it,” and then we’ll do the case study for it and say, “This is what we did.”

Let’s talk about the reality of our mastermind and where people need to be in their lives. Here’s what happens with these coaches. They make you fill out that form. They want to know how much net worth you’re at and then they price accordingly. They all do it, but here’s our reality. You need to be right around $100,000 before you think about joining this mastermind. If you’re not making $100,000 a year, this mastermind is not for you. Because you’ll be scraping just to stay in the mastermind versus having resources to deploy. If you’re ready to start buying single-family homes, you need about $25,000. If you don’t have $25,000, it’s going to be tougher. We can’t be any more honest and upfront about this, then we’re saying that if you don’t make six figures in your household, you shouldn’t join our mastermind. There is a sales coach who is screaming at me on the other side saying, “Shut up, Robert.” I don’t want your last $7,500.

That’s a scary thing is when we ran that big coaching program, I had one couple that spent $200,000 on real estate education for all these different gurus and they were in credit card debt for $100,000. I’m like, “Here’s what we’re going to do first. We’re going to wholesale some properties here to get that debt going, and then let’s go and buy some rental properties, maybe do some flips.” You can get carried away with the real estate education looking for the magic bullet. I’ll tell you, there is no magic bullet out there. You’re starting a business. I don’t care what guru you listen to. It’s real estate investing, but you own a business and your business is single-family rental properties.

It doesn’t matter if it’s single-family rental properties, duplexes, 22 units, Airbnb, it’s all a business. You’ve got to run it like a business. One of the biggest failure points in business is a lack of capital. In fact, I take it a step further and say lack of liquidity, meaning not having enough cash when something goes wrong. Let’s break it down even more simple. This will get into some technical piece. You need 6% reserves for a single-family piece of property if you’re going to finance it long-term. $100,000 house, you’ve got to have at least $6,000 in reserves. Plus, you’re going to have some construction escrow.

Let’s use an example of the duplex you gave, so it’s $110,000. It needs $7,000 for reserves. It’s going to need $10,000 in repair. That’s $17,000 and he’s got to put 25% down because it’s a duplex. He’s going to get conventional on it. He’s going to get into, that’s great. It’s going to be low-interest rates, but he’s going to have $42,000 to do the deal.

That’s not $42,000 cash in the deal when it’s all done.

Not at all.

TRE 26 | Real Estate Investing Tools
Real Estate Investing Tools: One of the biggest failure points in business is the lack of capital.

 

He’s going to have to have $42,000 somewhere. An IRA account, got some of it in cash. That all works. By the time that deal is completely done. How much do you think out of pocket?

About $30,000.

Yes, $30,000 and then he’s going to be cashflowing how much a month?

He’s going to be cashflowing $500 a month. He could make 20% cash-on-cash on one deal. It’s not bad.

Doing this without any money out of pocket is a nonstarter.

That’s what’s $1,000 a year membership is for to get you involved, get you around, see what’s going on, to get to our events. That is a perfect entry.

One of my favorite rules you have is don’t spend more than 5% of your income on real estate education.

It was brand new and I gave him the whole thing. I said, “We’re getting to move fast because this is probably the 1,000th time I talk about this. Ask the question as they come up.” You could see he was getting overwhelmed, so Catherine was in the room and she started asking questions for him because she could explain what that means. We did that and it was good. I said to him and I gave him the whole, “There’s real estate investing, there are real estate investors, and then there’s real estate investing education. That education business has nothing to do with those two things. Their whole purpose is to get you to an emotional peak so that you take out a credit card or checkbook and you write a big check.” Some of these guys were good. Some are not. Some have lots of rentals, some have lots of owner financing deals and some do not. Some have lots of big portfolios. Some do not, and you don’t know.

If you're going to buy a distressed asset, fix it up all the way. Don't do the lipstick thing. Click To Tweet

When you’re sitting there in the room and you’re seeing these guys on stage, you can’t tell the difference. You and I’ve been to all those events, you’re sitting there and you’re like, “Does this guy do or not?”

I explained that to him and said, “There’s a world out there that wants to get to sell you $997 products over and over and you need to be aware. Go through this rule. The first six months he said, ‘This is day one.’” I was like, “Go on BiggerPockets and read everything on there.” I’m not a big fan of BiggerPockets because I don’t think they treat the newbie well over there. They’re a little snarky to new people.

That’s typical online.

It’s what it is. I said, “There’s a lot of knowledge over there. Go buy The Millionaire Real Estate Investor by Gary Keller. If you want to learn how to flip, there’s a book called FLIP. That’s the one you want to buy. Buy those two and start there.” In the next six months, do not spend more than $500 total on real estate education. You can go to any $20, $47 $97, $77 event, but know that they’re going to try and sell you something at that event. I told him I was straight up, I was like, “I’m selling something. It’s my $100,000 membership, but I’m not going to allow you to buy it because you’re still in your first six months, maybe it’s a waste for you.” At the end of it, I said, “Here’s our funnel. This is what it looks like. The most we’re ever going to ask you for is $7,500.”

Never spend more than 5% of your gross income. If your income is above $100,000, then don’t spend more than $5,000. I don’t want to hear this. It’s investing in your future and this business. No, it’s not. We can break that whole thing down versus actual materials and versus intellectual property. The investments are not there. I went through the whole thing and I said, “You’ve got to have a 5% and also what you need to know is you need $25,000 out of pocket to start buying these landlord properties.” He said, “I don’t have that, but I have equity. Should I go out and refi?” I’m like, “No, just wait. This is a five to seven-year process.” Everyone in the room was nodding vigorously. They were all like, “Listen to this guy.” Everyone in that room at some point dropped big-time money as we did on something that maybe didn’t perform the way we thought it was going to perform.

What’s important to note here is that everything with some small exceptions. When you get into some of the higher-end marketing and sales, when you’re building a real estate business, that stuff’s not out there. When I used to build all those marketing programs that education is not out there. For 99% of you guys, you’re not going to build 100 houses a year house flipping business. It’s of no value. You need ten, fifteen years. All of the stuff that these gurus are going to teach you is online. What is the difference between our mastermind and what a real estate guru sells for $20,000 at the front of the stage?

What we do is we have the focus group. You join a mastermind, you’re going to get all access to all the videos and all the training but it is sitting once a quarter in a room full of people that are doing it. Some are ahead of you and some are behind you. We bring in the right vendors that we feel, “These guys are good for the group.” Not these guys that are just always looking for the predator folks out there. It’s like, “This guy honestly cares about your business and your portfolio. Let’s have a conversation with him and we can bring in some other bigger people and local banks.” We get into a room once a quarter and it’s a true mastermind. We’ll do some exercises like, “We need to figure out some numbers.” We’ll do the hot seats, which are invaluable. “Get up here, sit down in the seat, let’s go. Tell us where you’re at, what the problem is.” We’ll bring in some guest speakers. They’re known as anchors in the mastermind world. There’s a whole mastermind business model out there. We know people that have 100-house portfolios. They would share their information on how they build 100-house portfolios. They’re usually not coming out to our Monday nights at the bar. They’re not coming to our Saturday classes. They’re not ever going to show up at our first-time landlords, that $17 class.

They do show up when I say, “I’m going to be at this bar for happy hour.” There are three of us there and two of them have 300 houses a piece.

TRE 26 | Real Estate Investing Tools
The Millionaire Real Estate Investor

For us, it’s peer-to-peer learning. We’re not coaching. We’re not going to stand up there for 48 hours and just sit there like you guys used to on the weekend. This is, “Sit down. Where are you at? What’s the problem?”

I was at a Brad Sumrok’s event and I’m like, “When did Brad start doing this?” There’s the blue suit in front of the room.

A clipboard, ”If everyone please fill out this form.” I’ve been to Ron LeGrand’s event where he doesn’t let you in the auditorium unless you fill out the form. There’s a big backlog of people trying to get in because he gets a lot of people to his room when it’s like, “You’re not coming in unless you fill out this form.”

I’ll never forget, it was one of those events. I can’t remember which one. Early on in our career, we’d already bought 50 houses and they’re giving the whole dog and pony show, “This is what you do, you’d be great.” I did the math. He had a couple of different information packages he was selling and then the big upsell to their mastermind. I was at the back of the room and I kept a tally of the people who’d run in the back of the room. I can see their pain. It was $1 million with 300 people in the room. I’m like, “This is why they’re doing this. I get it.” I knew there was some money in it, but I’m like, “I had no idea.” The funny thing was this particular guru had his acquisitions manager with them and they allegedly buy 200 houses a year. We already bought 50-something houses. I’m looking over at my business partner and I’m like, “Our acquisition manager is in the car running contracts all day.”

We hardly even have time to go to stuff like this. How has this guy in Houston then he’s flying to Phoenix? He’s going to be in Dallas the following weekend. He’d go, “Because they’re not doing that kind of volume.” They’re talking about it, but they’re not doing it. That’s what we figured out. The other thing we started asking these gurus is what LLC are you buying your properties in? They’re like, “I’ve got multiple LLCs.” I’m like, “Give me a couple.” The reality is if you’re doing real estate, your net worth is public to a certain extent. If you get the guru that’s in Dallas and he’s telling me he’s buying stuff in Houston. Let me pull up Harris County appraisal and tell me what LLC you’re buying them in because then I can pull up all your properties. You would be shocked to know virtually no one has given me their LLCs. 

We for sure love this asset class. We need more. We got to get to that fifteen free and clear. There’s a path to that and we got to buy 40. We’re getting in a better position to do that. We’re going to be with Merrill. If anyone hasn’t joined up yet for that business line of credit and that’s a personal credit profile two-day workshop, go ahead and text me at (281) 401-9008. That’s a pretty big event for us and for sure we’ll be there. We’ll be doing the homework just like everyone else. I have a meeting with their business banking specialist. The question I have is, “We’re going to start borrowing some commercial money and choose the 80% LTV. That bank is going to want me to do banking with them. At least the rents should go through them, which is fair. That’s fine. Should I already start trying to get a business line of credit with that bank or should I not do that in my business anywhere near the bank I’m getting mortgages from? I don’t know the answer to that.

Anybody can get on and say, “You can buy ten rental properties. That’s not a big deal. That’s not that hard.” When you start scaling and if you’re only in this business to buy ten, it’s not enough. When you start scaling, you’re going to have to build a business. You’re going to have business lines of credit and commercial lines of credit. It’s not hard. You just got to hire the right consultants to help you do it and Chandler is certainly one of those. Keep that in mind when people hear like, “I could get a hard money loan and then I can get long-term through Fannie Mae.” You’re going to want those Fannie Mae loans out of your name as quickly as possible. That’s one thing to keep in mind.

A maximum three is what Merrill says.

There is nothing of value in your life that is passive. Click To Tweet

I don’t know any successful real estate investor that’s still out there buying stuff in their Fannie Mae.

You’re going to get started. There are a time and place for everything. There’s a path of progress, the loading order.

Cram a couple of those things in your name, your wife’s name, and get off to the commercial side as quickly as possible because you are running a business. Single-family rental properties are a business. Multifamily is a business. Airbnb is a business, a car wash. It’s all a business and you have to treat it like a business because if you don’t give it that level of seriousness and dedication, you’re not going to be successful in it long-term.

There is an argument for 401(k)s, just kick out 4% or for annuities that kick-off 6%. You don’t have to watch it. The annuity is going to guarantee you a minimum return. There’s going to be a floor and a ceiling. If you don’t have the time to watch that, then you certainly don’t have the time to watch real estate. People who get lost in their 401(k) or haven’t looked at their 401(k) in the year or six months or nine months probably need a rude awakening if they’re going to do real estate. It’s not an easy transition. It’s not passive. The returns could be worse, but it could be better.

We tell people, “I don’t care if Gerry Todd’s great or his company’s fantastic, but you’ve got to deal with Jessica, she’s going to call you. You’re going to deal with Mindy, they’re going to call.” You’re going to, “Something’s going on. I’ve got to do this.” You’re going to look at your bank and say, “It’s the 4th. I thought the check was supposed to be already.” I’m going to call, and they’re like, “It was a long weekend.” You have to stand on top of that stuff. I say there’s at least an hour to two hours a month if you have people managing your whole process, just managing the managers. When you get to ten properties, you’re probably spending about twenty hours a month doing it. That’s a fair number. You’ve got to stop, you’ve got to write the checks, got to see where the money is coming in.

It’s check-writing day. You occasionally have a property manager that sends an email, “We’ve got a problem with this here,” and then connect the roofer.

You’ve got to put up a fence.

I’ve literally flipped entire houses. It’s taking to get that fence done. There are going to be those times where it is time-intensive as Airbnb, but to say that it’s completely passive and it doesn’t take any of your time, you’d be sitting on a beach hanging out. There’s nothing of value in your life that is passive.

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Real Estate Investing Tools: Real estate is not completely passive. There will always be so much to do, but the returns are worth the effort.

 

It’s certainly not like an annuity.

This idea that, “We’re going to become millionaires because the wholesaler emails me a deal.” It all gets taken place in the background is not reality. I challenge anybody who had rental properties for more than a couple of years, you will know that. We used to do these big events and I would ask all the landlords, “How passive is a rental property?” Everybody would laugh. If you’ve been doing it for more than a couple of years, you know. From time to time, we’ve got to step in and we’ve got to do some things. The reality is it’s not passive, but the returns are worth the effort.

We’re talking about single-families, twos, threes, and fours. We love that asset class. We love it for the financing mostly because there are non-QM products that you can take out and give you 7, 10, 20, 30-year financing on the backend at a very reasonable rate. We’re talking about maybe $3,500 in origination fees and then two-and-a-half points between 6%, 7% and 8%. When you roll those points in and the origination fees over twenty years, it’s not a lot of money. It’s absolutely perfect. It can go in an LLC. It doesn’t show up on your FICO. You need good DSCR. That’s why we love that asset class. It’s the ability to appreciate our properties with low interest fixed loans.

The market is priced in a 60% chance of two rate decreases. They’re calling the FOMC out and saying, “It looks like you’re probably going to reduce rates twice.” It’s absolutely crazy. That’s why I got into multifamily. That’s why we’re looking at Airbnb and some of these other things.

We’re going to do those refis, pull the cash out, be prepared to go do another round of seventeen, eighteen properties.

You got your $25,000 into a deal. It appreciates a little bit. You do a refinance and get your $25,000 back, it still cashflows and then you go and do it again and again. You don’t have much money in these deals when you roll them every twelve to eighteen months if that’s how you want to play the game.

That takes time. You’ve got to stay on top of that, but for sure, that’s the way to generate wealth and to start creating more cashflow because you just start buying other properties and leverage it. Once you have that 20, 25 in front of you, pick the best ten. Sell the fifteen, pay off the ten, go ahead and try and do another five or six. That’s the plan for us. If you’re interested in joining and you already know the pricing, it’s (281) 401-9008.

 

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