2 Wealth Show S3 Ep25 - Stocking Stuffers for Real Estate
Super E and Justin discuss big things for real estate.
Key Takeaways:
Resources and links discussed
Sponsored By: Integrated Health Solutions
We are passionate about your health and wellness and we know you want to enjoy a vibrant, pain-free, active lifestyle, but when you are in pain this seems almost impossible.
In order to be pain-free, move fluidly, and enjoy an optimal level of functionality, you need a personalized yet integrated, research based and clinically proven approach and that’s what we do.
To learn more visit us at
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About the Hosts
Justin Bogard – Note Investor specializing in performing Residential Real Estate Debt. He finds deals and acquires them for his own portfolio as well as educates investors while walking them through the process of owning a Real Estate Note!
Super E – Real Estate Investor specializing in short-term rentals and the management of them. She connects investors with short-term tenants and manages everything in-between.
Connect with the Hosts:
2 Wealth Show S3 Ep25 - Stocking Stuffers for Real Estate
Super E and Justin discuss big things for real estate.
Key Takeaways:
Resources and links discussed
Sponsored By: Integrated Health Solutions
We are passionate about your health and wellness and we know you want to enjoy a vibrant, pain-free, active lifestyle, but when you are in pain this seems almost impossible.
In order to be pain-free, move fluidly, and enjoy an optimal level of functionality, you need a personalized yet integrated, research based and clinically proven approach and that’s what we do.
To learn more visit us at
ihsindy.com
cryotherapyindy.com
About the Hosts
Justin Bogard – Note Investor specializing in performing Residential Real Estate Debt. He finds deals and acquires them for his own portfolio as well as educates investors while walking them through the process of owning a Real Estate Note!
Super E – Real Estate Investor specializing in short-term rentals and the management of them. She connects investors with short-term tenants and manages everything in-between.
Connect with the Hosts:
[inaudible] Welcome to the 2wealth show, a show that shares how you can create real wealth for you and your family. I'm one of your hosts, Justin Bogard. And my co-host is Elizabeth Sickles, AKA super E I am a real estate note investor specializing in performing residential real estate debt. I find the deals acquire them for my own portfolio, as well as educate investors while walking them through the process of honing a real estate note. My co-host super E a real estate investor specializing in short-term rentals in the management of them. She connects investors with short-term tenants and manages everything in between. Our show was sponsored by bright path notes and Elizabeth Maora. You can find out more information by visiting our websites at brightpathnotes.com and elizabethmaora.com. Welcome to episode number 25. Hello listeners. Hello viewers. It's almost time for Christmas. Hi, super E.
Elizabeth Maora:Hello? Hello, happy December
Justin Bogard:Happy December. Yes. Um, we've been, uh, toying around with the idea of how we want to do our before Christmas episode. And last year we talked about the 12 debacles of Christmas where you and I discussed, and we went back and forth on the, just the funny and the odd and the strange, and maybe the disastrous things that have gone on with some of our real estate transactions, uh, even over the past year that our careers and that was kind of fun. So this year's theme, um, we're going to do all I want for Christmas is real estate. So Elizabeth, what type of real estate do you want for Christmas?
Elizabeth Maora:I want more single family houses.
Justin Bogard:Okay. Single family houses for the purposes of short-term rental.
Elizabeth Maora:Yes. And traditional rental.
Justin Bogard:Okay. Are you going to keep to the Indianapolis area
Elizabeth Maora:At this point? Yes. And also actually I should say too. The other thing that I want, cause I did buy my first note this year from Justin. Uh, I do want more notes. Okay. All about being passive on that side. That's right. So, and what about yourself?
Justin Bogard:Well, you mentioned short-term rentals and I keep thinking a, uh, I'm a note guy obviously first, but I think it would be really nice to have a vacation rental short term, vacation rental, somewhere close, you know, in a, in a hot spot. I feel like, and correct me if I'm wrong because obviously you're in this space lot more than I am. Um, it doesn't seem to have, um, maybe too much of a down season and it seems like the appreciation of the real estate in those areas, they have a stronger chance of growing consistently year over year. Am I wrong in thinking that or is that,
Elizabeth Maora:Uh, absolutely. When you're in true, you know, vacation rental beach mountains, that's where people want to be. Yeah.
Justin Bogard:I'm thinking beach mountain will be cool too. But I see in warm spots, like I know in the past I've mentioned that I go to Charleston, South Carolina quite a bit and it just seems like, you know, the temperature is really good all year round and it seems like there's so many beaches down there that it's almost like, I hate to say can't lose, but it seems really hard to, to not have a positive cashflow down there. Obviously I would want someone else to manage it. Like Elizabeth, that would be, you know, local to that area. I don't think I'd want to manage it myself, but it just seems like it's it's, it would be strong. So I think that's what I would want for Christmas is some, uh, as at least a vacation rental and selfishly I'd like to use it as well.
Elizabeth Maora:Absolutely. So I just it's, you know, it's kind of funny that you say that because I literally just got back from a conference in California and we've had a lot of my colleagues that are in vacation rental areas, especially the beach area where they're owners, because they've had so much appreciation, they've either sold them and the people that are buying them are moving into them. So they've lost inventory for the vacation rental side. Right. So what does that do that makes all the prices go up because there's less inventory, right? It's classic supply and demand. So it's, it's exactly what we've seen. Um, but along those lines too, one of the presentations was okay, thanks, keep going higher and higher and higher. But how long can we expect to be able to continue to increase prices? So that's, you know, there's always that, that balance as well, but no matter what Justin, to your point, absolutely people want to be in those areas and the appreciation just continues to increase. So,
Justin Bogard:So when I get into these situations where I do have physical property, Elizabeth, I know that because I have my note investing background, there's a stronger chance for me to what I call exiting out of the deal and just becoming the bank on it. And so I, and I envisioned kind of maybe getting one of these going, and if I decide I don't want to own it anymore, I can sell it with seller financing. Is it an Elizabeth? Correct me if I'm wrong, if you don't know this answer or heard of these stats, but do you think that the vacation rentals that we're talking about, the ones that are set up for more short, short term, do the buyers of those rentals? Do they typically pay cash or do they get debt on them or do you know the answer?
Elizabeth Maora:Excuse me, it's completely dependent. So my, my owners are, so my clients are the same way. They're either paying cash or they're taking debt and that's across the board with the other property managers that I've spoke with as well.
Justin Bogard:Do you think it's 50 50?
Elizabeth Maora:I would say from just from my inventory, um, it's probably 70% debt, 30% cash, maybe 65, 35, but right around in there,
Justin Bogard:Another, I'm going to dive deeper into this question here of those 70% that take on debt are the 70% versus 30%. We're going to put them into two categories here. The 70% that take on debt, do they get more real estate then versus the ones that pay cash? Or is that a number that you're not aware of?
Elizabeth Maora:Do they get more? What do you mean? So
Justin Bogard:I guess what I'm getting at is the ones that take on debt. Are they holding their cash back and spreading it across several properties with down payments and getting debt for all of them? Or is it the ones with cash? Just have a larger amount of capital to work with and they're buying more properties, all cash.
Elizabeth Maora:It's the ones with cash that have the larger capital.
Justin Bogard:Okay. And so they're buying more real estate than the ones that are taking on debt.
Elizabeth Maora:They're buying larger Properties, larger properties. Okay. Yes. Not necessarily more properties, just larger amounts of properties are larger in price. Yes. Yes. Very, very large in price. So for example, we have a new client, I'm assuming they're going to close on it. So they're brand new to us. It's it's over$700,000 house. So they're buying strictly for vacation rental here in Indianapolis and they already have a portfolio. Um, I think their realtor told me they have six or seven, um, traditional rentals right now and now they're they want to get into the short-term rental game.
Justin Bogard:Okay. So did you say 700,000? That's correct. For one property? Correct. So taking an, I want to get into the numbers of this. This may not have been the purpose of today's conversation, but I kind of want to know this cause I'm interested. So on the$700,000 property, that's going to be short term, I assume. That's is that a seasonal proper, is it a property that can be occupied year round?
Elizabeth Maora:Pick me occupied year round.
Justin Bogard:Okay. That property, the management fee is how much of a portion of the gross cashflow coming in monthly
Elizabeth Maora:25%.
Justin Bogard:Okay. And then there's taxes that need to be paid there's insurance that needs to be paid. I assume it's a long-term insurance and short-term insurance or is there such a thing?
Elizabeth Maora:There's a special designation for short-term rental insurance.
Justin Bogard:Okay. And then is there a hold back cost of, they need to be holding back of their monthly cash flow in order for incidentals and uh, okay. Nope.
Elizabeth Maora:Okay. Nope. We did not have a hold back. So they also have to pay utilities, which is not the same as a traditional and then, um, wifi, which is anywhere from 40 to$50 a month.
Justin Bogard:So you said utilities aren't necessarily like a traditional, what, what do you mean by that?
Elizabeth Maora:Oh, just that the homeowner has to pay the utilities on a short-term rental, whereas a traditional, the tenant is responsible for that.
Justin Bogard:Oh, okay. Right, right, right. Cause there, there could be, uh, there's water electric and then sometimes gas and then the waste, um, storm storm water, I guess, could be one or it could be bundled into the regular water utilities and then trash services and stuff
Elizabeth Maora:Actually in Indianapolis city of Indianapolis, our property taxes includes the trash removal. So we're paying for it. It is not free. It's not as separate a separate bill.
Justin Bogard:Okay. I remember, uh, one proper that I own personally in fishers, Indiana, it was, uh, an eyeopening experience from going from another place in Indianapolis where I just had electric and a water bill, uh, and the water bill included the trash and the sewer and stuff. So I had two bills that came in monthly and then I went to fishers and I had, I think about five bills. I had a trash company bill with was trash and recycle. I had an electric company bill. I had a, uh, a water company bill. I had a gas bill and then I had, along with the water, it didn't come included, but I had to pay a different, uh, city department if you will, for the storm water wastes and the, and the sewer. Wow. So that was interesting. I went from two to five and I don't know if that's a common thing for most areas. So I'd be curious if anybody wants to put in the comment section, if they're listening to this podcast or they're watching it on our YouTube channels, BrightPath notes, you do channel Elizabeth Maora'sYouTube channel. And just see if you've ever experienced more than five, uh, we'll call them utility companies or a property you own for
Elizabeth Maora:A single property, a
Justin Bogard:Single property. Yes. A single property. If you've done more than five, I would be curious to know what, what others, uh, whatever costs or outfit.
Elizabeth Maora:Great. Yeah. That's a really great question. And because every municipality is so different, so, you know, it's kind of funny. We have, um, we have four new houses right now that we're bringing on and I used to me, you know, it's always, whenever you do the closing, especially now, because it's the winter time here in Indianapolis and we're having freezing temperatures. My clients have to get those utilities turned on. They either need to be turned off or they need to be turned on so we can get the heat on and, you know, keep it going. Cause we don't want any, any frozen pipes.
Justin Bogard:Yeah. I, I can, I can imagine the, when you have that turnover quickly. So is that something that a property management company would provide as a service is to help get those on or that's the responsibility of the, of the rental property owner?
Elizabeth Maora:That's the responsibility of the owner for us anyways? I think probably everybody's a little bit different, but because the bills stay in the name of the owner for the short-term rentals, it's just easier if they set everything up.
Justin Bogard:Okay. Do you take the responsibility or offer the service and compare it to most other property management companies on taking care of like securing the property and if it needs to be winterized knowing it's gonna have a longer term, um, vacancy maybe due to repairs, or maybe it's just not set up yet for occupying, that's something that you guys do to.
Elizabeth Maora:Yep, absolutely. And actually go ahead.
Justin Bogard:I was gonna say, I, I say that because when you mentioned winterization I'm actually is a property I've had to take back in Michigan where I've had to quickly go in there and winterized and secure the property from a distance from here from Indianapolis. It's, it's an interesting thing. Cause I don't have any control over it after a lot, excuse me. I have to rely on vendors and other people that are local to the area to help me out.
Elizabeth Maora:It's, you know, it's so much easier in the summertime, right? Because we don't, it doesn't matter how hot it gets. Um, but in the winter time it matters how cold it gets. And actually just kind of along our, our theme of Ali went for Christmas. We, um, we took on a new client where we're going to be going to his property every week. It's not a short-term rental, it's their, their primary property here in Indianapolis, but they're going to be out of state for the winter time. So used to be. So we're excited to take on that project. It's just kind of interesting how, you know, your business can continue to evolve and offer new services, um, for clients.
Justin Bogard:That's great. I have a question about that. So someone is a snowbird. Maybe they leave to different state for two or three months during this colder season. And they want to, like you just said, run out their home to somebody for their short term, or maybe what's the term we'll use. The last couple of episodes was the, the longer short-term stay Kind of risk. Are they taking by doing that? Like, I guess for me, I would have fears of my home, my personal home being this kind of ran through and ransacked, if you will, or maybe some damages here and there is that just the inordinate risk that you just accept when you do that,
Elizabeth Maora:No matter what that is, that's a risk. I mean, guess, you know, we screen them as best we can, but they're still going to do whatever they're going to do. But actually, and I apologize, so this client, we're not going to put their house on short-term rental or traditional at we're just going to be going every week, checking different things out in the property, walking the property, flushing, toilets, that type of thing.
Justin Bogard:Okay. That makes sense. That's a nice service to offer. Cause then you have the peace of mind of knowing, okay, I don't have things are static in there. Someone's checking out if, you know, if an animal is, you know, tearing into something, at least you'd be caught sooner rather than later before damage occurs. But that, that makes total sense. So if someone's gone for more than a couple of weeks, that would be a good service to have somebody come by. If you don't have family or somebody local near you to check on the property,
Elizabeth Maora:That's right. And you know, we're going to be on call for, excuse me, um, for their security system. And you know, that way I can send somebody out. If, if we get a call on something and they can go enjoy their, their winter time down in the warm weather,
Justin Bogard:Do they forward their mail to where they're going?
Elizabeth Maora:They do not. So we'll be getting their mail. We'll be getting any packages that, you know, that get delivered on the front porch. And what we're going to do is we'll have a check sheet that obviously one of my teammates will go and they'll check everything as I walk through the property and you know, and we'll upload that so that the, our client can see, okay. Yes. You know, for example, Sherry was there on January. The second, these are all the things that she checked. This is what we found, you know, where everything's good. Um, you know, so they'll have that checks and balance to where they can see, okay, what day did we actually go? And that's just, that's a good, um, you know, you need that documentation anyways, as the service provider that yes, we were there. The S the state, this was what we checked.
Justin Bogard:That's awesome. I'm learning a lot. I'm getting, I'm getting more comfortable with the short-term space. Elizabeth, I'm serious about my goal is to get one and then just sell it with seller financing after I, if I feel like I don't want to keep it longer term.
Elizabeth Maora:Awesome. Yeah. That's, it's a great Christmas present. I'd love to unwrap that.
Justin Bogard:Yeah. A very large bow under a tree.
Elizabeth Maora:It brings the whole thing, you know, that Lexus commercial where they put the red, the big red bow on it. Oh
Justin Bogard:Yeah,
Elizabeth Maora:Exactly. So we've talked about big things for real estate. Justin, what about stocking stuffers for all you want for Christmas
Justin Bogard:Stocking stuffers for real estate? Let's see. Uh, I would like to get, um, instead of a larger note, I would like to get more smaller notes. I feel like I have a couple of small IRA and college accounts in our kind of family retirement, and we need to spend like, you know, maybe less than 10,000 here, 15,000 there. And it's like, when those, when those accounts it'd be nice to have those accounts, um, be ever evolving what smaller loans, I guess. And so that's, that's what I would like to see for Christmas as a stocking stuff, or there's a couple of opportunities to lend on our smaller amounts of money.
Elizabeth Maora:Excellent. Okay. I just, I want notes in my, in my stocking. I know I mentioned that earlier, but I'll take a lot more notes and, uh, I would love to do some, um, oh, um, some hard money lending or some lending that would be pretty awesome. So some certificates for that.
Justin Bogard:Yeah. It's, it's easier for folks like us in our seats because we're so active in real estate, um, to land or to know a hard money, how hard money lending works and making sure it's working over and over and over again, instead of having that, what I call that yield drag time, where you may have lose a couple of months of your money, not doing anything. And then you kind of lose the ROI opportunity from there. So I agree. I think it's easier for folks like us, but if someone is really a passive and wanting to be on the lending side of things, uh short-term or hard money, what we call it, I think it's a little challenging for them. If they're not in real estate, full-time maybe they have a full-time job doing something else because the turnover, your money then recycle it in a short-term fashion. It, it becomes work right. And you know that Elizabeth, but if you're active in real estate, it's obviously easier because we're seeing more opportunities than other than other people were that aren't in real estate. Full-time,
Elizabeth Maora:Uh, excuse me. Absolutely. Um, yeah, definitely a lot of opportunity for, for the Christmas time and for gifts. And, you know, to just keep in mind, I'm in real estate that, you know, we, which we talk about this a lot is having a qualified CPA that knows your situation, knows how you need to invest your money or what you need to be doing with your money to decrease your tax burden. And there are some people, um, for example, um, one of my buddies, he has to buy a new, he needs to buy a new vehicle before the end of the year. That's going to help him out on his taxes. So just keep in mind, we're, you know, we're right at the tail end of the years, but so make sure that you have talked with your CPA. And if, you know, there's only going to be a few days left, but if there's something that you can do to do it, uh, to get it in on 2021 taxes,
Justin Bogard:That's a great point. Uh, if folks that are listening and viewing didn't know already, it's always a great idea to have your tax planning probably at least two times throughout the year, probably, you know, after the first couple months, the new year, and then probably a couple months before the end of the year, just so that your CPA can kind of see what's going on with your books. And if they see you have an amount of money sitting over here, not doing anything, they may have ideas or suggestions of being, Hey, if you thought about this, we could lower this and then gain you some more here. So it's always a great idea to have that tax planning. If you didn't already, I didn't realize that when I first got into real estate, how important it was for the tax planning, but, and they kind of hold you accountable to, in my opinion, the CPA does and can say like, Hey, you know, you're, you're steering yourself down a way. That's going to be more difficult during tax season, or it's not gonna, it's not going to be advantageous for you. You mentioned somebody wanting to get a new vehicle by the end of the year. Um, I hear people say that a lot, but I often question if they really need a new vehicle, or if there's a different way that they can put their money to use, uh, to lower the tax liability. So I know certain situations that it makes sense, especially if they're a, we'll say like a trades person, like maybe a landscaping company, because they're always needing equipment. They're always needing something, you know? And so if they have a newer vehicle or newer truck to pull their equipment around, like that makes sense. But if it's like a business owner like you and I, sometimes it may not make sense for us just to be like, okay, we need to get a new vehicle before the end of the year. Right?
Elizabeth Maora:Right. Totally depend on, you know, your, your CPA and what they recommend, how you spend that money. I have other ways I want my money to make money, not that depreciate, uh, but you know, um, there's reasons for everything.
Justin Bogard:All right, Elizabeth, into the years coming up, what for our listening and viewing audience that are kind of doing what we're doing respectively in our real estate seats and the ones that don't really know, what is the end of the season look like for the real estate that you're in for the short term rental? Is it very fast? Is it, uh, is there a lot going on? Is it slowing down? Is it just dependent on if there's a big event going on nearby
Elizabeth Maora:It's fast and furious,
Justin Bogard:Fast and furious? Is it that all year round or is it just hit certain pockets?
Elizabeth Maora:We've got the holidays and some big events here in Indy. So that's why we're our end, the ending of the year in the beginning of the year, start up pretty fast. And then they ramped down real quickly, mill Jan, middle of January, um, through the end of February.
Justin Bogard:So it's pretty consistent. You can expect that to be a slower period, and I'm sure you do something different during that time period to offset any sort of revenue that you're expecting. Right. Absolutely. Excellent. Um, at the end of, I'll say September, there's only start seeing a lot more movement with inventory as far as like the bigger hedge funds, the bigger players, um, in a fund that fund has a timeline to it or a time horizon. And at some point that fund has to divest itself of all the investments to payback the investors with a waterfall and stuff. I think we've discussed this before, but that's, that's what I see towards the end of the year. And it's kind of exciting because you may not have heard from somebody in a while throughout the year. And all of a sudden be like, Hey, we were closing down our fund and we've got, you know, maybe, um, 25 notes that we've got to sell. And, um, you may pick up a pretty good deal. Or if you're, if you're, if they're sending out to a lot of people at the same level like me, then you may not be getting a great deal, but you do see inventory that comes through that. You can jump on that otherwise wouldn't have been available. So at the end of the year, it's, it typically moves a little quicker. We do see people that have money to deploy and they want to deploy it before the end of the year. So we definitely see more activity during this time until the end of the year. And it rolls a little bit into January, but then definitely February is a, is a slower period. And then things pick back up pretty regularly in, at the end of March and April and stuff, they start, start swinging into to Formax.
Elizabeth Maora:Very nice.
Justin Bogard:So we have that common downtime, if you will, that February ish timeframe,
Elizabeth Maora:Which is a great time to take a vacation, I get a little rest from the previous year. And, you know, as you're ramping up for, for 20, 22 now, since we're going to be in,
Justin Bogard:I know I'm just getting used to writing things 2021. I want to change it to 2022 now. Um, all right. Rapid fire questions here. We're going to end the episode. Uh, what's the biggest thing you've learned this year or the biggest realization you learned this year?
Elizabeth Maora:Oh gosh. There's a lot. I would say the biggest thing though is read below the lines. So, um, basically, so do your own research. Yeah. That's, that's fine. How about for you?
Justin Bogard:I would say we all know how to underwrite a deal, um, but underwriting a seller or a business partner or a, or a buyer, depending on what end you're on, I think is the biggest lesson learned. There's a great trust factor and there is a like factor, but then when it comes down to inking your name on paper and then reading through any documents or last minute changes with agreements, you find out very clearly how this relationship's going to unfold after you sign that documentation. So I would say biggest realizations this year would just be, um, really underwriting the person you're doing your business dealings with.
Elizabeth Maora:So that's a great point. Yeah, absolutely.
Justin Bogard:So oftentimes people are too trustworthy, which is, which is great. But, um, there's a, there's a saying that Ronald Reagan, uh, would say and it's trust, but verify. So, you know, you can always trust your counterpart. It's just, you just need to verify it and there's nothing wrong with that. You just gotta verify all the information
Elizabeth Maora:That's right. Read, read those or read those contracts that's for sure. And make sure you understand them.
Justin Bogard:Yeah. So, so for example, I'll just give a quick example is when I'm buying, we call a seller finance paper from a mom and pop. So someone that's just, um, uh, not really a real estate investor, but they have a piece of property. And they said, what was seller financing? They, they don't know what they don't know. They may use a title company. They may use an attorney. They may try to use an LLC. Um, so what we've, what we've been religious about doing is checking the validity of the person, especially when they're like an LLC or a company to see if they have signing authority on behalf of the LLC, because there could be a husband, wife, there could be multiple partners in a business, but not all of them may not have the proper operating agreement to show who can sign for it, or all of them can sign for it. And so with it's been really important that you know, who can properly sign on behalf of a company. We'll talk about that or like a trust so that if anything were to happen in the future, you don't have to go back and revisit this problem and try to get the correction of signatures. And, um, cause if somebody was had, didn't have the authority to sign a real estate note over to me, then that transaction might not be valid. And I could potentially lose all the money that I invested into it because it's as if it never exists and I just gave somebody money. So it's, it's just really, um, you know, I've never heard of anybody having a horror story like that, but it is something you want to be aware of check to see who has signing privileges.
Elizabeth Maora:And with that, we wish you all a very Merry, Merry Christmas.
Justin Bogard:Yes. Merry Christmas. I'm Justin Bogard with BrightPath notes Guys. One more episode left or the end of the season.
Elizabeth Maora:That's right. Thanks everybody
Justin Bogard:2wealth show is produced by Justin Bogard and super E sponsored by Bright Path notes and Elizabeth Maora. Thanks for listening and watching for our show.