Hello my friends, and welcome to another episode of Passive Real Estate Investing. I’m your host, Marco Santarelli. Well, today I am recording not from my office and on my normal microphone that I usually use. I am in Florida in my hotel room recording this on my laptop. So if the audio quality is a little bit off, I apologize. I’ve been traveling for the last three weeks, going from one event to another. It’s been a crazy last three weeks, and I’m finally heading back home in two days from now. But I wanted to get an intro, an outro done for the next episode, which is this week’s episode. And I was on Candy Valentino’s podcast recently. She’s the author of Wealth Habits. And actually, I had candy on my podcast here not too long ago, probably, I’m guessing, six or eight weeks ago. And she wanted me to come onto her podcast, and I said, of course. And we had a great conversation. In fact, we covered all kinds of topics and went all over the place. It was not just real estate, but we talked about creating wealth and preserving wealth and what it means to me and all kinds of great stuff. And she liked it a lot. And I asked her for a copy of the recording on her podcast episode on her podcast, and I thought, you know what? I will just publish that on my podcast. And that’s exactly what I’m doing here. So I’m just recording this quick intro and I’m gonna append the recording of the actual interview that I did with Candy. And hopefully you like it and enjoy it. There’s some nuggets of information in there that I think you can use as takeaways. Anyway, I had a good time. It, we went for I think about 45, 50 minutes, if not longer. So it was longer than both of us expected to go, and we could have gone for at least another hour. But I hope you enjoyed today’s episode.
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If you missed our last episode, be sure to listen to Ask Marco – Leveraging Equity, Short-Term Rentals, 100% Financing, Out-of-State Markets
And I will be back next week when I’m back home in California and recording my next episode. I’m not sure what that’s gonna be yet, but I do know I have market spotlight coming up. I do have another Ask Marco coming up. I have a few other guests queued up as well on various topics. So just look forward to those. So without any further ado, here’s my interview by Candy on her podcast and hope you enjoy it.
Oh, guys, I cannot wait until you listen to this interview with Marco Santorelli. He is a two-time Inc. 1000 entrepreneur. He’s been investing in passive real estate for decades. He’s an author, he’s a Broadway show producer. He’s invested in so many other businesses. It’s really incredible to talk to someone that has the depth of experience like he does, and is also able to break down the data and what’s going on in the market now in 2023. He’s the founder, OFTA Capital Management, and NATA Real Estate Investments. And I love his strategy of how he’s helping investors. We even go into the interview and disagree on one thing. I mean, not totally disagree, but we are coming at it from two different perspectives. So I always love those types of conversations as well. Let’s dive in, guys. I am so excited for you to listen in to this interview, and I am super pumped to have you on the show. So thanks so much, Marco, for joining us.
Candy’s my pleasure to be on. It’s I’m really looking forward to this.
Yeah. You know, we connected on your podcast, which you have a great podcast you’ve been doing for a long time when I was promoting my book, and I loved our conversation, so I wanted to be able to bring you on because you’re already doing stuff and you’ve been doing it for a long time. There’s so many people in the real estate space that are just now talking about it, and maybe they have their first deal or their second deal, but you’ve been doing this a really long time and teaching it. So can you share a little bit with the audience just about what it is you do, your, your passive obviously focused on real estate and a little bit about your background?
Sure. Yeah, no, I appreciate you asking. So, real brief I’ve always been an entrepreneur since I was a mid-teen. So I’m a serial entrepreneur. I’m an investor, love real estate. I got started when I was 18 years old, bought, bought my first rental property renovated it, managed it, you know, did the whole thing myself. So the writing was on the wall pretty early on. But I’ve always invested in real estate and then I branched out into investing in other businesses and everything from crypto to cannabis. But I have a, a deep love and passion for real estate. I teach how to invest in real estate and all kinds of strategies, mostly on the passive investment side, not the real, the active side. But I’ve done all of that. I’ve probably fixed and flipped 300 houses. So you know, and then that kind of branched out to be a little more eclectic, if you will. I, you know, I mentioned I’ve been investing in cannabis and crypto, but I even investing in nonprofits as well as Broadway, I have seven Broadway musical productions that are either in works or they have been released and are running right now. So that’s
A new one I’ve never heard of on the show, <laugh> of Broadway show. That’s really cool. Yeah. That’s interesting. Are they highly profitable?
Well, it’s interesting that you, you asked that question. So it is a very high risk industry. Out of 10 Broadway musicals, seven will not recoup your original investment. Wow. two of them you will recoup, maybe make some money, and then one out of 10 you’ll actually make some money. And sometimes it’s really good money, like production, like Hamilton will knock it outta the park. Mm-Hmm. <affirmative>. So you, you write a check when you invest in bro on Broadway in a production as if you’ll never see that check again. But when you do make money, it can be fairly lucrative. Interestingly enough you know, you know that saying where you should invest in the jockey, not the horse mm-hmm.
<Affirmative>. Yeah.
There, there’s a lot of truth in that with, with Broadway now, you know, it’s still a high risk, you know, and investment and there’s a, there’s an element of gambling in there, but if you have the right story, the right team, the right writers and the right lead producers, you increase your your odds of recouping and making a profit significantly. Fortunately. one of our productions that’s live right now, which is with Neil Diamond, it’s called The Beautiful Noise. It’s doing extremely well. We’re doing about 1.1 million a month in ticket receipts. Oh, wonderful. Yeah. And then another production that’s running right now for 10 weeks, literally just got nominated for a Tony Award a couple weeks ago. So I’ll be at the Tony’s in three weeks from now with my little tux in Bow Tie <laugh>.
Oh. So I love it. And then the other one that don’t make any money, right. They’re just offsetting your gains in real estate, so Right. You can just take those as a loss <laugh>, so, right. That’s so cool. And that’s what’s so great is you obviously have the passive income. Yeah. So when you have the passive income set, it gives you the ability to do so many things and so many different businesses and verticals that it’s not like you’re, you know, betting everything on the farm. And if it doesn’t work, because you’ve already got this other stuff established. Now, I like what you said, you don’t do active, you’re not doing flips and you’re not doing wholesaling. I would assume that you’re doing just all passive. Do you do multifamily, commercial? What’s your fa
Well, that’s a good question. A lot of people, this, you’re actually a great question, I think for your audience, because a lot of people think that they should start with simple investments like single family homes, and then work their way up to, let’s say, duplexes, fourplexes, and ultimately work up into what people refer as, you know, big real estate or apartment buildings. Mm-Hmm. <affirmative>. And some people do that and that’s what they want to do, and it’s great for them, but it’s a slightly different animal. But there are a lot of people who are very successful just building a large portfolio of single family homes and as well as duplexes, triplexes, and fourplexes, that category, those four, what we call residential real estate. Mm-Hmm. <affirmative>, even though apartments is residential, but it’s falls in the commercial side of things. So the financing options available to you as a, as a, an investor in, in apartment buildings is not as lucrative or attractive as residential real estate financing.
So it’s your choice. There’s no right or wrong answer. If you want to go the apartment route, do it. You know, there, it’s, it’s, there’s nuances to it. You’re dealing with big real estate and major mechanicals and, and it’s a little bit more expensive, but there are a lot of successful real estate investors that make a lot of passive income and create a lot of wealth just investing in basic single family homes and duplexes. It’s been going on for decades and decades and decades. Mm-Hmm. <Affirmative>, and that’s really who we’ve been catering to. And people will build some of our clients have 40, 50 homes, you know, they built it over a period of, you know, x number of years, and they’re doing extremely well. They mm-hmm. They have no interest in going to apartments.
So, yeah. I, I always say that you can make money in any vertical in real estate, just decide how you want it to fit into your life. You know, if, if, if you have one apartment building, even if it’s a 30 plex or 40 plex, and you have a business or another job, who’s gonna manage that property and making sure that it’s really tough when you’re starting something to go big. Like I always say too, it’s, it’s easier to step into something. It’s a little easier to understand. You have more flexibility mm-hmm. <Affirmative>, start with single family if you can. And then if for some reason it doesn’t work out, you could live in the property, maybe you could short term rent the prop. Right. There’s, there’s a, a bunch of different flexibility in, in those, in that market in order to do that. If you buy it wrong or you, you know, you find the wrong property and you overpay, and now you don’t have the rents, that’s a much bigger risk than just one single family home that you could probably put back on the market. So if someone’s listening now, I have like so many questions I have, but I’m, I’m trying to like, take them back. If someone’s listening now and they’re just maybe their first two homes, right? They’re their first few. What would you say is the best thing in this market, 2023, that you would recommend to someone to start looking out for investments?
I’m a big fan of single family homes, and here’s why. One, about 70% of the housing stock in the US is made up of single family homes, which means it’s not only the most abundant form of r real estate that you can find out there, but it’s the simplest, it’s the easiest to understand. There’s the least amount of competition for it, and there’s the most amount of inventory for it. So it’s easy to find, relatively speaking, it’s easy to get into it, it’s easy to sell it, in other words, liquidate it if and when you need to. And typically, you’ll never sell real estate for the sake of selling real estate. You’ll only do a, a 10 31 tax deferred exchange into other real estate or more real estate. But because it’s so abundant it’s relatively easy to get out of it, not just into it.
So the abundance is a factor. The the fact that people love single family homes as a tenant, you know, because it’s your own private yard. You have your own four walls, you’re not sharing with other people. You have a yard. There’s that feeling of home ownership, even though it may not be your home. So there’s a lot of benefits to single family homes, both as a landlord, as and as a a tenant. That’s why I love single family homes. The next best, in my opinion, is the duplex, because it still offers a lot of that privacy, even though it’s not completely private. And the financing for residential, as we talked about before, the one to four unit you can lock in on a 30 year fixed rate mortgage, which is not doable in the commercial space. The maximum term, yeah. Or loan is 25 years and you have to renew it, you know, every three to five years.
So you’re essentially recasting that interest rate and might go up. So it might become unaffordable, which is a concern in the commercial space today, because commercial, the commercial sector in our economy is not doing so well. And banks are already gearing up right now for what might be a small tsunami of foreclosures in the commercial space. Mm-Hmm. <affirmative> yet on the residential side, I might be going off on a tangent here, candy, but on the residential side, because there’s so much demand for, for residential housing, housing in general, and there’s a lack of supply, and it, this has been true for a long, long, long time. The cards are stacked in your favor as a real estate investor and a landlord. So this is why I love residential real estate. So that’s where I would start if I was a newbie, a brand new real estate investor, or if I was a seasoned real estate investor, but I wanted to continue building my portfolio, I’m more likely to find single family homes or res or duplexes to build my portfolio. Then looking for apartment buildings where it’s more competitive. A lot of people are chasing that inventory type. And for the most part, the cap rates are, are lower, which means that your ultimate cash on cap return will be lower on the commercial side.
I love that. And oh my gosh, I have so many different areas we could go in. I, I wanna just touch back about commercial for a minute, because you’re one of the very few people that I think maybe follows this and nerds out on the data as much as I do, because no one else has brought this up about all of the debt that’s coming due. And it’s, I mean, we’re talking into the trillions on the commercial space and how a lot of those, there’s gonna be a lot of opportunity for that type of investor, of course, to pick up some of that potentially, if that’s the way they wanna go. Can you maybe share just for people that, cause I don’t think we’ve talked about this yet, just share a little bit about what’s going on in the commercial space and if you would necessarily start to try to pick those properties up once they come do. Cause I think they’re really gonna be underwater, or would you stick with the strategy that you’ve always used?
Well, first of all, I would stick with the strategy that I have known for my whole life that I’m comfortable with, that I know is tried and true for me and for thousands of our clients that have built their wealth and, and their passive income over the years with nothing but residential real estate, again, one to four unit properties. Mm-Hmm. <affirmative>. So I have no intention of changing, even though I, I will say that in time there will be some probably great opportunities in the commercial space to pick up distressed or foreclosed commercial properties of whatever, whether it be warehouse or retail or you, you name it. But right now, you know, we’re going through a period of time where there, there’s some struggle in the retail space and e-commerce h has continued to explode year over year, over year. Which ma is making it harder for commercial businesses that are not local based, meaning like a barber or a hair salon or, you know, nail salon.
I mean, you, you can’t, you can’t put that online. You have to go visit face to face, but for the other types of commercial businesses, yeah, it’s been a struggle. I think that’s gonna get worse before it gets better. Will it prevent opportunities? Absolutely. But you need to educate yourself in a different area of real estate. You have to understand how the commercial space works and how, you know, leasehold improvements works and triple net leases and all kinds of stuff. It is a little more complicated than residential. This is why residential is just so nice to start in and continue with. So, I dunno if I’m answering your question, but
Yeah, no, I love that. I, I just, I, we could talk real estate all day, <laugh>, and I wouldn’t, I wouldn’t be tired of the conversation and all the rabbit holes you mentioned location. So I’m assuming that you invest in, you know, multiple different states. I always recommend, and I’m, I’m in, you don’t have to agree with me. I’m interested to see what you say. I always tell people to start where, you know, it’s a lot easier to buy in your local market if it’s a decent market because you have a little bit of insider advantage. It’s the one thing you can’t do in the stock market. You can’t get insider information. But in your local market, you understand it a little bit better to at least perhaps start with your very first property. But I also know that there’s certain areas that are really pushed up from Covid, and there’s a lot with a lot of opportunity. Have you done some research on maybe some areas that you think have some great opportunity?
Well, let me, let me address your first comment, because that’s really the the big thing I want to push back on with you now, I, I, I don’t disagree with you that you will typically understand your local market or what I call the backyard better than other markets because you grew up there or maybe you live there, you drive around and maybe you’re employed there. So there’s truth in that. However, this is where I’ve had one of my many rules for successful real estate investing is be market agnostic, which means you’re not married to any one particular market. If you look at the United States, you know, we’re, we have a very large country, it’s, it’s very much geographically spread out. We have about 500 metropolitan statistical areas. Each of those break down into submarket, sub MSAs, and then those further break down into areas and communities.
So you have lots of places to pick and choose from. So if that’s the case, think of it as if you were investing in the stock market. If you had your capital to invest and you worked hard to make that money, you want that money to go and work for you and produce the highest returns with the least amount of risk. So if you were investing in stocks, you would probably do some research and due diligence and pick stocks that were a stock that was bound to provide the greatest amount of return. In this case, it’s capital gains, but the highest returns, well, if you live in southern California like I do, and I wanna invest in Coca-Cola, which is based in Atlanta, Georgia, am I not going to invest in Coca-Cola just because I live here in California? It’s kind of a strange example, but the point I’m illustrating is you need to be market agnostic.
Meaning that you should invest your, your down payment, your investment capital in the markets that have the strongest fundamentals, the greatest potential for upside appreciation that generate flow today, ideally and in the future. And show promise for future job growth and population growth. Because those are the two key fundamentals that you want in a market when you choose a market. So if that’s the case, investing in your local market or your backyard might be a mistake. Couple of examples. If you’re in the Bay area of California, like San Francisco, San Jose, way overpriced, yeah. The price to rent ratio is so outta whack that the property will not cashflow. So you’re gonna spend a million dollars on a property that will rent for about 4,000, $4,500 a month, will not cashflow. So it doesn’t make sense to invest there. Mm-Hmm. <Affirmative>, that’s more like a speculative play.
Another example, let’s just say, not to pick on any particular cities, but let’s just say you live in, in, in the, in the, the, the city of Detroit proper. The city of Detroit has been declining for decades. It’s not growing in population, nor is it growing in GDP or employment. So that’s gonna be a problematic market. It’ll be very easy to buy there cuz there’s a lot of inventory, cheap inventory. And the numbers will look good when you pencil it out on paper, but in reality it may not pan out that way. And you’ll probably have a lot of problems and you’ll have, you know, a lot of tenant issues. And it’s just the demographics, again, I’m not picking on the city, but, you know, why would I invest in a market like Detroit or even San Francisco when there’s so many other markets where I know there’s health and growth, strong fundamentals, positive cash flow.
And I know that over the years I will have strong appreciation because the potential for that is very strong there because it’s growing in, you know, in population. So this is why I always say that it’s not a question of, you know when to invest in real estate. Cuz people will ask me all the time, you know, is now a good time to invest in real estate? I said, I’ll say, it’s not a question of when to invest in real estate, it’s a question of where to invest in real estate. There are always opportunities all around the country in all of these areas and pockets. So when you know that, and when you think about real estate investing in those terms, you take, break down the walls and be market agnostic, all of a sudden you have a lot of opportunity in front of you to pick and choose from.
Yeah. And so to, to kind of go back to the location topic, you know, you say about Coca-Cola, right? So my brain goes automatically, okay, well if I invest in a stock in another state, I don’t have to manage that company, right? I’m just taking a piece of their profits and it’s pretty much hands off. So in order to, if someone’s like, okay, yeah, this makes really great sense. I’ve traveled to Florida, I kind of know that market in and out, I think I’d like to start buying property there. How do you have the, the new investor or the investor that only has maybe one, two or under 10 units manage something from across the country into a market that they don’t know? Is there some benchmarks or some guidance?
Speaker 2 ([spp-timestamp time=”20:34″]):
Yeah, so when I first started investing out of state from Orange County, California, this was back in 2003 on the border of 2004, I was investing essentially two and 3000 miles away. Some of the properties I were, I was buying is sight unseen. Now that doesn’t mean I was making a mistake. I, although I did make, make my fair share of mistakes in the early days, but I would surround myself with the right team. There’s, you know, there’s a core team of people that you need, but you can do your due diligence, especially today with the internet and, and virtual services. You don’t need to be on the ground. The, the only benefit in that is you can see it with your own eyes and you can touch it with your hand, but that doesn’t change anything. You’re still gonna hire the same inspectors to do the inspections.
You’re still gonna hire the same property managers to manage the property and you’re not gonna be involved, or at least maybe you shouldn’t be involved in the day-to-day operations. This is why, this is why you hire full service professional property management companies, which is what we’ve preached for the last 20 years since I started, you know, our, our turnkey investment company. You know, helping other investors build their real estate portfolios. So, so there’s two types of investors. There’s those that self-manage, which is a very large percentage of, of individual mom and pop real estate investors. And then there’s the, there’s the more passive real estate investors that are w we keep using the word turnkey mm-hmm. <Affirmative>, but passive real estate investors that will buy and invest in properties in different markets outside of their local area because they’re making the best investment choice for themselves at that time.
But then they’ll bring in, and we do this for them anyway, but, but anybody can do this. You just bring in a, a quality qualified professional, full service property management firm, not an individual, a firm that can handle everything from tenant screening, tenant placement rent collection maintenance calls and handling ma maintenance and repairs and all that stuff. Inspections, turnover, all that stuff. So when you have that going on, you’re essentially the manager of the manager. You only need to be involved if and when you need to be involved, which is maybe a few times a year and let them manage the property and then they just auto deposit the net rent into your account and you get a monthly statement. And it, it’s, it’s not completely passive, it’s not completely disconnected, but it’s as passive as it can be dealing with full ownership of residential real estate. So, long answers to your
Question. Yeah, no, that’s good. If you were looking like right now, what are some of the, in 2023, right, if you’re looking to pick up a property, what are some of the cap rates and cash on cash returns that you’re looking for now? And where do those exist in the country, the best ones in your opinion?
So a shorter answer to that long question because it’s a long answer. If you look at the state of the union, if you will, the state of the real estate market today compared to a year ago, we’ve seen a dramatic slowdown in most of the markets. So if you look at the top, let’s say the top 100 markets, about 42% of those top 100 markets are what we’ll categorize as slow. Meaning they’ve slowed d down tremendously in terms of price growth, price in terms of appreciation and price in terms of rents still positive, but, but typically single digit and usually on the, on the low single digit mean from zero to 5%. That’s 42% of the country right now. Mm-Hmm. And I’m, I’m just talking about the top 100 markets. I mean, this spills over into the, you know, into more of that.
But, but it gives you a sense, 37% of the markets are, have normalized. They’re in the normal range of single digit annual appreciation, which can be anywhere from like four to 7%. Only about 18% of the markets are what we’re gonna call strong or very strong. In fact, right now, there, there are no markets that we would label as very strong. There’s very few of them. So typically strong, it’s about, you know, 18% of the markets are still appreciating above 5% and some of them even like 10% plus, but not very many. And then there’s a very small amount that are very slow and that’s typically found in like the Bay Area, San Antonio’s one of those markets. Cleveland, surprisingly, cuz Cleveland has been a perennial cashflow market. So, but it just is really slowed down and it could be because of industry and, and employment mm-hmm.
<Affirmative>, but where you’re seeing the, the least amount of growth is many of the coastal markets, particularly northern California and places that have appreciated very, very strongly like Salt Lake City, Denver Boise, Idaho, Vegas, Phoenix strong appreciation, been running too fast, too hot and for too long. So now they definitely need to go into a cooling period where that market will normalize as far as markets go that are strong or still appreciating and healthy. They would include markets like Charlotte Atlanta Charleston, North Carolina. So we’re talking about the Southeast and many areas within Florida, which should go as no surprise to many people. Be it Orlando, Tampa, west Palm Beach the, the western coast of for Florida has been very, very strong for many, many years now, it’s definitely cooled down. It’s more of a normal market, but because so many people are moving to the state of Florida in general, the state of Florida is, is a great place to look.
The Southeast a a great place to look, Texas, not as much as it used to be. The Tennessee still very very healthy and, and a great place for cashflow and cash on cash returns, with the exception of Nashville. Nashville has gone gangbuster insane. Yeah. Yeah. So but you know, we like, we like the western half. If you, in fact, if you look at the 25 markets where we have, you know, turnkey investment property in available to investors, our clients, you know, people we work with, almost all of it today now is on the eastern half of the us We used to be in Idaho, salt Lake, Phoenix, Las Vegas, but those markets are just, the inventory’s, low numbers don’t make sense. So now it’s flyover country, the northeast, and much of the southeast, that’s where we’re focused because that’s where the numbers make sense.
Yeah. And when you say, as far as the numbers aren’t, you’re talking acquisition, right? So to buy new properties now, even though the rents might be there, because they definitely are in Phoenix, and a lot of the markets that you mentioned, the acquisition price to get them are just so high. Do you feel that, how, how much do you feel, just guessing, right? We can’t, we can’t see into the future, but how much do you think that some of those markets that are really pushed up are gonna cool off?
Well, that’s a great question. It’s, I almost wanna call it the million dollar question, <laugh>. Yeah,
Right. It really is.
It really is. Because you can make a million dollars in equity gains in a relatively short period of time if you knew where that market was going. Yeah. but at the same time, you could also be upside down and lose a million dollars in equity. Yeah. You know it’s, it’s hard to time the real estate market. Fortunately, real estate does move relatively slow. It’s one of the slowest moving asset classes, which is a benefit to investors because you can see what’s happening and you can see what’s coming. And you can adjust without having to, you know, push button invest like you do with the stock market as, as if you were a day trader. You, you, you have weeks and months to adjust with real estate. So, and because of that, real estate can also be very, very forgiving if you buy Right. Especially in the, in the right neighborhoods like the, the, the, the neighborhood is is to me, one of the most important criteria to mitigate your risk, followed by the market as a whole.
Right. We’re all gonna have a pushup, we’re gonna have a, a cooling off period. There may be some recession, people get so freaked out by that word. But all it is, is really just the reset in the market. What do you, how bad do you think this will get? I think how bad it gets is depending on all the opportunity that’s available as well.
Yeah. you know, that saying all real estate is local. There’s a lot of truth to that because every single real estate market, first of all, I will say this, I, I preach, I, I’ve been preaching this forever. There’s no such thing as a housing market. There’s no more specifically, there’s no such thing as a national housing market. It doesn’t exist. You can’t point your finger at it and show it to me. Whenever we talk about housing in general at a national level, all we’re doing is we’re just averaging out certain numbers or metrics across the board, across, you know, the top 20 markets or the top 10 markets, or the top a hundred markets. So you’re just taking averages, you’re taking the pulse of, of the, the housing economy, if you will. But at the end of the day, all real estate is local. So what happens in real estate, especially when it comes to rents and prices, is a function primarily of supply and demand in that local market. Mm-Hmm. And you can get granular, you could even say down to a submarket, down to a neighborhood, and, and literally that’s true. It could be down to a street. So true.
So true.
So it’s all supply and demand driven. So if you want to know what’s happening with real estate, and if you want to make some predictions, look at supply and demand dynamics like anything related indirectly or directly to supply and demand in a particular market, because that will give you kind of like a leading indicator of sorts in what’s going on in, in that, that area, that neighborhood or that local market. So this goes back to what I was saying before, you know, like markets are adjusting, some markets are adjusting more so than others, like the overpriced overheated markets, you know, being on the western half of the US like the Bay Area. Whereas other markets are just taking a breather because demand still far outweighs supply, like in the southeast and the Northeast, where prices will adjust or slow down, maybe correct a bit. But over the next few years, as time goes on, they will continue to appreciate rents and prices because there are more people needing those, those households, those homes that then there is supply. And so it’s just, look, it’s just basic economics 101.
Yeah. What do you think are some of the maybe mistakes that you see? I mean, you work with a ton of investors that go through as students and your training, and I mean, you have that an ultimate guide to passive real estate investing that people can kind of get started with. What are some of the mistakes that you see people make maybe before they come to you as they’re trying to do this on their own?
Wow. Okay. So I guess the first would be we already talked about it and that, that is not realizing that you can invest anywhere in the us that you should be market agnostic to understand that there are lots of places to invest, which means there’s a lot of opportunity for you. So choice. Yeah. So just so once you take the blinders off and you open up your scope to the entire country rather than just your backyard or your local market you’ll do, you’ll do a lot better. You’ll do, you’ll, you’ll be far more successful and you’ll, your wealth creation will happen faster. So that’s, that’s one mistake. Two is sometimes people invest from the bottom up instead of top down. And what I mean by that is, a lot of times people will be looking at properties in a particular area or their backyard or where other investors are investing because that’s where they’re investing.
And so they start looking at properties, but they spend very little time, if any, looking at the market, meaning the fundamentals of that market and the health of that market and the neighborhood that it’s in. It’s easy to buy a property, but once you have it, you can’t move it. If all of a sudden you close escrow on a property, and let’s say it’s newly renovated, it’s, there’s nothing wrong with it, no deferred maintenance. And, and the numbers look pretty good on paper. Like, you know, you’ve, you’ve underwritten the numbers and you, you invest in that property. Well, what if the neighborhood you know, is, is not desirable, like there’s low demand for it, or there’s high crime rate, or there’s terrible schools in addition to, you know, increasing crime or whatever it may be. You can’t change that. You can’t pick the property up and move it to a better neighborhood or a better location.
It’s, it’s there, it’s rooted. So a lot of investors I’ve seen, and I’ve done this too, made the mistake of fo focusing so much on the property, the numbers, the condition and all that stuff that they invest in the property, but they’re not really investing in the, in the neighborhood, the area and the market. Mm-Hmm. <Affirmative> the top down approach, which is my sixth rule of my 10 rules of successful real estate investing, is to start with choosing the market or the markets that make the most sense. And then working your way down to, you know, the areas or sub-markets, then the neighborhoods, and then start looking at properties in those neighborhoods that meet your criteria as a real estate investor. The demographics, the, the you know, the availability of, of the numbers, like cap rates and all that kind of stuff. So top down approach rather than a bottom up approach.
So that would be another mistake to avoid. Another one is, if you don’t know what you’re doing, if you’re a new real estate investor or you’re just getting started, don’t try to self-manage, even if it’s in your, in your local market. Learn, learn the business of investing in real estate from having professional full service, property management companies doing the work and understanding all the pieces of it as you, as you go. Then if you want to self-manage, choose to self-manage. And there are a lot of tools online to help you do that. Especially today. There wasn’t as many tools 10 years ago, 15 years ago, even five years ago as there is today. Today you can basically handle everything from finding, screening and qualifying tenants, placing the tenants and showing the properties without you ever being you know, on the ground. Yeah. So there’s a lot of self-management tools out there today, but the, a good place to start is actually with management companies that, you know, can expose you to the, the, the ropes, if you will. So those are great.
Those are great because I, and I think the thing about the management company is really important is because are you an investor or are you a landlord? Right? Do you wanna actually manage the day to day? And if you’re doing that, then you can’t really be sourcing and finding new properties that are gonna create new assets to build more wealth. So I think that that’s important to people to have that distinction of do you really wanna be the property manager or do you wanna be an investor? Cuz the more time that you’re spending on that one property that you already required, you’re taking time away from finding new deals and expanding your portfolio. So I love that. Was there something else you wanted to share? Was it another one of those rules? I’m so interested to know what your 10 rules are. Is that in your ultimate guide to passive real estate investing?
I, I believe it’s in there. Yeah. I believe in there. And even if it’s not on our website, it’s, it’s a sticky post, which means it’s always at the top of our blog. It’s, it never moves from number one. So it’s the first thing you see and you’ll always see it there just because it’s, it’s kind of like that foundational blog post. It’s like, here are the 10 rules that, you know, that I cut my teeth on and made mistakes on. And now here they are for you, <laugh>.
I love it. I love it. Can you give us one more, maybe off the top of your head?
Yeah. Well, it’s not a mistake, but yeah, definitely. One more. Yeah, that’s ok. Sure. Yeah. So so I, I always start my, my presentations with this as well. The first thing I always tell people or even ask people is, is, well, my, my first rule is, is educate yourself. Number one, educate yourself. Okay. So when I’m doing a presentation and you know, I’ve done presentations to as many as 2000 people in a room, my first question to them is, finish the following sentence, ignorance is blank. And what do you think most people say?
Most people probably say bliss, right? Because that’s what the saying has always been.
Correct.
I wouldn’t say that <laugh>, I would say it’s costly. <Laugh>
I would say ignorance is costly. You’re on the right track, you’re on the right track. So I always, I always ask them, that’s the answer I get, it’s bliss. And then, but then I always tell them, I say to me, ignorance is expensive.
Yes, <laugh>.
So you don’t know what you don’t know and what you don’t know is going to cost you opportunities. Time, money, you name it. And it doesn’t have to be in the financial world. It could be in your personal life, it could be in your relationships, it could be in virtually anything, but ignorance truly is expensive. You know, it, it speaks to the saying that you know what, what you don’t know won’t hurt you. Well, that’s absolutely wrong. What you don’t know can and usually will hurt you because if you don’t know the right things to be doing, saying, looking into investing in et cetera, et cetera, it’s, it’s gonna cost you and you don’t even know it’s costing you, you know? Mm-Hmm. <Affirmative>, you don’t realize it. And that’s a problem cuz ignorance comes with a tremendous price. And that price is that the, those who are ignorant, and I don’t mean this in a derogatory or or negative sense, but those who are ignorant never really realize the fact that, that it’s coming with a, a, a tremendous price. I mean, the biggest takeaway from this interview is this. If they, if people listening to this interview, remember nothing else. Remember this one thing, the cost of ignorance is more expensive than the price of education.
Woo. It’s so good. Say that again. The
Cost of ignorance is more expensive, far more expensive than the price of education.
So good.
Education can be literally free. I mean, there’s so many good resources online podcasts. Yeah. You know, like yours and mine books are 10, 20 bucks. I mean, what, what kind of excuse do you have to not educate yourself?
Yeah, I love that. I think, I think it’s important to remember too, that investing, just like building a business is a skill. And if you want better returns than the average investor, you need to put more work into learning, understanding, educating yourself. And what’s great is you don’t need to go to college and go into debt to learn this stuff. You can actually, like you said, it’s free as long as you’re getting the right information. Cause I think also misinformation can be very expensive for some reason in the digital space and on social media, they, there’s so many people talking about real estate and having funds and they’re like on their first property or their second or third property. And so I think it’s important to, to obviously work with someone that has experience like you do. I love what you’re doing and I know everyone’s gonna wanna get the rest of those 10 rules. I know you have a guide. Where can we find that?
Yeah, there’s a lot of domain names that I bought. I have an account on GoDaddy and I have like, well over a hundred domain names and they all kind of point to all my websites, excuse me. But the, the, the mothership website, if you will, is NoDa real Estate. Noda is spelled N O R A D A, no Nora, however you wanna pronounce it. But nora realestate.com is our main real estate website. And there’s tons and tons and tons of resources on there. We probably post three blog posts a week, at least on there right now.
Awesome. Oh, that’s great. Just education about what’s going on in the market and real estate investing. That’s so great. Awesome. So we’ll make sure to link that up in a show notes otherwise too. Where else are you online? I know you have a podcast. Let’s promote that. Can, where can they find your podcast? What’s the name of it?
Well, thanks for asking Candy. I appreciate it. So my podcast is, is aptly titled Passive Real Estate Investing. The website is passive realestate investing.com. The show is called Passive Realestate Investing. You could find it on iTunes or wherever, just type in past of real estate investing. So it’s pretty easy to find.
Awesome. Yeah. Yeah. I love it. And I, I recommend everyone go, go listen to it. And I don’t do that very often cuz like I said, most times the information I’m not a hundred percent aligned with, but we have a lot of commonality in everything Yeah. That you talk about. So I, I love that. So everyone go, go check that out too, to get your, your weekly real estate dose. And this is one question I always ask everybody at the end of the interview, and I’d love to know your, your answer to this is, obviously the show is Generation Wealth and we talk a lot about wealth, real estate, investing’s obviously wealth, but now doing what you’ve done for so long and being in business and real estate, what does the definition of wealth mean to you at this stage
Time? Mm-Hmm. <Affirmative>, it’s, it comes down to time. Look, there’s a difference between being rich and being wealthy. You, you can have, you know, millions of dollars, you could be a billionaire and be rich, but doesn’t mean that you are necessarily wealthy. I mean, it makes it far easier. But unless you convert that wealth, let me take that back. Unless you convert those dollars or that pile of cash that you have that makes you rich into a predictable passive income stream that affords you to do what you want, when you want on your own live life, on your own terms, you don’t actually have you don’t actually have time freedom. So ultimately what we want is not the money, it’s a, it’s a means to an end. It’s a vehicle. Ultimately what we all want is to be free. We want time freedom. Well, how do you have time freedom? You need financial freedom, at least financial independence, but certainly time financial freedom, financial, that financial independence allows you to do what you want, when you want. It allows you to survive and live. So we want that financial independence or that financial freedom to give us that time freedom that comes along with it. So for me, wealth measured in financial terms is all about time. Free time.
I love that. I love that. Thanks for sharing that. I know so many people that make a lot of money but don’t have a lot of time. And so I think it’s a really important distinction. So thanks so much for coming on and spending this time with us. I know you’ve got so many things going on, and so I just really appreciate you pouring into the audience and everything that you’re doing. And thanks again.
Thank you Candy. Appreciate it. Well, I hope you enjoyed that interview with Candy. I certainly enjoyed it. I think she has a good show and I certainly enjoyed having her online. But that is it for today. I tried to keep this as brief as possible on the front and backend. Remember to download the free report on our website, The Ultimate Guide to Passive Real Estate Investing. And of course, if you’re interested in real estate or just you have questions about where to get started, what markets to look at and, and how we could potentially help you just set up a free strategy session with my team. Our investment counselors are here to help you in doing all that and more. And of course, if you have questions about real estate, don’t hesitate to submit those to me. You could email those to me at askmarco@passiverealestateinvesting.com or just go to the passiverealestateinvesting.com website and click on the link and you can submit that to me at any time. Alright, well that is it for today. Thank you for listening and we will see you on our next episode.
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