I’m Melissa Nash, real estate investor, mama of four, and the creator of a seven figure rental portfolio. Built one property at a time, and now I help other investors do the same. This is about designing a life that you don’t need a vacation from. This is her real estate life and your freedom story starts right now. I will be your host for today’s episode. Let’s get into the good stuff. Hello, Michael. I am so glad to have you here today.
FREE copy of The Ultimate Guide to Passive Real Estate Investing.
If you missed our last episode, be sure to listen to TBT: How To Build A Powerful Credit Profile
Hi, Melissa. How are you?
I’m doing great. How are you?
Great, great, great, great.
Wonderful. So for everybody listening who does not know this voice and who is Michael, you have helped thousands of investors build wealth with rental properties, especially in the indie market. And I know my listeners are going to get so much out of your experience. So for those of you tuning in who have not met Michael yet, he’s been an entrepreneur for over 20 years with a serious track record in real estate, stock market investing and building multiple streams of passive income. True. He has been a part of 1100 real estate transactions, worked with clients using everything from IRAs, 10 31 exchanges, and has helped investors from all over the world build cash flowing portfolios, portfolios. And if that isn’t enough, he is a husband, an adventure racer. We’ll have to talk about that. Yep. A speaker and just an all around wealth building machine. And before we get into all of that, wow, let’s give a warm welcome to Michael.
Thank you. Thank you. Thank you. Thank you. It’s almost if I wrote that. No, I’m kidding. <Laugh>.
<Laugh>. It’s almost as if I kind of got some tips from your, your website. Right,
Right, right. I’m gonna have to add that. And a better pickleball player than you, Melissa. No, <laugh>.
Oh, way better. Way better. Considering that I’ve played pickleball once in my life.
Oh, great. Thank you. You have me beat <laugh>.
Thank you for the intro. Thank you so much for having me.
Absolutely. So Michael, before we get into all of the technical stuff Yeah. I’d love to know, when did you first realize that out of state investing was the strategy?
I was supposed to be able to, you know, trade the stock market from Eastern time, you know, that’s nine 30 to four and, you know, live on my millions or whatever I was supposed to do. That was my goals. And I realized after doing that for, you know, five to 10 years, it was very, it just wasn’t scalable. It was, I wasn’t building equity very fast. I couldn’t really give my kids or my wife anything. It wasn’t, it wasn’t building any enterprise value. There’s no tax deductions. So even though I enjoy it, it really ended up becoming a hobby from covered calls to option strategies to iron condors, those boutique things. And and so I kind of came on across real estate. I don’t say as a mistake, but you know, guys like to talk to each other and kind of, you know, rib each other, trash talk each other.
And that’s really how I came across it. I had a, a, a kind of a dream house, if you will, for me, which was a kind of a, a nice house on the cul-de-sac. And my buddy was in northern Ohio, and he said, wow, you know, and I, I knew I made more money than him, and I, he is like, well, you make a lot of money, but all you did with it is buy one house. I’m like, oh, wait a second buddy. Look at my W2, look at my 10 90, you know, he is like, buddy, I’ve got like 15 houses and you know, I, I’d never made as much money as you, but my tenants are paying off all my mortgages. And you know, my rents are 1,502 grand. So by the time I retire, I’ll have 30 grand a month coming in.
And all I had is one house at the time. And I’m like, I think I just got my butt kicked <laugh>. So, so I was like, listen, you know, I gotta, I gotta get started on this. And that was about 15 years ago. And since then I’ve done just over a hundred million dollars of transactions, you know, 1100, 1100 homes. And, and really by, not by mistake, you know, I failed a lot in the journey, but by design. And so I jumped in at two feet and only in the Midwest. And so a lot of investors will call me up. I seem seemingly have half my clients in California for whatever reason, and really, really enjoy these, these Midwest markets.
It’s interesting because we weren’t taught this in school. Right? Amen. And so it took your buddy to be like, Hey, man, like, why are you not doing this? Right? And so that’s really why we in this real estate world, reach out to mentors and read the books mm-hmm <affirmative>. And listen to the podcast. And that is why I am so excited to dive in with you. Yeah, yeah. Because you’re an expert. You are that person that when we’re looking at mentors, we wanna look at somebody who’s steps ahead of us, right? Sure, sure. And you admitted you have failed. I have failed. And that is part of real estate, right? That is part of real estate.
Well, it’s funny, I, I like to do a lot of sports and you, you virtually learn nothing by success. You learn, okay, that’s one way to do it. Right. But in today’s day and age, once you do it right, that’s on film. Okay. I’m a like, let, let’s call it a football game. So as soon as you make that cool play, man, everyone knows about it. Right? They can practice defending against that one cool play that you made, man, you know, so, so it’s really, it’s, it’s about almost failing your way to success. I’ve got a 24-year-old son, and he’s struggling right now in a little sales gig that he is doing selling printers and copiers. I’m like, buddy, this is, this is hard. You wanted to jump in the deep end, you know, let’s, there’s no secret. We gotta double your rate of failure. Failure, you know, we’ve all been there, you know, we’ve all made mistakes. And that’s one of the best ways to succeed, you know, is it is you can literally fail your way there.
Yeah. Well, in the world that I’m in, where I want real estate investing to be as passive and easy as possible, and most of our listeners are those busy working professionals. Sure. And they don’t have necessarily the time to put in the reps to get that experience and to make your mistakes that you learn from. Right? And so the idea of easy real estate investing out of state is the goal. That’s what, you know, that if we can lean on somebody to teach us their mistakes, how they did it, and then that’s gonna make our risk a lot lower and make it a little bit easier. So that is leading in to what we are going to be talking about today with Michael, is how can out of state investors actually be successful?
Well, it, it, let me just back up a little bit. ’cause You said like proverbial air quotes right around out of state. And I just wanna reflect on my background. When, when I traded the stock market and I wanted to go buy, you know, an eBay or a Microsoft, I just point and clicked my, my mouse and I bought a company out of California, or, or Dell computer out of Texas. It didn’t. So for me as an investor, I’m in the Midwest, I’m in, you know, Indianapolis. So, but I, I wanted to own Dell computer when they were doing their stock spots, or I wanted to own Microsoft for the dividend. Like, so for me, it, it just made sense. I, I wanted to live in the Midwest, born and raised in Chicago, but I wanted to own those companies that were based in California or Austin.
So it didn’t, I didn’t have like a big thing that I needed only by companies in Chicago. I, I, I wanted to do what’s best for me and my family. So it didn’t, so when I, my, my first flip was in Burbank, California. I just, I, I had an opportunity. It didn’t really matter the zip code I needed. I wanted the opportunity. So that’s kind of how I was raised. It didn’t, I didn’t have, like, I needed to invest in Chicago. That was something my family was too important. I wanted to invest where it made sense,
You know? Yep, yep. And, and that’s so right. Because I’m not looking across country when I invest for fun. I’m not like, oh, cool, you know, I wanna go invest over here. It’s because I have to like it, my local market in California is expensive. It’s not landlord friendly. Right. There’s zero cash flow to be had. And so I do have to look out of state and I have to be okay with that if I’m gonna do this thing. Yeah. and so just to recap, so you are what I call a provider. Sure. So you are the guy in Indianapolis, Uhhuh, <affirmative>, when I’m working with an investor or talking to somebody and they’re looking at these Midwest markets that everybody loves to talk about mm-hmm <affirmative>. And they’re like, Hey, how do I do this? I’m in California and I wanna buy a property in the Midwest. How do I do it? Right? And I’m like, Michael’s one of the guys that are gonna help you do it. <Laugh>. There you go. There you go.
Well, well, to kind of, again, I, I just like this framework. ’cause You’ve got a great, great base here. And it, and it kind of reminds me of why, why I pay, you know, I’ve got a, a, a why I pay, I gotta do an oil change on my car. I mean, my dad used to teach me on his Buick to drive it up on the ramps and get underneath the car and unscrew the oil filter. And I guess I could do it with my dad’s Buick, you know, 25 years ago. But my time just becomes more valuable, right? I hire a CPA to do your taxes. I guess you could maybe do your own ta It depends. I, I don’t know. I’d just rather pe spend it, spend the money on a guy who that’s what he does all day long, right? And so the same thing with someone like me, or it’s kinda like if I, if I hire a, a, you know, like a, like a travel person to make my trip to Italy, like really awesome.
‘Cause I don’t know Italy that well. So I hire the travel lady to book me on events that I would interest me, right? So the same thing in the, you know, when you’re doing this type thing is, is, you know, you’re an expert. Like I’ve got a, you know, a lot of California clients do in their jobs. And I said, well, that’s your job. My job is to make sure we can replace your six figure income with rent. And that’s what I enjoy doing. So let me kind of walk you through it. So what I was taught, see I went to, after I, we sold that company, is I went to teach for Rich Dad seminars in, in Arizona. And I was, even though I knew a lot about the stock market, I played dumb. ’cause I was back then about real estate, and I just kind of really borrowed from their experience.
Okay? And they, some guys liked whatever, you know, tax lis, foreclosures, dah, dah, dah. And the guys who were a little bit wealthier and had a little bit more money they were buying and holding and replacing their income with, with turnkey rentals, and they really love these Midwest markets. So originally I was, one of my mentors had a hundred homes and I said, let me borrow, let me take you out to lunch. <Laugh>, you know, let, what’s so interesting about all this knowledge that your listeners are, are, are learning is, we used to say that if it was all about knowledge, then all the librarians right? Would be millionaires with great sex lives. Is, is what we used to say, <laugh>, you have to take action, right? So you can’t keep going to the seminars and the podcast. You need to go buy your first house or two and be like, oh, it’s not as big of a deal. Or, oh, it stresses me out or whatever is, you know, when people come up to me and they say, I wanna start with 10 homes, I go let’s start with four, let’s start with two. You know, let’s relax. I’m looking for long-term relationships, you know? Yeah. So that’s a, that’s a good little context for your, for your audience there.
Yeah, no, perfect. I love that.
Yeah. And a little background, why I was then after that happened is one of my coworkers was an executive at UPS. Okay? So you don’t know UPS is based in Indianapolis. It was a private company before it went public. And so when, when you own private shares, they, you know, there’s really no secondary marketplace for a private share. And so they, you buy, buy, buy with the hopes of either an IPO initial public offering or you get bought out, right? And so when that company did go public, we used to joke, even the janitor was a millionaire. Not really, but, you know, everyone made money. Yeah. And the smart people bought real estate. And so that’s what I did, is I copied I the off the coattails 15, 16, 17 years ago off, who’s now one of my business partners who owned 20 homes, and he kind of taught me the ropes.
Speaker 3:
And then what I did is I bought my first 10 homes with his health. And so that’s kind of how it all started. And then right during that time, my story in, in my, in my book is right during that time, my dad was diagnosed 21 years ago with, with cancer. He was diagnosed in a November, and then he passed away in January. And I said what I thought every son should say, which is, I will take care of mom. I didn’t know what that meant, but it sounds like something you should say. And so when I said that originally I had some of my mom’s money in the stock market, but you just have to be willing to lose a little bit of money when you use the strategies that I was talking about in the stock market. It’s kinda like, you know, going to Vegas, you can, you’re supposed to stand, you know, play blackjack, you’re supposed to stand on a 20, but the dealers can still get 21. Right? So you can still lose money, making all the right choices. And my mom at age 55 60 did not have the emotional bandwidth to handle that. So we rolled over her account, we bought deeds inside of her IRA and helped her replace dad’s income. And then someone in the Los Angeles said, raise their hand and says, can I be your mom? And I said, wait a second here, there could be a business behind this. So that was, you know, over a thousand houses ago, <laugh>.
Wow. Wow. Yeah. Well, so I’ve been an investor for the last 10 years and I developed what I call the freedom success formula. I like it. And it, thank you. It comes down to three things, and this leads into you, okay? Mm-Hmm <affirmative>. So stick with me here. Sure. The first one is the property, the process, and the third one is the people. So we’ve got the three Ps. I love it. And you gotta have all three. You can’t have one without the other. And the last one, the people, this is where a lot of investors get stuck because number one, as you just explained, working with people that have been there, done that ahead of you. Mm-Hmm. But then also, who are the people that you need to succeed, especially when somebody is investing from 2000 miles away. So that’s what we are really going to unpack today. Great. So what I did, Michael, yes. I went straight to some of my investors, Uhhuh, and I asked them if you could sit down with someone like Michael, who knows a lot about helping investors invest in outta state markets. They’re trying to invest somewhere else, right? What would you ask? Oh, so I’m excited. How do you, how, I was gonna say, how do you feel about this? Can we roll through these?
Great. Yeah, of course. I love it. <Laugh>.
Okay, perfect. So I came up with these clients six questions that every outstate investor needs to have the right answers before they jump in. Got it. So here we go. Right? Lemme ask you this really quickly before I jump into their questions. Yes. Mm-Hmm <affirmative>. This is my question. What do you think are the most common fears or worries when people come to you when they’re thinking about buying out of state?
They’re really not super nervous, but there is an emotional, you know, when I, when you go to dinner and you buy a hundred dollars dinner or whatever it may be, you, you get the value right away, right? These people are usually, your clients are usually, you know, 35 to 55 ish years old, and they’re taking their hard earned money from a very safe environment. Usually a could be a savings account, checking account, could be an IRA or whatever. And they, and, and they feel they’re putting it in air quotes in harm’s way to a certain extent, they’re buying something that they can’t drive by, like a Toyota Camry or a steak dinner or, or, or 1, 2, 3 main street. So what I have to do sometimes is say, wait a second here, we, you know, we’re all like each other. We’re the house is worth X, it’s appraised at X.
Right? Okay. I mean, so, so are, are there risks? Potentially, we have insurance, we have an appraisal, we have an inspection. You know, that’s where you kinda leverage yourself a little bit. And that’s why I always tell people that are, that maybe started a little bit too late in life or maybe got divorced and they need to catch up. I go, let’s get going. But they’re nervous. Like they think it’s in harm’s way. They’re like, oh, at least I’ll lose this money. I don’t want you to think it like, we’re gonna lose money. You bring money to Vegas if you wanna lose it, or, and then you set it on fire. Whatever you bring there, you’re gonna set it on fire. That’s not what we’re doing here. This is where replacing your income, it’s more strategy than people think. It’s like, it’s not risky in my view, because of all the different, you know, circuit breakers we put in place.
So, right. I think the thing that I hear the most is people go, well, I can’t, I can’t drive by it, I can’t touch it. And I’m like, well, I mean, I, I get that, but are you a contractor? Are you a plumber? If there was something wrong with it, are you the one that’s gonna go fix it? Because there’s plenty of people that you can hire for those things. And we can look on Google Maps and we can see that it’s still there, like it exists, right? And, and the title company is gonna make sure it exists and it’s titled correctly, right? So like that idea of being able to drive by it and touch it, it’s like your example of the stock market. It’s like, well, you don’t see that, right? And you freely invest in it. And most of us don’t even know what the hell we’re doing with the stock market.
Right? Right, right, right. So to echo that, I, I like that. Now that said, I want you to, if you’re mature enough in your kind of investing, you know, mindset is they always say, you know, rich people have money, and wealthy people have time. Okay? So Melissa, if you and I were to go ahead and say we really have an opportunity to buy that Subway franchise in the airport, let’s just say you and I chip in x, I don’t know, call it 50 grand each. Well, we better not be making sandwiches. We better be maybe doing some books, maybe having a meeting and you know, trying to, you know, whatever. We’re doing the numbers. It’s a business opportunity. We’re not making sandwiches. We’re not, you don’t have the noon shift <laugh>, Melissa <laugh>. You don’t actually do make, you know, so when you’re evaluating, you know, these opportunities, you don’t really do the work.
You don’t do the plumbing, you don’t get the calls late night that a tree fell down and I need it cleaned up. You have people for that. I did have a new investor actually says, Hey listen, my wife would really appreciate that you can walk through the home on FaceTime. Ever since Covid, we can do everything online. I go, well, did you review all the pictures? They go, yeah, but it’ll make her feel better. I go, great. What time? Wednesday at noon. I go, great, let’s go <laugh>. It didn’t matter to me. Right? I mean, they bought two houses. We, we walk through both of them. They, and they had questions they wouldn’t thought of before. Great. You know, that’s fine.
Yeah. Yeah. I think we’re our own, we’re set. It means sometimes like and times…
There’s many times, many
Times there’s an underlying just extra comfort that people need. And really, that’s why I appreciate you and like why I love working with you and why I have for so long is I know that there are some people that need that extra touch and that little extra handholding. Yeah. And for whatever reason, we don’t need to, you know, psychology dissect it, but we’re there to help people. And that’s the, you got…
It. You got it.
So, okay, are you ready? Question number one.
I’m ready.
Okay. How do I know if the neighborhood I’m investing in is actually good? The deal might look good on paper, but how do I trust that the location is solid, safe, and has long-term potential?
I love it. That’s a fantastic question. Because objectively we can evaluate the property that’s worth x, right? A hundred grand, 200 grand, right? We can have an appraisal via comps, right? However, when you go do a neighborhood rating a class B class, C class, that reeks of subjectivity, right? Who says it’s a, who says it’s B? Is there a scale somewhere? How do we know? One of the key ways to do that, to reverse engineer that for your own, for your own sanity or your own peace of mind, I should say, is to reverse engineer the rents. Okay? So you go on Google, go on Zillow, excuse me. And then you find out nearby what are things renting for? Okay? So let’s just say in my case is, let’s just say a property rents for $1,500, we do a three times rent. Three times of net rent is, it has to be your income.
So let’s just say it’s $1,500. That means you have to net $4,500. Alright? That means you have to gross call it $5,500, which means you have to make about $70,000 a year. Okay? So $70,000 a year, that person in the Midwest has plenty of choices on where to go. Okay? They can go a class B class, C class, they’re not gonna go where there’s bullet holes and they could probably afford a class. I specialize in B class ’cause it’s the highest rate of return. So if there’s something that’s renting and everything’s renting for $600, let’s just say using my math, that means you have to net $1,800. That’s not the highest class of renter you’re going to attract. It’s one of the reasons why multi-units don’t work well in my particular city. Okay? So that’s one way to use a little bit of empirical data to go ahead and go from there.
Next is, many people will say schools. Now schools are a little bit better indicator when you do a primary, okay? However, less than 55% of my clients or my tenants rather have children. So if I have a truck driver who makes $85,000 a year and he is living with his dad who’s a veteran, they don’t really care about schools, they just want a, a nice house in a good neighborhood. Make sense? Right? So what you can do is you can of course rely on your provider. What I would do is I would pull those comps, you know, those comps in the area. I can provide comps for everything. And then we can look around those areas. We can look at a crime map, okay? And get those online if you want. And then also you can talk to other owners in the area. We have a lot of owners and what are the average maintenance things we see our tenants are staying on average for four to five years in these homes.
They’re not moving because we buy in good areas. I can prove that. So those are other things we can do. And then next is you can drive around with me on FaceTime and we can say, Hey, this is what’s going on. This is the deal, this is the Marshall’s growth, this is the Chase bank, this is the car dealership. It looks like most of the Midwest. So those are a few things we can do. It is a little bit subjective, but also when you look at those rents to purchase price, it needs to make sense.
I could not agree more with you. Mm-Hmm <affirmative>. Thank you so much for breaking that down. It is very subjective to personal opinion and everybody has their own. And you can even start going into B minus A plus. You know, you can start going into all those and I’m like, who made that up? Like, where did that come from? And so I think that it honestly is the best way to look at it. I also kind of look at a little bit, if you’re in a little bit better area, the property’s gonna appreciate a little bit more at which means you’re gonna have a little bit more rental increases. Correct. And so if we can add that into it, then that’s gonna be a little bit better area.
Yeah. Because this question was kind of common is I went ahead and produced a video that filmed all of our neighborhoods that I sent to people that are interested. So I just sent that video to ’em. So they’re like, oh, I get it. It’s like a brick ranch, shotgun ranch, a thousand, 1500 square feet, indestructible. I go, yep, yep. That’s kind of what you’re looking at, <laugh>.
Yep. That’s it. <Laugh>
That’s what you want. Perfect. You don’t want, like me in the Midwest, we don’t even go, we try to not hardly ever go even two stories, right? Because why do you have a bathroom upstairs? ’cause If that breaks, it hurts. The first floor, <laugh>, all these different things that we do, we try to reverse engineer it for performance. So,
Perfect. And by the way, anybody, yeah, anybody who’s listening, who wants that video that Michael just mentioned, just reach out to me, check out the show notes and I’ll get that video over to you. Great idea. So thank you for mentioning that. Yeah. So, okay, question number two. Are we ready? Yes ma’am. What questions should I ask a property manager before I ever hire them?
Good question. There’s list of this stuff all over the place right now that said, if you keep going through the list, you sound like someone who’s reading off a list.
<Laugh>. Right? Well, and and also by the way, like, it’s also very annoying. I can only imagine, right? Like being the property manager on the other end of that phone call and somebody is just pounding ’em and pounding ’em and just taking, taking, taking, right?
Right. So here’s one thing that I would ask is because we did property management as a necessary evil because we had so many of our personal holdings, okay? And we were sick of paying other people, we thought we could do it better. We’ve done that for years and years and years. Property management is not a fun business. No one calls you happy. No one calls and says, Hey, I heard you’re gonna raise my rent. Hey, great idea. You know, no one never does that, right? So it’s not a necessarily a very fun business. Like pickleball is a lot of fun, right? So I would say this, I would say make sure the property manager owns homes in your area. Okay? I would also say make sure that they are vertically or integrated. Okay? What I mean by that is, like us, we, we own the construction company, we own the acquisition company.
We ac we actually own the self-directed IRA company, but then we also own the property management company. So, so what happens there, why that’s so important that they own everything vertically instead of using a third party, is we get really quick feedback whether or not we’re doing a good job on our rehabs. What worked before 10 years ago doesn’t work. Now what did tenants want? Now what is this? We thought this worked that it didn’t work, you know, as a property management company. So do they own those doors? My business partner and I have had income off of rent for years and years and years. What are the tricks to getting people to stay? Are you in the area or do you sell in 15 areas or do you physically have your money tied in there? ’cause Money is emotional and you wanna take care of people, right?
If it’s money, it’s emotional. You wanna do business with people you know, like, and trust. So that would be number one. Do you own those doors in the area? Of course, the standard, all the different, I’m not gonna go over the little administrative questions. How much do you charge and all that other stuff. So that would be number one is do they own doors in that area? How long have you been doing it? Another good question would be, what should I expect as far as vacancy or if you were to set expectations when the lease expires? Okay, what should I expect? I like to under promise and over deliberative to folks, and I’ll let ’em know that if it’s the spring or the summertime, it’s not gonna take long to rent. No one likes to move during the winter though. So if all of a sudden you bought the house in December and your property manager mistakenly gave you a two year lease, we, in the December, we only give an 18 month lease, so it expires in the spring or summer.
So we get a better chance to rent, right? But if all of a sudden you bought one and they, they give you a two year lease that expires in December or January, it, it could sit vacant for a minute, you know? So as long as they’re honest and transparent, I don’t do section eight investing necessarily, but people might say that Section E is guaranteed, nothing’s guaranteed. Right? Anybody can move for whatever reason. So we, we never use the G word <laugh>. <Laugh>. So just as you feel honest, you feel that they’re, they’ve been around for a while. And then, you know, like me, if something screws up, we take ownership of it because most of our investors have five to 25 homes. So we give people warranties on our work, things like that. We stand behind it. I answer my phone a little bit old school, but why not? We have people’s money. We, we wanna take care of people. So those are things that you get a good feeling about that they’ve been in the area for a long, long time. Right?
I, I love that too, because also the idea here is you are building a relationship mm-hmm <affirmative>. It’s not just transactional, especially if you’re an investor who wants to grow their portfolio, which everybody wants to grow a portfolio. I’ve never heard of anybody saying, Hey, I wanna buy one property, Melissa. Right? You know, we wanna build relationships. And so if we can get a property manager on the phone and actually talk like human to human, don’t just go through like a chart and go, I’m gonna check these boxes off and see if you pass. I, I think it, it’s more of a, also use your gut instincts when you’re asking these questions and communicate.
<Laugh>. Totally agree. A perfect example I had, there was a, there was a some tree work that needed to happen in the springtime. It’s very common. And I went to my investor who’s been with me for years, he owns I think four houses. And I said, Hey, Victor tree work’s not cheap, but it, it’s, we need to be proactive. The tree’s dead. We’ve gotta take it down. It’s not fun. Here’s the costs. He goes, oh, okay. No problem. I, I haven’t had any expenses on this house for a long, long time. I can see the tree, I can see the before. Okay. He says, do you want me to fund it or do you want me to, you know, like contribute or do you want me to take it outta rent? Well, he asked me, I said, you can do whatever you want. I mean, we’ve got a great relationship.
If you wanna a CH, the money to me, great. If you want me to take it outta rent, whatever’s best for you, Victor, are you traveling right now? He’s like, no, I’m not I’ll, I’ll send it in. Whatever. You gotta have that because these are the guys that refer you other clients. It’s easy. We wanna do business with people we wanna go on vacation with, right? And refer us business. In fact, we sort a new thing in our, with our tenants that we give tenants a referral bonus when they go ahead and refer us additional tenants. Okay? So we have had a very organic growth within our tenant base and we’re looking for that because I want a variety of reasons why you’re staying in the property. You just refer the property two streets over to your aunt who could be a babysitter for your kids. There’s another reason for you to stay in the property. All these different marketing things we do just like anybody would, right? But we do that organically. So all of a sudden it makes sense.
That is so brilliant. Okay, so this is a very good question. So let’s see how you’re gonna handle this one.
Oh, I’m nervous.
What should I expect a good property manager to handle? What is my job as the owner? You know how basically I’m looking at that as going, they wanna be passive, but they also don’t wanna be totally in the dark. What is that Right balance?
So what I like to do with folks in the beginning, we do a, a welcome call with investors and I have my office manager, project manager, Bonnie, on that call. And I say, we like to match your pace, okay? We have people that say, send me my money, send me my 10 99. Okay? You know, at the end of the year, you know? Right? Or we have people that are like, I kind of wanna learn. I’m like, you know, what is this, what is, you know, why did you put a clean out in what, what are the benefits? And, and I don’t mind that at all because it makes them smarter, better investors, right? So, but I ask them to be clear on that. If someone says how many shingles are on the roof? I, that’s not a good investor for me because I don’t know, you’re too much of an engineer.
I love you engineers, but it’s too much How many nails are on the roof? I, I also dunno, but if you say, Hey listen, I wanna do this, I wanna do this, I wanna grow my portfolio, we will match your pace. That’s what I always say, say to folks. Now then that said is our products, we don’t really have a lot of maintenance because we spend such a huge amount on our rehabs. Okay? Now that said, if you own a home for eight, nine years, like owning a car for eight, nine years, things break down, gutters get full. You know, I mean, things happen to a property, right? So at that time where it’s usually not major mechanicals if you buy one of ours, but it’s usually more wear items, right? From water heaters to what whatever might cause you trouble is go over with your property manager and ask them questions and feel free to ask me or any property managers, is there a more inexpensive, efficient solution?
Do we have to replace the one, there’s only a few working components inside an HVAC system, we’re okay replacing any one of those. If we feel it’s not throwing money away. At some point, you gotta get a new system, you know, we’re okay with that. We own the same door as you do. We can, you know what? Like you gotta keep the tenant happy, but we don’t need to cost us thousands of dollars. Is there a more inexpensive solution? You know, many times with our newer investors, there’s not a lot of expenses, so they don’t really have any questions. Just feel free to call me up when you wanna buy more <laugh>
<Laugh>. I love that. Is there a more or a cheaper way to do it, essentially? I love that. Because here’s the thing, and I know some people are probably thinking this right now, is property managers, if there’s an expense that comes in, they add their fee on top of that, right? And, and I think, I think that’s fair. People ask me that about, oh, do you know they added 10% to the cost of that? And I go, well, yeah, they actually have to pay somebody in the office to take those calls to get bids. So let’s say it’s a, the HVAC system is out. Sure. They’re gonna have to hire somebody to make those calls and get somebody over to the house and there’s coordinating, gotta get in with the tenant. And so some people fear that the first thing the property manager is gonna say is, oh yeah, let’s replace the entire HVAC unit because they’re gonna be able to add their 10% on top of that cost. And there are a lot of people out there doing that. And so I love what you said is just, hey, is there a better solution that’s cheaper? Maybe we don’t have to replace the entire thing. And it’s also letting the person know that you’re working with like, Hey, I’m, I’m kind of checking you and I actually care about my budget.
Yeah. Yeah. Perfect example is, we had a, a water heater that was on the blink. We, you know, those things, you wanna pay holes in drywall, we’ll get to when we get to it, but a water heater, heat ac, we, we get to right away, right? And it was a bad thermocoupler in the, in the water heater. So that’s an easy fix. And it, it wasn’t old enough that the whole unit should have, should have busted, you know, broken down. So those are things that you do that we would do for our brothers and sisters. And same thing, a lot of my investors become friends over the years, right? You wanna take care of ’em and they refer you business and it’s real easy.
So perfect. Okay. The next one is, how do I not be annoying? Now this one is kind of funny because
You have some Karens that ask this question. No, <laugh>, I
Just kidding. I know, I obviously, somebody’s a people pleaser and they’re just like worried about being annoying. No, literally they’re like, you know, is, is reaching out to my property manager once a week too much? Is that annoying? Mm-Hmm
<Affirmative>. Well if there’s nothing to talk about Yeah. Because there’s nothing to talk about, right? A perfect example though is I have a new client, I think he referred him to me, his name is Adam and he’s, I wanna say Northern California, Boise, something like that. Maybe you moved to Idaho from California. Anyway, he’s like, Hey listen, I want to get to six properties, but my wife and I are starting with one. I go, great, you’re very excited. Why? You’re talking to me. Very excited. Why? He’s like, I just have never done this. I’ve, I’ve been involved in the industry, I’ve never done this. And I said, oh, okay, it’s got four walls and a kitchen and a bath. That’s not, it’s like a <laugh>. It’s not that hard. He’s like, well I know, but you know, so I may ask you, and this is kind of a nice thing they said to me, they go, I may ask you silly questions.
There’s no silly questions, but it’s gonna make him a better investor. So feel free, I get to emails within 24 hours and I get to text right away and feel free to FaceTime me or whatever you need to do. If you’re cool about it, that’s fine. It’s just, many times our investors don’t have a lot of questions because we, like I say, we do new roofs, new h vvcs, there’s not a lot of expenses that you’re gonna incur with us. ’cause We do a full turnkey, it’s kinda like when the inspection comes back, there’s nothing we negotiate. All of it should be done by us. We don’t negotiate all that stuff ’cause it’s turnkey. So that’s kinda what I feel. That seems like a good experience for your clients, right? I mean, so you do that and they’re like, wow, that was easy <laugh>. I’m like, it’s supposed to be <laugh>.
Right? Right. That’s, that’s the idea. That’s the goal. Yeah. You know, and, and the way the systems are set up is, again, going back to your subway example, which I, a I loved that example is, you know, there’s online portals for this reason. People can log into their portal and they can communicate, they can see when the, the tenant paid the rent. If there was a work order that was in there, you can see it all in there. I went seven years without talking to one of my property managers.
Ooh, okay,
There you go. And yeah, and people are like, what? And I’m like, it wasn’t that I didn’t know what was going on. I saw everything in the portal. There wasn’t a reason to call them up and, and be like, Hey, explain this to me. The information was there, so it was right. And we had a tenant for seven years also, which by the way was amazing, right? So win, win, win. So, okay.
Here’s a, here’s another thing before you get to the next question too, is I many times am able to acquire my homes ’cause I like to buy and rehab and re-rent. I buy them from lazy property managers. Okay? What a lazy property manager does, and I hope this wasn’t your seven year experience, is they don’t raise rents at all. Okay? They’re like, oh, you know, Bonnie or Joan or whatever is just doing a great, she’s a little bit older so we don’t raise rents on her. And meanwhile the investors taxes are going up, right? And that, and, and eventually trees need to be trimmed, right? They grow every year. And so all of a sudden the expenses are going up, taxes are going up and the lazy property manager doesn’t raise the rents. So then they call me up and say, Hey Michael, I know you’re in town.
This thing is only making me x it’s worth y can you take it off my hands? I’m like, sure. I go in, I, I put some new stuff in there, I charge market rent and all of a sudden I can make a profit off that because of a lazy landlord. That’s not what you want. Okay? So we start everyone off of the two year lease and we always increase the rent between year one, year two. We just want our tenants to be conditioned that that’s what you do. We raise rent and we also do a great job with service. So as long as that landlord or that property management company knows that and believes in that, you’ll, you’ll get that if they own doors because taxes do go up. Like that’s how life works. So make sure you get that, hopefully you had a good experience and they raise rents. And every now and again, we’ll have conversations with these folks that says, Hey, you know what? I know the rent’s going up a hundred dollars or $200. Hey, we’d really, really appreciate a new screen door. Okay, well so I said I, let me ask the owner and then I asked the owner, I say, well, you split it with ’em. I’m like, sure. Those are the types of things that we do. Everyone win, everyone feels they won.
I love that so much. And the example of a, a lazy property manager. Yeah, I have another property manager that literally, I think I, I told this on a podcast a while ago, but the property manager literally sent me a message and they’re like, Hey, we need to replace the window in the laundry room. I’m like, why? What happened to the window? It was a brand new window was last time I checked, right? And they go, well, I don’t know, it’s broken. I go, well why, how did it break? This is important to know. So then they call me back and they go, oh, the tenant’s son threw a baseball. And the baseball went through the window. And I go, why are you reaching out to me? Why is it my problem <laugh> dude, it’s not my cost. Yeah. I’m like, why don’t you collect the money from the tenant? And they go, oh well yeah, I guess so. I’m like, what? Come on, right? Help me out. Yeah.
Then you feel, then you feel, maybe I should, then you take your hat and you turn it backwards and you’re like, ah, let me review some of my expenses here. Did they not know that this is tenant damage? You know, so Yeah.
Right, right. So it’s, it’s asking, not do not be afraid to ask your property manager those questions because if it is, yeah, I love it. Even if there’s a plumbing issue, put it back on the tenant if it was something that they did and if they caused it like directly and they can, and a plumber can prove, hey, your kid’s toys down the toilet, that is their cost. And a good property manager will do that for you.
That’s also why we don’t really need to give a whole lot of security deposits back because we document, document, document and we’re like, well you can’t do this, gotta do this cleaning fee that whatever. We’re in a very, very landlord friendly states. Our evictions are 45 days and $500. I mean, so it’s very, very landlord friendly. So I’m like, why would you spend 10,000 when you could get a, a good rate of return and spend 500? These landlord friendly states make a lot of sense to me, but it’s kind of what I know. Sure.
Next question we’re Yes ma’am. Gosh, we, we only have two more left. Okay, let’s go. So what are the red flags that tell you that a property manager is dropping the ball?
Good question. Question. Red flags would be lack of communication. I get frustrated, people come to me all the time and they’re like, and what happens is property management companies are very difficult to scale. Okay? Really what happens, they start hiring staff when things start breaking down very few times are they proactive? Okay, so, hey, you know, I’ve asked, I’ve had sent four unreturned emails and I still can’t get an answer to why the window was broken in the basement or whatever you’re, you know what I mean? These are clues. So if they’re not returning emails, they’re not getting bids back. They can’t be proactive and replacing furnace filters. They just have too many doors and not enough staff. Okay? So that’s fine. I don’t think people are malicious at all. They just, for whatever reason, they got overwhelmed. Okay? So that’s a clue. Number one is lack of communication.
Number two would be the time between a turn probably won’t experience, hopefully a lot of turns. But a turn should not take two months or three months between tenants. We’ll give you a bid within a week because the turn might be x, you gotta paint it or you know, whatever it is to turn the property, right? So you turn it, you fund it, and it should be back on the market very, very quickly. We cross rent everything. So as soon as we have good pictures, we can go from there. So if it’s taking too long to turn what’s going on. I’ve had somebody one time they tested their property management company out with a separate email address and they said they were interested in the property and they put in a lead that they wanted to rent it from a different email address and they never got called.
That’s bad. I’m like, they’re just too busy. That’s why we’re very organic. We actually, my whole goal personally was to have a bunch of properties that require very little maintenance that are super simple to manage. So I only manage properties that I have rehab. I don’t even advertise, I just do that. I mean, maybe every now and again you come to me and I’ll, I’ll evaluate maybe one of yours, but, but otherwise it’s just my stuff because I want a great life. So I don’t wanna manage someone else’s headaches. So I know if I have easy, fully rehab properties or it’s a cinch to manage. So that’s what I do. But people just take everything with a vowel in it and they just get overwhelmed.
The last one. Yes. Now this comes from somebody who recently had a very not so great property management experience. And so their question was, how do I protect myself from being taken advantage of when I’m not there in the area? Is there something that I should have done? Or basically they said what systems or checks or habits or something I can put into place so that I can sleep at night knowing things are being handled. So basically they felt taken advantage of. They were actually, it was, it was an unfortunate situation with the property management company. Now they’re a little bit nervous. So that’s where that question’s coming from.
If you’ve got a feeling in your gut that that’s not right, that’s a clue. There are plenty of property managers around, right? If there’s not a match, there’s not a match for whatever reason. And so no one really wants the bad press, I hope, right? I’m gonna go complain on whatever website you wanna complain on. Just say, Hey, you know what, evaluate, do a better. I would say this, if you were my sister, right? Do a better job of evaluating, here’s the three prospects. The other property management companies, I’m looking for me personally, I don’t go with the biggest one because you run into those systems. ’cause They have overhead, they have, those are great. But if you have a hundred doors, if you only have one or four, you’re a, you’re tiny man. So, or start with a provider like me. ’cause I, you know, we, we don’t grow that big. We wanna go organic, ask those three providers these questions and leverage someone like you. You’re in those areas. You have more than one provider. You have more than one property manager in the area. So leverage someone like you, I would say go from there. Borrow from other people’s experience. So that’s not that hard to do. Find someone with more experience than you. Poor business owners in the world. Yeah. But it also happens when they get too big. So it’s, it’s that sweet spot. It’s difficult to find. So stay,
I was gonna say that. Yeah, nimble, pretty small. The growth pains can hit all around. We’re all trying to build a business. I’m an investor, my portfolio is a business. Property managers or providers or whoever, all these people, they’re growing a business as well. You gotta be educated, you gotta be prepared, you gotta have some risk. You gotta have a little bit of thick skin. And when something goes wrong, the most successful investors I know are the ones who take it as a learning tool. And they go, how can I learn from that? Well then guess what, the next property I buy, I’m gonna ask this question specifically. ’cause I got burned on that <laugh>. So now I know I’m not gonna let that happen again. I wanna, you know, like what you said earlier, I don’t want a two year lease so that it expires in December. I’m gonna ask my property manager, can you please sign an 18 month lease? You know, let’s be proactive here. Instead of pointing fingers and being so angry at that property manager. Let’s stay, let’s keep our mind sharp and continue education. Right?
I like it, I like it, I like it. And for those of your clients who say, you know what, I like it, but I still wanna fly out and see it. I always offer this to people that, you know, I always say, as long as you’re not wasting your time, I’m not wasting mine. I will actually buy folks plane ticket and come on out. You know, make sure you’re pre-approved so you can make your, you know, useful time. Not just kick tires and be like, hey, this is six or seven or 10 houses to look, choose from. These are six or seven houses that we’re rehabbing. This is our city, these are our professional sports teams. We have professional basketball, we have professional football, we have this, we’re the 13th, largest city in the United States. And then we go from there and you get, you drive around the truck, you have a meal with us, you, you meet our family and then leave your checkbook at home.
Say, Hey, that was a good experience, Michael, I have questions on these four properties. I’m gonna pick up the two best. Is this one leased yet? I go, you know what? It funny you ask, see my daughter and I actually do the leasing together. She’s the manager and I kind of oversee things. So I said, you know, my daughter Vienna just nailed a fantastic tenant. I love it. And here’s why. They’ve been a firefighter for years. They’re married to the lady who works at the post office or you know, something like that. That’s great, right? That’s the story. Let’s go. If you don’t want it, let me know. It’s easy. So those are the types of things you can do.
I love that. Perfect. Yeah. Michael, thank you so much for being here today. You’re welcome. And sharing so much wisdom. And I know this has helped take a lot of the mystery and the stress out of outta state investing for so many people listening. So, and if those of you who are tuning in, if today’s conversation got you thinking about Indianapolis, or if you’re feeling curious, what would look like to work with Michael and his team, reach out to me or somebody on my team. The show notes are going to be filled with contacts. So take advantage of that. That’s what we’re here for, to open up the Rolodex, so to speak. And again, that’s aging me now, Michael <laugh>
Rolodex. There you go. People
Are, people are gonna go, what is a Rolodex? But that’s what we do. I’ve got a big fat Rolodex and I am there to help connect you with the right people, the right systems, and the right support so that you can do this confidently and successfully. So until next time, thanks for listening. And remember, you do not have to do this alone. So thank you again, Michael.
Thank You Melissa.
That is it for today’s episode with Melissa and Michael. If you haven’t subscribed to the show again, remember to do so, help us share the show with your friends and family. Remember to leave us A rating review, and we will see you soon for another episode on the Passive Real Estate Investing Show. Thank you.
Download your FREE copy of: The Ultimate Guide to Passive Real Estate Investing.
Get your FREE coffee mug by leaving us a Rating and Review on iTunes. Here’s how.
See our available Turnkey Cash-Flow Rental Properties.
Please give us a RATING & REVIEW (Thank you!)