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is it better to buy more expensive higher quality rentals, or less expensive rentals?

10/28/2020

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I have been toying with this question in my head lately. Is it better to buy a greater number of cheaper rentals? Or is it better to own a fewer number of high quality rentals. Basically there are a few ways to dissect this it could be either buying in B class areas vs C Class areas or just buying higher yielding more expensive rentals in the same area. I'll start with the B Class vs C Class. 

More C Class Properties Vs Fewer B Class Properties

So what are the pros of each?

Less B Class Properties Pros: 
  • Better area = less risk (higher credit scores, better incomes, less crime, area is better kept and local economy is more attractive). 
  • When there is an economic down fall A class moves to B class usually while C class jobs are affected more. 
  • Having fewer properties ='s less maintenance issues, fewer roofs, fewer furnaces to upkeep or replace. Less work and money for owner. 
  • More desirable area to live = easier to fill vacancy, higher rents. 
More C Class Properties:
  • Cheaper Acquisition price allows you to purchase more properties quicker
  • More properties can reduce risk if one is taken out by damage from a storm or fire you have a higher number of properties to cushion that blow. 
  • Vacancy is felt less when you have a higher number of properties. 

The Numbers

I'm going to be talking about two properties these are based off real properties that I analyzed in the market. 

- Property B - is in a nice B class area, with a booming local economy, high rents, stable tenant base, and low crime. 3/1 row home 1200 sqft. 
-Property C - is in a seedier area, there is less commercial activity, the businesses are not kept up as well, the prices are cheaper. 3/1 row home 1200sqft. 

Luckily in Philly it's really easy to compare like homes because most of them are 3/1 row homes. 

I will be writing this as if we are buying it as an investment property so 15% and 10k for closing costs which is pretty close for philly. 

Property B - 3/1 row home 1200 sqft

Price - 200k 
Down payment of 15% - 30k
Closing Costs - 10k
Renovations 12k
Rent 1800/mo
Mortgage Payment - 1061
Cash Flow - 739

Total out of pocket + reno cost = 52k

Property C - 
3/1 row home 1200 sqft

Price - 130k
Down Payment of 15% - 19,500
Closing Costs - 10k 
Renovations - Already Fixed Up
Rent - 1300/mo
Mortgage Payment - 694
Cash Flow - 606


So the numbers work out to be pretty close for cashflow. So it is really a quality of area and risk choice. Property C was actually a property I tried buying myself but was short on reserves and didn't end up getting it. When riots erupted this summer that area was in the heart of them so the risk is not negligible. 

Also in B class areas you get more appreciation which can help you when you get HELOC's or Refi and can balance out the high acquisition costs. 

Buying 5 high rent properties vs 10 lower rent properties in the same area!

So in this scenario we will be analyzing whether it's better to own a fewer number of more expensive higher rent properties or a higher number of lower rent properties in the same area. 

Property 1: 4 bed 1 bath- 1800 sqft home
Price - 237k
Down Payment of 15% - 35,550
Renovations -3K 
Closing Costs - 10k 
Rent - 2200/mo

Mortgage Payment - 1294
Cash Flow - 906

Out of Pocket expenses: 48,500

If we owned 5 of these:

Out of pocket expenses: 242,500
Cashflow: $4530


Property 2: 3 Bed/1 bath row home
Price - 200k 
Down payment of 15% - 30k
Closing Costs - 10k
Renovations 12k
Rent 1800/mo
Mortgage Payment - 1061
Cash Flow - 739
Out Of Pocket Expenses 52,000

​If we owned 10 of these:

Out of Pocket Expenses: 520,000
Cashflow: $7390


I'm actually really surprised that when I wrote the numbers out that property two was more expensive that property 1. So in this case I think it's a clear winner that property 1 is the winner. This is not always the case though but you have to weigh your options. I think buying the fewer bigger properties that can yield higher rents and eventually have fewer maintenance issues because you own fewer properties is the way to go. 
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Don't Wait to Buy Real estate Buy Real Estate and Wait....

10/21/2020

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Whenever I read the quote "Don't Wait to Buy Real Estate, Buy Real Estate and Wait.." I always thought it just meant that your home appreciates over time. But what else does that quote mean? What other benefits do you unlock from owning real estate overtime?
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Options

Why I love buy and hold real estate is because it gives you OPTIONS and I try to emphasize that whenever I can. If you do not own any assets and you just have cash in the bank then your option is to purchase something (if you have a ton of cash then you have options).. But if you are like most of us we don't have millions in the bank. Real estate unlocks cash for us.

​ Through OWNING real estate you may forget that your home is appreciating (hopefully barring some event). You may wake up one day and check what prices are going for on your street to find your home has appreciated 70,000 since you bought it (this can happen in a few years depending on where you live). That 70k in equity is now yours to play with. You could do a cash out refinance on your home and pull that cash out up to 80% LTV (Loan to Value). 

Meaning: 

Joe bought his property at 200k.
It's now worth 270k.
He owes 189k

270k x 80% = 216,000 - 189k = 27,000 that Joe can pull out. Joe's new loan would be higher than the original, change his payment, and mortgage closing costs would be charged. 

This money can be used to buy a new investment property which will create more OPTIONS for Joe. 

Or a HELOC can be used ... Home Equity Line of Credit. A Heloc lets you use that 27k as a line of credit to borrow against. You can use all 27k and will pay the back bank at generally higher interest rate than a mortgage. This is something that can be used over and over again as long as you keep paying it back. 
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Lowering Your payment


​If you have owned real estate since the height of the high interest rates in the 80's than this applies. Interest rates have generally been falling year over year for the last 30 years. There have been some spikes in some years but the trend has been downward and it benefits people who own real estate! (and can hurt traditional investors). When interest rates lower money is cheaper to borrow. Traditional IRA and Mutual fund investors get less of a return on their investment. 

Real estate investors can refinance their loan and get a lower payment on their property.  

2 things I have done or am doing: 

One property we refinanced from a 4.75 to a 3.75 heightened the payment around 150 a month but knocked 10 years off of the mortgage. The overall savings were around 170k over the 30 years of the mortgage. 

Another property I just got approved for a new loan that will allow me to take advantage of the low interest rates. I had a 3.75% and will be dropping to a 2.625% and upping the mortgage from a 27 year back to 30 year. This will drop my payment $198 / mo upping my cashflow $198/mo or $2376/yr. Upping my money I can reinvest in that property!!!
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Getting Rid of PMI


​PMI is Private Mortgage Insurance that you pay when you put down less than a 20% down payment on a property. We generally do 5% down payments and add value (fix up) the property which usually brings our equity in the property up to at least 20%. We also live in Philadelphia which has been appreciating really well adding the equity we have in the home. 

So the one homes we pay $63/mo in PMI on the loan since we didn't have much equity in the property when we refinanced. Since then we have redone the kitchen and bathroom and comps in the area have gone up considerably. Now I can have the property reappraised which will cost $475. The property will most likely (knock on wood) appraise to show we have 20% equity in the property now and we can drop the $63/mo or $756/yr PMI. Over the 18 years left on the loan that's $13,608 in savings! 
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Equity and Appreciation 


Most of the benefits I mentioned before were side affects of improving the property condition and APPRECIATION! I do not buy for appreciation but it is a great side effect of owning real estate.

When I bought a few years back I was told the market was high, but I didn't care because I plan on holding these properties forever. To buy the same properties today I would be paying around 60k more. The Philadelphia market over the past few years along with most of the nation has enjoyed a generous appreciation. This appreciation increases the value of your property and thus how much equity you have in the property. 

If you bought a property for: 

200k and put down 5% your loan is = 190k

Your market value was 200k when you bought it and your loan is for 190,000. 

If that property is worth 270,000 today then you have:

270,000 - 190,000 = 80k in equity. 


The benefits of buy and hold real estate keep on giving the longer you own it. We have only owned ours for a short period of time however I keep finding new benefits every year. Of course I find new maintenance problems every year too but to me the pros outweigh the cons. Everyones goals are different but for me buy and hold real estate provides the best returns!
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What if we did one thing well?

10/7/2020

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What if you did one thing well?


With life today, opportunities seems to pop up everyday. Especially on social media. Stocks, bitcoin, drop shipping businesses, real estate, side hustles. It’s hard to focus on one thing because when the market takes a huge dump and I see stocks drop a huge amount in like "this is the time to get in I could make thousands I will just have to do a little research and some money". Or a side business opportunity comes up and I think of diverting my attention there. 


The people that I know are successful a few things well and are strict about what they do. The CEO of the How Group: Gary Jonas does builds 50 unit buildings mostly in Philadelphia. He has plenty of opportunities brought to him all the time for other projects but the how group is an expert in that. Which is why they have 750+ units today and are growing!


One multifamily investors I have tried to find deals for had a strict criteria and whenever I brought something outside the criteria would just say it’s not in my criteria I’m not going to entertain it. He has 70+ units and manages them well!


To the outside it seems short sighted. Why don’t you try new things, are you afraid to expand leave your comfort zone? But to the person on the inside they are clear on their goals and their vision to get there. 


For me the goal is a clear number of passive income and the vehicle is real estate. However real estate is a large field: commercial, Airbnb, wholesaling, flipping, etc.... should I do the construction myself it saves me money but it dilutes my focus and weakens my visions, drive, and opportunities elsewhere. I decided to focus on long term buy and hold rentals this could be single family or multi-family investments but the premise is the same. I am not doing flipping, wholesaling, etc... I am buy properties I can see myself owning for the rest of my life and pursuing the BRRR strategy next to help add these assets. 

Buying properties and the BRRR strategy are all driving towards my goal of my monthly passive income number. Not to say the other avenues are not great but they are not for what I am trying to achieve. 


Losing Focus:


My fiancé and I recently renovated my kitchen and bathroom and thought We would do that on a few more houses. We quickly realized while the outcome of the project is awesome It cost us way too much in time. We could have paid a tiler 500$ what took us a week to do. What if we had spent that time networking with people in the multifamily industry about how to scale? I would say that’s worth more than $500. It’s easy to feel the need to do everything but you have to ask yourself the question do I want to be a great tiler or do I want to be great at real estate? So we will be hiring out tile from now on!

I will still do little things like painting and landscaping because I know what I'm doing. But the hard stuff that takes a ton of research I am hiring out. 

Block out the need to do everything DEY Mentality - Do Everything Yourself and do one thing well! 


Getting Focused

In addition to this I use the Bigger Pockets 90 day Intention Journal to help me stay clear on my goals. This has been a game changer for me! As someone who is scattered and has 100 things going on a day using this is key. You write down your three big goals for the quarter everyday, what you are thankful for, and your schedule.  I highly recommend using a planner everyday. Another great resource is the book the One Thing by Jay Papasan. This book puts into perspective what is the one thing we need to do each day to get us closer to our goal?

The Breakdown:

Have a clear goal for me : Have X amount of passive income monthly.

The How: I will use long term buy and hold rentals to get there. 

What are my next steps: I need to network with individuals who have accomplished what I want and ask how I can reach that goal. What is the fastest path?




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The DEY Mentality ... Do Everything yourself

9/30/2020

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We have all heard of DIY do it yourself but slowly DIY can turn into DEY..... Do EVERYTHING yourself. Jake and Gino the Multi-family Investors call this the Ima mentality or ima do it myself.

​This article will be talking about how we slowly take on more and more and resist handing off the lower $/hr tasks as we scale. I write this as someone who has spent many nights the last few weeks tiling his own bathroom and drywalling this week. 

When I was buying my first house I met this inspector. He was telling me he used to build houses and he even designed several of them himself. In my head "you were a developer why are you here"? I asked "so why aren't you still building homes". His reply: "I felt like I had to do everything in my business - I managed my guys, ordered the supplies, and did even the payroll myself". Hearing him say that really stuck with me and scared me. 

That stuck with me for some reason maybe because I always grew up with this mentality of if you can do it than you SHOULD do it. Whether it's about saving money or just a pride thing. You can get away with everything for awhile: doing the accounting, doing all of the work yourself, doing your job, trying to educate yourself etc... At a point things the hats you are wearing start to thin out because you're tired from doing everything and you start to weaken in those roles. 

Some peaks and valleys I have hit: 

Running my landscaping company out of college - it was a new company but I was working from 5am - 10pm everyday and extremely tired. For many reasons I decided to give it up. Part of which was having time to educate myself. I took a corporate job and everyday I spent 5-8 hrs listening to real estate podcasts and reading books when I had free time and hit my goal of being full time in real estate (this took 2.5 years not overnight)! My partner ended up going into sales and killing it. We make calls and drive around now, not moving thousand of pounds of dirt everyday much better!

Feeling like I needed to learn and do everything on my properties - I had a dryer break so I went on YouTube spent a few hours learning to fix it. I went to Home Depot bought supplies. Spent 2 hours trying to fix it . I eventually couldn't figure it out and had to call someone to fix it which he did in 20 minutes and charged me $250. I wasted so much of my time on a task I do not want to be good at.

It was a huge learning experience and after that I call people when I need mechanical things fixed or even if it's something I know I haven't fixed before. 

Be clear with what you want to be! I want to be a successful real estate investor, not a dryer mechanic or an accountant (which is why I pay an accountant). 

I did a few large projects this year my kitchen and bathroom and have learned quickly what I do not want to do again. I found myself pulling late nights tiling my kitchen and bathroom with my Fiancé ourselves. I could have done the easy work of putting the mason board down and just called someone to do the tile (which took me days). But I had done tiling before and knew enough to get myself into trouble. 

Business is a lot of learning what you shouldn't be doing and delegating that out or as my boss Jesse would say "delegate and elevate". It is a scary thing because your first thing you think is "I don't have the money to delegate". But when you do delegate it out you use that time more effectively and usually end up making more money at your job or on an investment. 

What 15-20$ / hr tasks are you doing that you could delegate in your business?

What do you hate doing in your business that you feel you have to do?

What is something you would like to do more like reading or network but you don't have the time because tasks you should probably not be doing get in the way?

What are you going to do to elevate your business?
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Renting your own property? what you need to know!

9/23/2020

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Disclaimer: I am not a lawyer or city official. Know your cities laws for rentals and Fair Housing Laws. Every county is different so know your own laws!

So you are renting your own property out! You probably have some questions:

Where do I find tenants?
How do I screen tenants?
Do I pay to screen them?
How far in advance should I list my rental?


All these questions and more will be answered! It is important to avoid certain pitfalls when renting your property out and this will cover those as well. I list my rental myself,  professionally lease for landlords, and the company I work for as well on their 50 unit buildings.  

First things first you should have a rental license (at least in Philadelphia) if you are renting your property out. Check your local requirements!

The Process - The company I work for and I list our rentals 2 months in advance. If the property is going to be vacant in June list it in April and start getting tours in. Between screening and showings it usually takes 2 months to get a good tenant in. 

Where to list:

When I list my own rental I list on Facebook Marketplace, Zillow (still free in Pennsylvania), and Craigslist. Zillow started charging however not for PA. Zillow also will out put your property on to Hotpads and Trulia. 

Advertising Your Property:  
So I'm sure most people do not set out to discriminate but I have seen a lot of Facebook rental postings say : "looking for a young professional to move in". There should be no mention of what type of person you are looking for. It should be solely off the application. I will get back to this later. 

In Philadelphia all of these categories are illegal to discriminate against:


(The Following was taken from The City of Philadelphia Website: )
In Philadelphia, it is illegal for landlords to discriminate against tenants because of their: 
  • Race 
  • Ethnicity
  • Color
  • Sex
  • Sexual orientation
  • Gender identity
  • Religion
  • National origin
  • Ancestry
  • Disability
  • Marital status
  • Age
  • Source of income
  • Familial status
  • Domestic or sexual violence victim status
Landlords cannot do any of the following if it is based on any of the previous categories:
  • Refuse to rent housing
  • Make housing unavailable
  • Set different terms, conditions or privileges in the lease
  • Refuse to make reasonable accommodations/modifications
  • Otherwise discriminate


So You Have Leads Now What?

You have 50 leads in your inbox now what? What I would do is call down the list and set a 1 hour slot for everyone to come, but give them a specific time do not call it an open house. When people have an appointment for 3pm they are more likely to show up. 

For example: 

Me: Hi Jim I have a tour slot left to see the rental this Thursday at 3pm?
Jim: I can't make that is there any other time? 
Me: No sorry I'm booked up the rest of the week.
Jim: Ok I'll make it work.

People are flakey so keeping your tours to one hr a week will save you a ton of time. What it also does is when a ton (10) people show up to a property at once it creates a sense of urgency and people want what people want so it rents quicker. 

When touring people avoid this!

People will ask you what are the demographics of the area? Or are there a lot of families around here? Are there a lot of young people in this area? Is this a safe area? You cannot answer these questions. Just say I legally cannot speak to the demographics or safety but you are free to look up the crime statistics! 

Also do not steer people! Steering is pushing people to other areas based on race, religion, or other characteristics. Ie: I have a rental in this part of town you might like better because you're older and it's quieter there. 


Congrats the open house "appointments" went well you have people who want to apply! So what's your application process?

Here is mine -  I have a paper application that everyone over the age of 18 will fill out and put your job and salary info. I will need paystubs as well. In addition to that I will send a link for the credit and background check through TransUnion SmartMove it will be $40.00 per application over 18. 

One of my colleagues uses this criteria to screen and I use it now as well:

Qualification Standards:

- Gross income must be 3.0x monthly rent or more.  Income verified.  
- Reliable rental history w/ current and previous landlord contact information provided, if applicable
- 580+ credit score
- No collections, foreclosure or bankruptcy in the past 3 years.
- No history of violent crimes, felonies or any crime relating to minors.

It is so important to have a set screening criteria before you start the process. If you lower your standards throughout the process you have to go back and notify everyone. This could open you up to discrimination issues if you told someone one set of criteria and someone else something different. Be clear and no your standards!

Now you found somebody you like! I require one months rent as a security deposit, and first months rent upfront (this is negotiable). I will not take the unit off the market until the security deposit is received. 

For everything of how to operate as a landlord ie: collection rent, book keeping, leases and other docs check out: The Automated Landlord Article

Other Scenarios:

Pets: If you choose to rent to people with pets you will have a pool of people that can't go to other places and this will give you an advantage. Plus you can charge a $25-50 pet rent and a 300-500$ non refundable pet fee. Check with your insurance company on what pets they allow and breeds when it comes to dogs. 

I do not allow pets but someone has a helping dog that's a Pitbull mix and my insurance company doesn't allow Pitbulls. I'm not an insurance agent and this is not a plug but State Farm has no breed restrictions. I do not use them but if I were in this scenario I would go there. 

​Philadelphia and Surrounding Areas Listen Up!

If you are renting to a family with children and your home was built prior to 1978 you need to know this... The following was taken from the City Of Philadelphia Website:

Philadelphia Lead Paint Disclosure and Certification Law
  • In 2012, the Philadelphia City Code was amended to include the Philadelphia Lead Paint Disclosure and Certification Law.  Currently, the law requires owners of properties built before 1978 and rented to children 6 years or younger to provide the tenant with certification prepared by a dust wipe technician stating that the property is either lead safe or lead-free.  Beginning October 1, 2020, landlords will be required to test and certify rental properties as lead-safe or lead-free, regardless of a child’s age, in order to:
    • Execute a new or renewed lease or
    • Receive or renew a rental license.








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The Financial Freedom train - 4 steps to financial freedom.

8/25/2020

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 The financial freedom train is all about getting to financial freedom. This is just one way to do it but I think the over arching path is how most people get there. I best heard financial freedom explained by Thach Nguyen as: "What age do you want to have the option to work in life?" You may be doing this because you hate your job and want to get out. You may also love your job but goals change and down the road you may want to travel 2 months out of the year, be a stay at home dad/mom, or want stability if there was a job loss. I think the best part of financial freedom is the piece of mind that comes from knowing you are financial stable enough to weather a job loss, large unexpected expense, going on more vacations, and the opportunity to spend more time with family!

The Financial Freedom Train!

Step 1: The Roadmap


Where are we going and how are we going to get there? In my financial freedom model I choose real estate as a vehicle to build my wealth but that is just one way. You can choose a less active path such as mutual funds and other means. I choose real estate because I think it is the quickest/largest net worth builder and I do not mind the work that comes with it. 

How much money do you need? What if you find you want 10,000 in passive income a month? Let's build this out using rentals from my area:

House rents for 2000.

So if this rental was paid off it would cashflow 2000 - 266(taxes) and 100 (insurance) = 1634. 

$10,000/1634 = 6.11


So we need 6 or 7 paid off rentals to get to that goal.

So we buy our 6 or 7 rentals that cashflow atleast 400/mo * 6 = 2400/mo.

We dump that 2400/mo into one house + if we want to add more until it's paid off then we unlock that 1634 of more cashflow and start paying off the next rental. It's like dominoes with cashflow at the end. 

2. Budgeting and Saving 

It's not what you earn it's what you keep!!! There are a lot of people out there making 80-100k but they rack up debt quickly. It is key to keep your expense low throughout your journey. What sounds better the oppurtunity to vacation for a few months one day or a car payment today. I wrote a post on how to save huge amounts of money 

www.callphillyhome.com/home-buyer-education/saving-money-in-your-20s-and-30s this will tell you everything you need to know!

3. Increasing Your Income

This can be a difficult one and you may have to be creative. I was at a corporate job that I hated and increasing your corporate salary could take years. Should I get my MBA, spend 2 years of my nights and weekends + 50000 with interest so I can earn 10,000 more once I'm done? That didn't make sense to me.

I had been interested in real estate for years and a few peers even at my corporate job said I should get my license so I did. I worked from 3 months spent 500-700$ and got my real estate license. I began working nights and weekends besides my w2 job which was 10-12 hr days. The days were long but my real estate job gave me life again. I began earning more money that I could save up for my third real estate deal. 

I ended up quitting my W2 job to pursue real estate full time. Which I could only do because I was saving up for a 3rd real estate deal which now became my cushion until I could replace my income. 

So side effects of pursuing financial freedom I'm now doing a job I am passionate about and had the money to jump ship because I was saving for my 3rd real estate deal. Changing jobs was the biggest shift for me. I went from working 10 hr days in something I didn't like + 1.5 hr commute to working where I wanted, in a great company that feels like a family, doing what I love everyday. 

Once you increase your income make sure to keep your expense low! You maybe able to take your foot off the gas with the little stuff but do not go out and buy something big now that you have done the work. 

4. Putting Money on the Train! 


So you have made your road map, you saved, you boosted your income and kept your expense low! Now after months of saving a consistent amount of money you have a lot of money in your savings account. When I get to this point I invest the money in real estate. Real estate is great for me because it is not liquid aka I cannot take my money quick if I want to buy something I probably do not need. The way I think of it is taking my saving putting it on the financial freedom train (real estate deal) that will appreciate, cashflow, and depreciate my taxes. 

When you have a lot of money in your savings not in a deal or mutual fund you start thinking of things you could buy. They may be practical too like : I should buy a truck for 25k I do a lot of work on my homes this would help. But that money could be in a real estate deal helping you take back your freedom and you can get the supplies delivered from Home Depot for a low fee. 

These are basically the four steps you will be told if you read any of the books out there. The goal is buying back your freedom and security. If you don't like your job this could give you the freedom to pursue that side business you have been working on or spend more time with your family.

It is not an easy journey but it is very possible so why not try?

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What's new with New construction?

7/29/2020

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Do you ever wonder about what has changed about houses over the last few years? What are the new cutting edge things happening with new construction? When I started working with new construction I was amazed at some of the new features! If you work in the industry some of this will be things you have already seen for awhile but many have not. Here is your inside look at the what's new with new construction! First we will start with taking a look at Philadelphia's newest home: The Ironworks!
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The Ironworks In Northern Liberties

Click play above to see The Ironworks Slideshow!
The Ironworks is Northern Liberties newest home! With studio, 1 bedrooms, and 2 bedrooms. So what is new with the newest home in Philly?
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​Latch Systems Bluetooth Locks

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https://www.latch.com/m-series
This is something I have never seen before until working on The Ironworks Project. Bluetooth locks.....THE FUTURE..... The locks connect to your phone so you can unlock your door from your phone, no more fumbling with keys. That's great right? I think the real benefit to this is you can give someone a temporary code! So if you have a dog walker they can go into your place for the hour and then the code expires. Or if you get groceries delivered you can give the driver a code and get them put away for you while you're out! Never lose another package again!
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The mirror

The Future of fitness ... As gyms have shut down in America I see this becoming a huge new shift in the way we work out, and THE IRONWORKS have it! The Mirror is a one stop shop for fitness. It looks like a normal mirror but once you touch it The Mirror turns on. It has a ton of interactive online fitness classes and takes up minimal space. 
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Dog wash

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https://nextluxury.com/home-design/home-dog-wash-station-ideas/
Our generation is increasingly bringing their four legged friends with them to where they live! The How Group (the company building The Ironworks) says bring them along! They are installing a dogwash room in the new Ironworks building. Instead of going to take your dog to the pet shop in the winter why not go to the first floor of your building. At the Ironworks you can bring 2 pets with no breed restrictions! Did I mention the Ironworks is across the street from a dog park too!
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Shared Rooftop Deck In the works

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In the pre and post war eras people in Philadelphia hung out on stoops and porches. This is how people got to know their neighbors and create the community we love! Now we have shared roof top decks! What I love about all of our roof top decks is they all face Center City and get decked out with beautiful patio furniture! 
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What's new in the industry?
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Pex Systems

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Picture belongs to https://www.finelinehomes.com/pex-plumbing/
If you work with new construction you have probably seen this for awhile but many have not. This is one of my favorite features of new construction builds especially because I do most of the work on my house myself! Pex plumbing is basically plastic plumbing. The Pex system is basically an electrical panel for you water lines. Anything that uses water leads back to this panel and has an individual shutoff! My house was built in 1940 and when I went to redo my kitchen I may have spent 30 minutes trying to shut off the right water line. I NEED THIS!
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More Efficient Ac Systems

So again some of this stuff is 10 years old but many people still don't know about it. 

Bypass/Damper Systems

So a damper system works so that one AC can cool a large house. It cools one zone at a time. Thus if it's day time and you're having people over cool the downstairs then upstairs at night. I'm not an HVAC guy though so I will kick it over to this YouTube video that describes it better. 

Mini Split Air Conditioners

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Picture from https://www.homedepot.com/p/MRCOOL-DIY-Gen-3-18-000-BTU-20-SEER-ENERGY-STAR-Ductless-Mini-Split-Air-Conditioner-Heat-Pump-w-25-ft-Install-Kit-230-Volt-DIY18-HP-230B25/311900321
Mini split air conditioners are great because they can be installed without duct work! This is a great solution and very efficient. They work off remote control or by your phone and are the most efficient system. There is generally one in each living space or bedroom. So if you are in that room turn it on if not turn it off and save electricity! There are DIY friendly kits but this deals with water and electric something I would pay someone to do for sure!
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Working in new construction and seeing the innovations has been eye opening to me. I'm so excited to see what they will come out with next!
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Minding our own business!

7/22/2020

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So many times we put ourselves second. We don't have time to read, exercise, do financial planning, focus on my goals. Most of the time we are minding other people's business instead of our own.... Working 10-12 hours at a job, saying yes to everyones requests, watching 20-40 hours of the new cycle a week. 

Minding Our Companies Business:
A lot of people get caught up in the daily grind of life. 

Wake up at 6:00am 
Get to job 6:30am
Leave Job 4:30-5pm
Get Home 6:00pm
Dinner 
News 
Bed 
Rinse Repeat

This was my schedule for a couple years. Overtime, focusing my free time on how I could improve my companies business, and the news. Does it sound familiar? I remember the one day I was the first one in the office at 6am and stayed until 5pm when I was the last one. I went to get up and my boss said "wait can you help me stuff envelopes?" I was there until 7pm. That was the American thing to do work 13 hour days! ... The promotion never came. Well maybe I could get my online masters degree then I can make an extra 10-15k per year. 

I will write another post on the cost benefit of a masters degree later but for now. 

Average time spent to obtain masters 1.5 to 2 years
Average cost 30,000 - 120,000 ( will go with 30,000)
Most likely 2 hours per day spent 5 days per week.
That is 10 hrs a week  
520 a year 
780 hours over 1.5 years. 

So if our time is worth 25/hr that's 19,500 in lost income and 30,000 for the degree. 
49,500 to make an extra 10-15,000 a year. 

We are in jobs to make money not to go into debt for a new title or slight pay increase! We should be asking ourselves what is the highest and best use of our time! 

Here is the path of minding your own business! Mike has the option to work 12 hour days everyday, but instead realizes he wants to learn about financial freedom and decides to work 9 hour days. Leaving that extra hourly pay on the table and possibly looking like the guy who isn't committed. Mike picks up a real estate book and learns that if he house hacks he can save his rent money. But where can he get the down payment? Mike creates a budget and begins to learn financial planning, a side effect of trying to reach his goal.

A year later Mike is in the same job BUT has bought his first house hack and is living rent free! He is now saving the $1300 a month he was paying in rent. THAT'S A 15,600 RAISE he just gave himself!!! In the first scenario that would have costed 49,500 and 1.5 years of our free time.

Mike has $500 worth of student debt every month and wants to pay it off. Instead of pouring all of his money into his student debt Mike learns he should buy another asset to pay this liability off! So Mike, saving the rent money he wasn't paying buys another house hack! His first house now cash flows $500/mo paying his student debt (except when maintenance issues arise) and still doesn't pay rent at his new house. 

Mike now has 2 assets that will appreciate, gain equity, create passive income, and can have tax benefits!!! This is the point of minding your own business. To many times we get caught up in if "I do well for my W2 company I'll make more money". The point is not to make more money, buy bigger shinier crap and retire in 30 years. The point is to use the money they are giving you as a tool to create freedom for yourself IE: have assets pay your bills, save for rainy days, take stress of money out of your life.

Minding your own business starts with:

Creating time to learn
Educating yourself on your finances (not just paying a financial advisor)
Implementing what you have learned

Minding Other People's Business

I have found that there are two types of people who need help in the world. There are anchors and there are mentees. Anchors are people who you can't help. You have exhausted every option. You have taken the horse to water and the horse won't drink.

There were always people I knew who needed jobs until you told them you had one then it wasn't the right time. Or on the other hand there are addicts, people with mental health issues, and others that you can't help. Not that they are not worth helping but medically or professionally you don't have the resources. These are the people that if you keep thinking you can save will bring you down with them. You have to identify the anchors and let go of their issues and focus on yourself. It is not selfish it's just valuing your time towards people who want to be helped!

Mentees are people who want to be helped! These are the people who just need to be pointed in the right direction and will run there then when they get stuck come back. Take your time back from the people who you can't help, stop saying yes to everything, and invest in yourself and others who you can help!

Minding The Worlds Business!

 I used to spend hours a day watching the news so I could stay "Informed". I usually felt depressed after watching the news. I did not read books and did not use this time to volunteer... I watched a show of peoples opinions. The average American spends 35.5 hours watching tv a week!

35.5 x 52 = 1846 hours / year. 

What if we all volunteered that time or read books. The world would be a much better place than us all watching people scream at each other on the news. Now I'm not saying to bury your head in the sand. If you still want the highlights I suggest NPR's 5 minute daily podcast News Now. It gives you the big stuff you need to know and most of that I don't need to know. 

The point of all of this taking your time back from things that don't matter and investing in yourself and others. Once you take your time back, you invest in yourself! Then once you get to a place of happiness you invest it back into others and the cycle continues! 


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The Automated Landlord!

6/17/2020

 
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Most people avoid rental real estate because they think it is a lot of work. It definitely is more work than mutual fund investing but you have more control and much better returns (in most cases). Like anything real estate is about systems and once you have those systems in place your business can be run from anywhere and EASILY!

The Systems I Use to Run My Business:

Let's Start at the beginning so you just bought your first property and need to rent it out now what? You need to find a tenant how do you do that? You can use a Realtor aka me or you can do it yourself. 

When I Rent My Property Out Here's What I Do:

Put it on Zillow Rental Manager (this is a free service) it will populate it out to Trulia and Hotpads. I also have a lot of luck on Craigslist and Facebook Marketplace. You can join community groups ie: Philadelphia Housing, Manayunk rentals, insert your area....

So now you have 20 leads great do you do 20 separate showings? NO. Hold the house open for an hour or two and let all of them come through at one time. This does two things. It saves your time from running around and creates a vibe that there is a ton of interest in the property and they should get their paper work in to beat out the others. 

What is your application process? Where do you start and how do you make sure you are getting a great tenant?

This is a two step process:

Get a standard paper application that states their job, income history, and past landlords (2 back or more). 

For screening my potential tenants I use a site called Cozy.com. They make it super easy to screen tenants. You set up a listing in Cozy for free and request credit and background checks for that listing. You put in the clients first/last name and email then it sends them a link to apply. It is a $40.00 fee to the applicant which is pretty standard everywhere. This is also great because you do not see the clients personal info like SSN so it removes some liability off your shoulders. 

You Have Got A Tenant!

You have to have a lease for them to sign, pet addendum if they need it, other docs.. Where do you get these docs, do you have them sign them in person, where do you store these documents?

I bought this package from BiggerPockets.com (click bigger pockets for the package). The package was $100.00 included :
  • Residental Lease Agreement
  • Lease Extension
  • Pet Addendum
  • Lease Amendment
  • Application
  • Move-in/Move-out
  • Lease Guaranty
  • Lease Addendum
This is definitely worth it and they have been reviewed by a state specific lawyer before being published. 

So now you have your lease you are ready to sign! What I do is Electronically sign all of my documents this way I don't have to chase down the tenant again to sign in person. Any friction that you have in your business gives your potential tenant time to think about backing out. Everything should be immediately done if possible. 

Esign Softwares I Use:


Free Service: dochub.com the free service allows you up to 5 signatures a month I believe. 

Docusign: I use this one now because I am a Realtor and have to pay for it. I actually prefer using Docusign it's a lot easier than Dochub. For a decent Docusign package you are probably going to pay $25 a month. So I would start with Dochub and if you grow to a lot of units use Docusign. 

Where to store your documents:

You can create a folder on your computer or you can use Google Drive. It is a free service and is super easy to use. 

Collecting Rent:

Do you pick up cash, do you get sent a check in the mail, carrier pigeon? Like I said before any friction in your business is a chance for things to go wrong. IE: You are not getting rent checks and your tenant tells you it was sent but "must have got lost in the mail". Now you have to conduct an investigation. Avoid the hassle and set up electronic payments. I use Venmo and when someone signs the lease it states that "Rent will be paid via Venmo". It is not an option. I have some landlords I work with who use Google Pay or Cashapp. I just use Venmo because I know it and it is a free service. I have never had a problem with this service. 

Accounting:

This is crucial I truly believe if you are running any business you should have a book keeping service and an accountant. For my book keeping I use Quickbooks. I recommend the starter one it's 25$ per month. Which may seem like a lot but if your hourly rate is $25/hr and you waste an hr tracking expenses in excel or looking for receipts than you already paid for it. 

How it Works:

-Have a bank account just for your rental
-Get a debit card
-Link the bank account to your Quickbooks
-Anytime your write a check or swipe your debit card it will populate in Quickbooks ie: "$20.00 spent at Home Depot on this date" then you just mark it as job supplies. 

Your accountant can login at the end of the year and do all the accounting work for you! Also they can write off your depreciation for you which is a large write off!

Maintenance and Repairs:

Things break and go wrong in houses all the time. The first year I owned a rental it was very emotional everything that went wrong was a big deal and I tried to fix it all myself to save money. I would spend money, buy the wrong supplies, and then call someone anyway (and I am very handy). I now have a list of contractors I call when anything goes wrong. If your tenants call you and say "hey the washer broke" you should respond: "ok here is my maintenance persons number set up the appointment and I'll pay the bill". This just took you out of the equation between mediating when someone will be home and your contractors availability. 

Get an electronic lock:

I heard a horror story my one friend drove two hrs away for vacation and got a call from the downstairs tenant: "Water is leaking through the ceiling into my unit". The property was built below the road and it was sewage back flow. The upstairs tenant was on vacation so he had to come all the way back to unlock the door for the maintenance person. If he had an electronic keypad he could have given the code to the maintenance person and let him in.

Also I would find an emergency service that operates all hrs in addition to your maintenance person. Most of them are really expensive but if you are on vacation and you get that call at 11pm your maintenance guy isn't getting there until tomorrow. Have these systems in place before they happen! 

Last Two Tips:

-Automate your bill pay
-Decide on a Standard rent increase every year and have it in the lease at signing. IE: Hey John so your lease is a year long and if you want to review in a year there will be a 3% increase. This incentivizes long leases and is not a surprise if you raise the rent at the end of the year. 

If you have any other tricks you like to use please comment below! The more systems you have in place the easier your life is. Which is what financial freedom is about FREEDOM getting your life back from your job! Don't take on another job automate your business! 





The 4 Lies/Reasons We never get started in business

6/10/2020

 
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There are a lot of reasons we tell ourselves or others tell us of why we shouldn't start our own business or invest in ourselves. Family, friends, colleagues even while they may have your best intentions at heart, a lot of times discourage us from breaking away from the norm. It's ok to take out hundreds of thousands of dollars in student loans (with interest)  is "good". Investing in yourself outside of standard educating is "bad, risky, costly, etc..." I have been lucky to always have supportive family encouraging me, but I have still heard the common criticisms from others.

One of my favorite phrases is: "Free advice can be the worst advice". This doesn't mean if you are networking with individuals in your field and not paying a fee for it the advice is bad. This means, when you mention your idea at a party and your friend/relative/colleague with no experience says that's a bad idea because .....

So this post is about the 4 biggest lies we tell ourselves or others tell us of why not to get started in business. 
1. I Don't Know How to Get Started!

We all know this lie/reason to get started. I still tell it to myself today when I do something new. What would you tell someone if they didn't know how to do something? GOOGLE/YOUTUBE IT (LOUDER FOR THE PEOPLE IN THE BACK). We have been doing this for 20 years and still when we want to start something we let ourselves get stuck and say (I don't know how to do this).

Now in business the waters are a lot murkier depending on what you're trying to do. If Google fails you then you have to seek advice. You need to have a network. I have joined paid real estate groups which just because you pay for them doesn't make them better.  I've messaged dozens of people on instagram who I see doing something I want to do and ask them how. Reading books on the subject and podcasts are a great way also to get advice!

If the task feels big break it down into small chunks and tackle it a task at a time! Don't look at the wall of Getting Started look at the small tasks. 

When you tell yourself I don't know how to get started replace it with I don't feel like getting started!
2. It Didn't Work for Me So You Shouldn't Do It

This was one I heard from someone at a gathering. I was telling him I was interested in pursuing rental real estate. He told me how he invested in this neighborhood (cheap rentals and high crime) and the vast amount of problems he had. His advice "I wish you luck but it was a pain for me". To someone starting out if that was the only opinion you had you would run for the hills. Luckily I had been listening to podcasts and networking so I had a lot of great stories I knew of.

​No matter what the business path is you want to take if you have the ambition I believe you can make it work (if there is a need for your business/product).  Which brings me to my next lie/reason we never get started.
3. The Market is Oversaturated, There is No Need for My Service/Product!

This is the lie I told myself when I started my landscaping company with my business partner. I was in a town where all you saw were landscaping trucks, it honestly felt like hundreds a day.

In my head: (there are so many landscaping companies who needs another one? Why would I be different?)

We quickly found ways to separate ourselves. I was good at creating websites and you know what most companies didn't have? A website! I did a ton of research on YouTube/google on marketing (when I say a ton maybe 5 hrs). I would always get the same response when I answered the phone: "Wow we haven't actually had anyone pickup/return our call".  I grew my business by being responsive to clients and getting quotes out quickly. We eventually became the top 3 recommended companies on Next-door which was huge. 

So the point is there is always going to be a ton of competition in any industry. Most of that competition doesn't pick up their phone, they don't get back to clients within 1hr or even 1 day. If you have ambition and care about your clients you can be the best in your industry. But if you are overselling your clients stuff they do not need and not valuing their time, it's going to comeback and you will be sorted out. 

Be ambitious, be honest, value your clients time and you will succeed!
4. It's Too Hard

I have also been told this when starting out in business by others:

"Hey well it is great you have that passion but you know I have heard that (Insert your idea) is really hard to be in".

Usually this person means well but has no experience in this industry. Or we tell ourselves "I want to get started pursuing this idea but it sounds too hard".

I have heard both and I still tell myself this sometimes when I go to pursue a new idea. You have to switch it to "what are the challenging parts of the process?" Get educated around those parts and they will become less scary. You know what else is hard waking up at 5/6am going to an office for 8-10 hrs a day and doing something because it pays the bills. If you pursue your business idea it may take 12-16 hr days but if it's something you love it will not feel like work and the hours will go down .... eventually.  Being in business for yourself is hard and challenging but so is going to work for someone else.

If you are having trouble getting started with your idea reach out I'm always happy to help where I can! Pursuing your own business is hard but it is so rewarding and all the milestones small and big are things you will never forget!
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    Matt Tallent is a Realtor with The How Group. His passions include rental property investing and helping others achieve their real estate goals.

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All photos courtesy of Anna Gupton @ https://at-a-glimpse.weebly.com​

Real Estate License Held in Pennsylvania with the how group @ compass Re Pennsylvania LLC.

Matt Tallent is a real estate licensee affiliated with Compass RE. Compass RE is a licensed real estate broker and abides by equal housing opportunity laws. All material presented herein is intended for informational purposes only. Information is compiled from sources deemed reliable but is subject to errors, omissions, changes in price, condition, sale, or withdrawal without notice. No statement is made as to accuracy of any description. All measurements and square footages are approximate. This is not intended to solicit property already listed. Nothing herein shall be construed as legal, accounting or other professional advice outside the realm of real estate brokerage.

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