The SFR Show

In this week's nugget of weekend wisdom, Michael Zuber weighs in on when to employ different acquisition strategies. 

---

Transcript

Emil:

Hey everyone welcome back for another episode of The Remote Real Estate Investor. This is one of our weekend wisdom episode. So hope this catches you on an amazing weekend. So in this week's episode is somebody you guys are probably familiar with. If you've been following the show for a while, we have Michael Zuber back on who is the author of one of my favorite real estate investing books called one rental at a time, he also has a YouTube channel by the same name, definitely recommend checking out both of those. If you want to check out if you missed Michael's previous episodes, he was on episode 11 and 37. So go check those out. He's a regular on the show, and we wanted to bring him on for a quick weekend wisdom. So hope you guys enjoy this one.

Theme song:

Emil:

You mentioned doing BRRRR during 2010. Really before it was even BRRRR. I know you've also mentioned you know, if you're a busy professional, like you don't want to tie up a bunch of capital like buying a turnkey can be smarter because you're not having to keep putting a ton of money in. I'm curious if you have, Are there times in the market cycle that you prefer one or the other? Or how do you decide right now I'm going to be I'm going to follow the birth strategy versus right now I think I'm just going to use less capital go turnkey.

Michael Zuber:

So for me personally, or are we talking about your audience? Because we're really different people, right? Your audience is busy professionals. That's probably what you're asking about.

Emil:

Yeah, but I'm curious. Just even from your story, right, you were a busy professional. And at some point, you kind of made the transition. So maybe it was just being comfortable…

Michael Zuber:

When you think about, so buy and hold rental properties is one rental at a time, right, you can get at one rental at a time, basically two different ways. One way is you can buy turnkey properties, which I consider clean, zero make ready, right? Means you buy it, you either have a tenant or you you stick a tenant in no additional dollars out of pocket, just so we can clean up the understanding. I believe in the beginning, when you have yet to build a team when you have yet to really understand the network and all the nuances in any market the right thing to do the least risky thing to do, the fastest thing to do is to do what today is called a turnkey property.

That said, as you gain experience, as you gain units, you as an more experienced investor will have the option to make choices, there will be market cycles, I've been doing this 20 years, and there's been two or three portions of this cycle where bur is just more profitable. The best example was 2010 to 2014 in that market, because it was generally bouncing off the bottom, you still could get yesterday's prices and tomorrow's values. So if you bought a dump, you got yesterday's prices, but once you polish it up, you can get tomorrow's value because there wasn't a great supply of them. That was such a special time. BRRRR was a huge benefit for me because I recycled 95% of my capital or more every time so I could just keep on buying as fast as I found deals in my pile of money never left and it never had to grow. So that was a pretty special time.

Lots of people, Brandon Turner included were very successful in that time. And he's built a great career off of it David green as well I believe but most markets are not 2010 to 2014 where you really couldn't do anything wrong. Right? In between 2010 and 2014. If your project was too much longer than it should have been you won if your project cost you an extra 10 grand you won I mean it was it was a special time and for people to not nuance The difference is just not fair. That was so special. It may never be that easy. Again, that said you can always find what I now call slumlord properties today you have to find really slumlord properties but they're out there right? These are ones that can't be financed, no bank would loan on them you have to pay cash very few buyers have appetites for properties that smell and have bugs and just are disgusting but if you can negotiate a fair price you can go in get it because it doesn't really cost that much more to fix a disgusting versus a semi disgusting because it's still paint still new floor still new kitchen still new bath, still some floor it's all the same stuff.

So you can still go in you just got to buy them right I would tell you in a market that is so hot for owner occupant that doing bird today is a lot harder than 2010 to 14. Not impossible. I'm going to suspect the market will get better for Burr in the future when it's more even keeled today, at least in the markets. I'm in owners are dominated the market 90% of the offers are coming from owners only 10% from investors. I have never seen it that way. It is so hard to be an investor today because there's no inventory and everything that clean is getting bid up by FHA buyers, which put less down and have lower interest rates. So I can't compete. I put in 100 offers or so this year and haven't gotten any of them.

Emil:

Yeah, that's kind of what I was getting to that answers it perfectly. It's it's kind of like a blend of experience having the right team knowing how much all those things are actually going to cost you which only comes with experience and then partly timing.

Michael Zuber:

Yeah, the one thing I would really close with is I would never tell someone to make BRRRR their first investment Too risky, too many ups and downs. It's just too hard. You don't even know if you want to be a landlord yet. And now you're going to take on working with general contractors without knowing the team, the risk profile of your first rental property being a BRRRR project. Not great.

Emil:

Yep.

Michael Zuber:

Your chances of success are not great,

Emil:

Especially as a remote investor, which is our audience.

Michael:

Yeah, not great. Time man, time. The thing that people don't realize is a busy tech professional. It's usually not money. That's our constraint. It's time, time, right? We time use it more efficiently. I tell people you can learn your market 20 minutes a day, people fight me on now like frickin ages. Do it stop going 1000 directions in 1000 different things. Just focus, tighten up your focus. Look at it 20 minutes a day and move on. Right? You've got life you got to raise a family. You got all this 60, now you're working at home you're working 24 seven. And you know, use Roofstock Learn to market pick, look, get after it and just move on.

Emil:

Love it.

Awesome. Hope you guys enjoyed that episode. And thanks again to Michael Zuber for coming on. We'll  have him on on a future episode as well. Alright guys, enjoy your weekend. Happy investing.

In this week's nugget of weekend wisdom, Michael Zuber weighs in on when to employ different acquisition strategies. 

---

Transcript

Emil:

Hey everyone welcome back for another episode of The Remote Real Estate Investor. This is one of our weekend wisdom episode. So hope this catches you on an amazing weekend. So in this week's episode is somebody you guys are probably familiar with. If you've been following the show for a while, we have Michael Zuber back on who is the author of one of my favorite real estate investing books called one rental at a time, he also has a YouTube channel by the same name, definitely recommend checking out both of those. If you want to check out if you missed Michael's previous episodes, he was on episode 11 and 37. So go check those out. He's a regular on the show, and we wanted to bring him on for a quick weekend wisdom. So hope you guys enjoy this one.

Theme song:

Emil:

You mentioned doing BRRRR during 2010. Really before it was even BRRRR. I know you've also mentioned you know, if you're a busy professional, like you don't want to tie up a bunch of capital like buying a turnkey can be smarter because you're not having to keep putting a ton of money in. I'm curious if you have, Are there times in the market cycle that you prefer one or the other? Or how do you decide right now I'm going to be I'm going to follow the birth strategy versus right now I think I'm just going to use less capital go turnkey.

Michael Zuber:

So for me personally, or are we talking about your audience? Because we're really different people, right? Your audience is busy professionals. That's probably what you're asking about.

Emil:

Yeah, but I'm curious. Just even from your story, right, you were a busy professional. And at some point, you kind of made the transition. So maybe it was just being comfortable…

Michael Zuber:

When you think about, so buy and hold rental properties is one rental at a time, right, you can get at one rental at a time, basically two different ways. One way is you can buy turnkey properties, which I consider clean, zero make ready, right? Means you buy it, you either have a tenant or you you stick a tenant in no additional dollars out of pocket, just so we can clean up the understanding. I believe in the beginning, when you have yet to build a team when you have yet to really understand the network and all the nuances in any market the right thing to do the least risky thing to do, the fastest thing to do is to do what today is called a turnkey property.

That said, as you gain experience, as you gain units, you as an more experienced investor will have the option to make choices, there will be market cycles, I've been doing this 20 years, and there's been two or three portions of this cycle where bur is just more profitable. The best example was 2010 to 2014 in that market, because it was generally bouncing off the bottom, you still could get yesterday's prices and tomorrow's values. So if you bought a dump, you got yesterday's prices, but once you polish it up, you can get tomorrow's value because there wasn't a great supply of them. That was such a special time. BRRRR was a huge benefit for me because I recycled 95% of my capital or more every time so I could just keep on buying as fast as I found deals in my pile of money never left and it never had to grow. So that was a pretty special time.

Lots of people, Brandon Turner included were very successful in that time. And he's built a great career off of it David green as well I believe but most markets are not 2010 to 2014 where you really couldn't do anything wrong. Right? In between 2010 and 2014. If your project was too much longer than it should have been you won if your project cost you an extra 10 grand you won I mean it was it was a special time and for people to not nuance The difference is just not fair. That was so special. It may never be that easy. Again, that said you can always find what I now call slumlord properties today you have to find really slumlord properties but they're out there right? These are ones that can't be financed, no bank would loan on them you have to pay cash very few buyers have appetites for properties that smell and have bugs and just are disgusting but if you can negotiate a fair price you can go in get it because it doesn't really cost that much more to fix a disgusting versus a semi disgusting because it's still paint still new floor still new kitchen still new bath, still some floor it's all the same stuff.

So you can still go in you just got to buy them right I would tell you in a market that is so hot for owner occupant that doing bird today is a lot harder than 2010 to 14. Not impossible. I'm going to suspect the market will get better for Burr in the future when it's more even keeled today, at least in the markets. I'm in owners are dominated the market 90% of the offers are coming from owners only 10% from investors. I have never seen it that way. It is so hard to be an investor today because there's no inventory and everything that clean is getting bid up by FHA buyers, which put less down and have lower interest rates. So I can't compete. I put in 100 offers or so this year and haven't gotten any of them.

Emil:

Yeah, that's kind of what I was getting to that answers it perfectly. It's it's kind of like a blend of experience having the right team knowing how much all those things are actually going to cost you which only comes with experience and then partly timing.

Michael Zuber:

Yeah, the one thing I would really close with is I would never tell someone to make BRRRR their first investment Too risky, too many ups and downs. It's just too hard. You don't even know if you want to be a landlord yet. And now you're going to take on working with general contractors without knowing the team, the risk profile of your first rental property being a BRRRR project. Not great.

Emil:

Yep.

Michael Zuber:

Your chances of success are not great,

Emil:

Especially as a remote investor, which is our audience.

Michael:

Yeah, not great. Time man, time. The thing that people don't realize is a busy tech professional. It's usually not money. That's our constraint. It's time, time, right? We time use it more efficiently. I tell people you can learn your market 20 minutes a day, people fight me on now like frickin ages. Do it stop going 1000 directions in 1000 different things. Just focus, tighten up your focus. Look at it 20 minutes a day and move on. Right? You've got life you got to raise a family. You got all this 60, now you're working at home you're working 24 seven. And you know, use Roofstock Learn to market pick, look, get after it and just move on.

Emil:

Love it.

Awesome. Hope you guys enjoyed that episode. And thanks again to Michael Zuber for coming on. We'll  have him on on a future episode as well. Alright guys, enjoy your weekend. Happy investing.

This week, we bring you something different with a collection scary real estate stories from some friends of the show. Join Chad Carson, Gary Beasley, Jim Barker, Tom Schneider & Michael Zuber for some creepy stories for the Halloween season. 

---

Transcript

Emil:

Hey everyone. Welcome back to The Remote real estate investor podcast. On today's episode, we have something really special for you guys. In the theme of Halloween, we wanted to go out and collect a bunch of horror stories very, very spooky real estate investing stories. And so we asked a couple friends of the podcast to share some stories they've had along the way. Some of them funny, some of them a little scary, some of them real spooky. So we have a total of five people speaking given their stories today, and that includes author and coach, Chad Carson, Roofstock CEO, Gary Beasley, Jim Barker, who is the VP of construction at Roofstock, our very own Tom Schneider, you guys know from this show, and author and good friend of the show, Michael Zuber. So without further ado, let's hop into their stories.

Emil:

So first up, we have author Chad Carson. So let's hear from Chad.

Chad Carson:

It was actually an investor friend who tried to get me to take over his property and manage it for him. And we went and looked at it. It's like, Yeah, I got this tenant who's not really paying that well. And that's okay. Yeah, we'll see how that goes. And it was a big is a brick house with a huge basement. And I said, Well, I'm gonna have to go visit the house. I'm not gonna take it over before looking at it. And so we walked to the house, we were walked inside, and we could just tell the tenant was really not at ease. Like he was just kind of nervous about something and kind of watching us too closely. And I noticed he got really uneasy when I started going towards the door to the basement.

And I said, Oh, okay, I guess I better go the basement, open the top of the door, the basement. And all I heard was thousands sounded like of wheels going squeak, squeak, squeak, squeak, squeak, squeak, squeak, like lots and lots of little wheels and little sound like little feet, you know, little rodent feet running on these wheels. And so I kind of went to flick on the light and I looked at the bottom of the stairs, and there's like two red eyes, kind of looking up at me in the dark, and I flipped the lights on. And there are, there's there's one whole room in this basement with just tons of tons of rat cages or mice cages too.

But that was only one part of this basement operation this guy had going on, there was all the reptiles and the other part of the basement that were the they're eating all of the rodents that he was raising, so he had big huge snakes. He had turtles and these big bats. He had I don't think I saw any alligators, but it's turtles and iguanas. And so it's like an exotic pet operation going on this guy's basement. This is one particular horror story. I was glad it wasn't my property and I told the guy as we walked out I said I'm not managing this property until you get rid of this tenant.

The final part of the story I'll try to make fast is that he did get the tenant notice the tenant had to leave it was like 60-90 days later when he finally got it out and we went back to the house with the same friend and we're like we walk in the front door the same front door it looks it looks empty oh okay and not so bad and we're walking down the hallway the same hallway that had the basement door and all of a sudden this massive like big you know kind of dark brown mouse rat thing like comes charging down the hallway right so we both for the living room and take off is this mouse like was not scared of us at all like runs around the corner right when that happened I was right before he said Ah not so bad.

There's this looks not so bad is this mouse comes charging down and after the mouse comes charging down we're getting ready to leave because I'm like let's just get out of this place. And I look over at my friend he's got this big huge roach crawling out of his shirt that must have dropped down from the ceiling somewhere. So long story short you know that if you get a bad tenant and that's the moral of this story was he didn't screen his tenet he didn't inspect it he didn't pay attention to what's going on and things can get out of control if you're not paying attention so that's that's the lesson there.

Michael:

Holy Smokes. I thought you're gonna say yeah, you decided to take it over and have him cut you in on the business and get 10% commission for all the animals and sales.

Chad Carson:

Oh man. I didn't touch that property I was I helped them advise them I you know from a distance so I didn't get any more roaches or or my shoes.

Emil:

Right Next up, we have Gary Beasley so roofstock co as many of you know, he has a really spooky story to share with you guys. So let's hear from Gary.

Gary Beasley:

When I was in the hotel business, this would have been back around 1997. I was in the midst of acquiring a very old hotel in Claremont Berkeley hills called the Claremont Resort and Spa. So this is right on the border of Berkeley in Oakland. It sits on top of the Hayward Fault. The really creepy thing we found out right before closing The general manager of the hotel came over the grab behind the diligence room took me in his office and said, Gary, I got to share something with you. Like, okay, what is this is the building have termites or something, he says, he hands me this file doesn't say anything. I opened it up. And it's a thick file full of handwritten notes.

These were from guests, and from people who worked at hotel, and was all very, very similar. And it all happened on the fourth floor of the Claremont hotel. So the guy's name was Henry Feldman, I could remember it like it was yesterday. And he looked at me and he really wanted to watch my reaction as I opened through and started reading some of these notes. But there were dozens and dozens of accounts of people seeing a woman in a long white flowing dress, and either hearing or seeing one or two small children. And sometimes they would look out their window and see them in the Rose Garden. And like her tending to the roses, and sometimes she'd be kind of floating the hallways and like Oh, come on is this I'm looking around for a camera. He's like, no, read more there. This is no joke. And a lot of these are pretty recent.

And then a number of things would happen in the rooms. One, sometimes the lights would go on and off unexplainably. tv would go on in the middle of the night, really blaring loud. Water would be on in the bathroom when they clearly had not been in the bathroom. drawers won't open in the dressers. And then one that was pretty freaky was a lot of people complained that they tried is when they tried to exit their hotel room, the door handle was hot, it was really hot, and it wouldn't, then they couldn't turn it. And so like this is really odd. And also, the other thing that was very common was people being awakened by someone thumping on their chest when they're sleeping, like bam. And no one's in the room.

It's like what is going on. And in fact, I heard this from when I was getting my haircut one day there. But the guy who used to cut my hair was telling the story that it just happened at someone who's the hotel, this was a few years ago, and she like, moved to a different floor or whatever. So I'm trying to say I asked him what's the commonality of all this stuff? Because you know, I have no idea. But none of these people know anything about any of the other stories. Oh, there's one more and then I'll tell you the kind of the genesis of it. And what puts the theory. There's an NBA team that used to stay there when the warriors have people in the LA Times will stay there. There was an A famous NBA player. I think you can even find this online somewhere, who was there and he was complaining about the noise in the next room, the little kids playing. And he called downstairs and they said Sir, there's no one in the room next to you. It's vacant. It's not been booked.

He's like, no, there is you could come up here right now. And so they come up open the door. Sure enough room, no one in the room, totally vacant, nothing touched. He freaks out. And I think he actually checked out of the hotel. I don't think he went to a different floor. So all this crazy, crazy stuff, right? And so I said, well, Henry, you know, what do you think that the genesis of it was? He goes well, there was a woman who lived here with her small children. Before it was a hotel, on the property. It was just a house. And she and her children died in a fire on the property

Michael:

That's wild.

Tom:

It's like all the different mediums to it's like the electrical, the water the…

Gary Beasley:

Exactly, exactly. So he said, I'm not telling you, you know not to buy the hotel. I don't know if any of its true. But I was told by my lawyers, you know, this is the kind of thing we have to let everybody know about. And he said, we've never had anybody hurt or anything like that. So if there is anything there, it's not a malevolent thing. But he said I started very much a skeptic, but with all of these things happening that are so similar, because I don't know.

Michael:

Wow, how many how many stories is that hotel here?

Gary Beasley:

It's the top floor, the fourth floor.

Michael:

The fourth floor? Okay.

Gary Beasley:

Yeah. And then there's a tower as well, that goes up. There's a bell tower. So there's one room that actually connects to the bell tower where there's been a bunch of stuff. It's kind of centers around that whole part of the hotel

Michael:

That is so wild.

Tom:

If you haven't seen the hotel, just google Claremont hotel, and you'll immediately go Yeah, that's probably haunted.

Gary Beasley:

Yeah, it’s probably the largest wood frame structure this side of the Mississippi. So another bit of trivia with this hotel, so it was owned by this great guy named Harold Schnitzer. For probably 50 years before we bought it from him back in the late 90s. And he was one of only I think three owners and the hotel was built after the 1906 earthquake. But the land for that hotel, reportedly was one in a checkers game. Back in the around the turn of the century. So there's a lot of really, really interesting colorful history around the hotel.

Pierre:

So you guys still ended up buying it?

Gary Beasley:

We did end up buying it.

Michael:

Wow.

Pierre:

Have you received reports of this kind of stuff happening since you've bought it?

Gary Beasley:

So you know, it never has been something that's been that widely reported or talked about obviously, this kind of stuff is still happening because I heard it from my the guy who was cutting my hair there probably five years ago, because I used to go there just to kind of stay connected and and all the people who work there like oh, yeah, it's just like common knowledge that this stuff happens. But But yeah, so I think if there's if there you know, there's something if there was something going on before we bought it, it's still going on.

Michael:

Wow, you just in about four and a half minutes convinced me to never stay at the Claremont

Tom:

Just avoid the fourth floor.

Gary Beasley:

Some people pay a premium and ask to stay on the fourth floor. Like I said, No one's ever been hurt. I mean, you might be a little spooked.

Michael:

Yeah, yeah.

Gary Beasley:

But this way if the TV comes on or whatever, you know what to do. It's just nothing to worry about. Just go probably turn it off. Make sure the waters not running in the bathroom. Calmly Go back to sleep calmly Go back to sleep.

Pierre:

Put a pillow on your chest.

Gary Beasley:

Yeah, no. So the whole theory is she's trying to wake up or kids or wake up whoever's there and get out of here. Yeah. Happy Halloween boys.

Emil:

Okay, next up, we have our very own Jim Barker. Jim's got another pretty spooky story for you guys. So let's hear from Jim.

Jim Barker:

There's a lot of weird stories out there and I thought seeing a giant pipe organ built into a home was really up there, that was in Long Beach California but, but this one was a trip out to Indianapolis and we had a group of houses there for the firm that I was working with that that were really in need of a lot of renovation they had purchased these sort of sight unseen really low purchase prices knowing that they needed some rehab but didn't know exactly how much they needed and and when we got into this house, I think my first experience was walking into the home it didn't have the utilities on the walls were sweating. And being a Southern California native and and at the time kind of living in Florida and going out throughout the southeast. I didn't really think about it but that was like oh, it's got a basement and I kind of went to go walk in the basement I think I was using my my cell phone flashlight and it almost stepped into like a about five feet of water their water is just full of water in this basement.

So kind of quickly realized we needed to get a waterproofing company out there and they did a good job they they pumped the water out of the basement and identified Yeah, we had this long term issue there with this house and created a plan for us to waterproof the basement with some excavation around the outside and some sump pumps and rock Okay, this is a it's already a scary rehab house but it wasn't truly scary at this point, just a little odd, but when they got the basement dry and then the next step was sort of remediate all the water damage in the basement.

And they said okay, well take us a couple days and then you can come take a look at it really scope out this house after we're done. So in the process, they they stripped this entire basement of the drywall that was around the basement walls, and let it dry out had some fans in there. And then and that's really when when I got the call from this vendor saying Hey, you got to come back. This is something weird going on at this house. And yeah, I'd seen a lot of things probably you know, a couple thousand SFR houses that had been at this point and nothing really fazed me whether it was a hoarder house or or anything else that you might run into but when I got back to this house, he's like yeah, I just you know, it's so strange you just got to go in and experience it for yourself and so this house was odd enough already man had been stripped of drywall and didn't have cabinets or anything in the kitchen. So it just kind of looked like this old creepy space.

And as you went down in the basement, it was just kind of like a split level. So as you walk down the stairs and kind of went down there like what what does he guide me into I really didn't know and like, get to the bottom and you see this like, weird, creepy. Two foot by two foot hole that's been cut in this cinderblock wall of this basement. Like, what is that and go in there and like, what were they tunneling outside of this basement for I have no idea and stick your head in the little hole and you're like this doesn't even seem safe. But sure enough, they tunneled out and kind of created this maybe six foot by four foot little room that couldn't have been more than in two or two and a half feet tall, underground, and it had nothing in it, but a foam rubber mattress and some old like 1970s floral cushions from couch cushions and like what was going on in this house if it wasn't visible? Who decides to randomly tunnel outside of their house? And what could they have possibly been hiding in here?

You know, is that their escape room? makeshift escape room? Was it a, something where somebody was being smuggled, like I really didn't know. So it's just like, I don't know what to do with it other than like, we've got to get rid of it. And so luckily, we didn't ever find out anything bad happened here. But it was a scene out of Saw or something where you look down in this basement and everything is torn up. And there's this hole in the, in the side of the foundation wall. And so we quickly just crushed it from the outside, made sure that room was gone back-filled, the dirt and patched up that basement wall, and the house turned around. But there was a lot of speculation with me and my coworkers at the time and some of the neighbors, what the house might have been used for. And the the old man that used to live there. And I think one of the neighbors speculated that he had two wives and maybe he only ever saw one of them at any given time.

So the stories is just got more and more wild as we went along. But I don't think there was much truth in any of those specular stories, but it sure was a strange room and we never did quite figure out what was really used for but it no longer exists. And now it's a perfectly functioning SFR rental house and, and yielding well for the current owner.

Tom:

Oh my gosh, just Yeah. Just perform an exorcism on that part of the house. How scary Jeez.

Jim Barker:

Yeah, just Who knows? And maybe just a little hiding room or playroom for some kids. But yeah, when when you find it like that your imagination shirt runs wild.

Emil:

I was trying to think in the background of something not ridiculous that could have gone on there. And I'm drawing a complete blank, like I can have it couldn't have been anything legitimate and had to have been something just, I don't know, really not safe or legal. Or…

Jim Barker:

I'm convinced that the weirdest stuff happens in basements. And maybe it's just a myth from not growing up having a basement but now in my experience, I'd like a whatever weird happens. It's always in a basement.

Emil:

All right, next up is our very own co host, Tom Schneider. Tom has another great, great story for you guys. Let's listen to this one.

Tom:

So I was at the time this is, I don't know 10-15 years ago, I was working in acquisitions. And there was a property that I was looking to buy. This is for a company that eventually went public but we were in major buy time. And this property was located in this area called the Iron Triangle in Richmond and you guys are familiar anyways, I go to this property with my construction manager that I work with and the property is listed as vacant per the MLS listing so vacant. We go there I have my super key so I'm able to unlock the door and me and the contractor opened the door and you know I couldn't put it into words but it was so obvious this home was not vacant. There was nothing visually you can see that really spoke to someone was there but I don't know call it intuition as soon as you open the door and stepped inside you we're not the only ones in this room.

So we continue you know we look at each other and I think he felt it as well and we are walking you know through the house I think it's like a three bedroom one bath doing our our standard process right. First we go over to the kitchen estimated costs, pretty standard, you know and still have that kind of sinking feeling that this is not we're not on our own in here. So looking through the kitchen testing the water, you know a little bit of brown spurts out of the water just like a not a good omen. You know some rust or whatnot. Anyways, continuing working our way through one bedroom, another bedroom until we finally get to the master bedroom. And, I mean, we both just looked at each other. And in the corner of the room, there was this closet. And it was just slightly opened a little bit. And, you know, we had to know, is this house empty? Or is it not.

So I walk slowly over to the closet and I, it's dark out to, you know, not a lot of windows and I open the closet door. And looking in there. And I see, in the back of the closet, this is a weird deep closet, I see two eyes looking right back at me. And I turn around at the construction manager, we got to get out of here! So we sprint out of the door. I think we forgot to put the super key on and we were just spooked called the listing agent, that house is not vacant, you got to go and take care of that and made it out alive. No major issues. But man, it's it you got to trust your intuition. If you you feel the energy of somebody or you know something, I still don't know today could have been a bear. I don't know. You got to trust that, that intuition and double check with the listing agent that your house is vacant.

Emil:

Next up, we have Michael Zuber who many of you know he's been on the show a couple times. I actually remember hearing this story on Michael's YouTube channel. And we had to invite him on to recount it here. So here it is.

Michael:

Yeah, so let me set it up. Because again, so we were probably in year eight or year nine of our investing journey, we probably had 100 doors by this point, we had probably had 500 tenants by this point. And again, while this story is truly just truly nasty, I do want to say that most tenants are just awesome people. So I don't want this one horrible event to scare anyone away. But it is it is pretty bad. So this starts in a very unusual manner. Somebody comes in to pay rent, my property manager takes the check, tries to apply the check to the unit and says innocently enough name on check doesn't match tenant in house, what's going on? Right? Not thinking any of it.

The tenant at this point, I don't know. The first error or honesty or whatever you want to call it says oh, by the way, so and so I've already forgot their name, the other tenants left. And I moved in and I want to pay the rent that he was paying. So we're like, Okay, cool. We're not going to take your rent, we have to put all tenants through an application process, right? But good news is you have the money. So you're good, good sign. We think we're gonna get through this okay. So he fills out an application right there. He again tries to pay before he leaves and we say no, right? You're not an approved tenant yet. We can't take your money. But we should have an answer in 24. Worst case, 48 hours, right process is smooth.

So lo and behold, that evening, I get a call. And I start to hear this story. Right? Because I have at this point, they're not bothering me, the owner, I'm probably somewhere in Europe or Japan or somewhere. But they call me go we got we got a problem. I'm like, Oh, crap, what problem we're going to talk about today. So they go through it much like I have with you. And now they tell me that the application that the gentleman filled out, everything is wrong on it except his name. He's lied about everything. Where he works. Past references didn't check out. Just nothing is right. Other than his name, and the only reason they think his name is right is because it matched the check. That's that's all they know, at this point. And they're like, what do you want to do? Because he's already moved in. He was already going to pay rent. And they're just not sure.

And I'm like, well, you're my property manager. What's, what do you think the process is, this is this is not an approvable tenant. Right? So call him up. See if he has a legitimate excuse, which I don't know what it'd be, but check. So, my intention is okay, the guy's got to go, right, 30 day notice, you know, get out we'll you know, we'll Park friends but you're not approved right seems to set it makes sense. So long, behold, he calls me they call and now it turns tense. He is clearly upset. Which at which point the property manager the owner of the company gets involved because he is just berating my property manager, right my point of contact and he makes a call that Okay, you've got to get out in three days, you know, just three days to pay to quit and At which point he really doesn't like it.

We think nothing of it. He's just a grouchy tenant at this point, he tried to cheat the system and get out. Lo and behold, about two or three in the morning, my property manager gets a phone call from the police. I find this out the next day at like 6am or 7am. But apparently this individual sent out a mass communication on his social media, advertising a hammer party. So you know what, I grew up in the 90s. I'm thinking MC Hammer, right? I'm like, okay, he wants to throw a big bash. Before He Leaves. I'm like, in my, my property manager goes, No. He goes, he threw a hammer party. I'm like, all right, I give up. It's not MC Hammer. What is it, he told his entire social media staff to bring a hammer to his unit. And they started putting little holes in the drywall. Right, just smashing the drywall smashing the toilet smashing the tubs with hammers.

So much so that he almost broke into the unit next door, at which point the police were called, and people were arrested, because there were people on parole that shouldn't have been there. And lo and behold, we spent, I don't know something like $20,000 because again, right, once you start putting holes in drywall, you know, stuffs got to go. And, you know, toilets got to go and sinks got to go and countertops got to go and cabinet doors were just bashed off. They were demoing a relatively nice unit. And this all started from a guy who wanted to pay rent. That's the terrible thing of this story.

Tom:

I'm never gonna hear hammer-time Just think of it and not think of that story again.

Michael Zuber:

Yeah, it was a, it was not a good experience. And I just I think about it all the time. All he wanted to do is pay rent. He I'm sure he thought he was doing the right thing. But then you start lying on your application and your job doesn't check out. And yeah, I mean, it's just like, who knows what was going on? We never had a chance to dig into that. Because he just went from, you know, trying to sneak through to I'm going to be mean, And oh, by the way, he went to jail. He went to jail that night. And we're talking,

Emil:

You and I we're joking before we started recording. But I mentioned I feel like if you've been doing this long enough, everyone who's been doing this decade or two, like they have a crazy story like that. It's impossible not to have one.

Michael Zuber:

Yeah. You will. You're in the people business. I mean, I didn't understand that for years. Right. I thought it was spreadsheets, I thought it was sticks and bricks. I thought it was stuff. It's not stuff. If you're a landlord, and you're a long term landlord, you're dealing with people, people go through life. Sometimes you're winning in life, and sometimes you're losing sometimes. You know, it's it comes up aces, and sometimes it's deuces and Damn, I mean, it's you can run into people that are having pretty bad days. And I'm sure they don't mean maliciously, maliciously, but he was angry. And he destroyed a unit and ultimately, frankly, paid the price with his freedom because he went to jail.

Emil:

Alright, thanks, everyone. Hope you didn't get too spooked out during all this. But hope you all have a great Halloween. I know it's going to be a little bit different of a year, but hope you all enjoy it. Anyway. One other quick thing to tell you guys about before you head out. We're running another Roofstock Academy promotion this month for all of our podcast listeners. And if you're not familiar with rootstock Academy, that is our online on demand training and coaching program where you can get one on one coaching with myself, Michael Tom, also in our private slack community. And we have tons and tons of hours of on demand lectures for you guys to go through to really, really power up your knowledge of real estate investing. And that code if you go to roofstockacademy.com and check out just enter the code HALLOWEEN, you'll get $151 off enrollments. So again, roofstockacademy.com, and apply the code HALLOWEEN at checkout before October 31 to get $151 off enrollment. All right, we'll check you out on the next episode. Happy investing

This week, we bring you something different with a collection scary real estate stories from some friends of the show. Join Chad Carson, Gary Beasley, Jim Barker, Tom Schneider & Michael Zuber for some creepy stories for the Halloween season. 

---

Transcript

Emil:

Hey everyone. Welcome back to The Remote real estate investor podcast. On today's episode, we have something really special for you guys. In the theme of Halloween, we wanted to go out and collect a bunch of horror stories very, very spooky real estate investing stories. And so we asked a couple friends of the podcast to share some stories they've had along the way. Some of them funny, some of them a little scary, some of them real spooky. So we have a total of five people speaking given their stories today, and that includes author and coach, Chad Carson, Roofstock CEO, Gary Beasley, Jim Barker, who is the VP of construction at Roofstock, our very own Tom Schneider, you guys know from this show, and author and good friend of the show, Michael Zuber. So without further ado, let's hop into their stories.

Emil:

So first up, we have author Chad Carson. So let's hear from Chad.

Chad Carson:

It was actually an investor friend who tried to get me to take over his property and manage it for him. And we went and looked at it. It's like, Yeah, I got this tenant who's not really paying that well. And that's okay. Yeah, we'll see how that goes. And it was a big is a brick house with a huge basement. And I said, Well, I'm gonna have to go visit the house. I'm not gonna take it over before looking at it. And so we walked to the house, we were walked inside, and we could just tell the tenant was really not at ease. Like he was just kind of nervous about something and kind of watching us too closely. And I noticed he got really uneasy when I started going towards the door to the basement.

And I said, Oh, okay, I guess I better go the basement, open the top of the door, the basement. And all I heard was thousands sounded like of wheels going squeak, squeak, squeak, squeak, squeak, squeak, squeak, like lots and lots of little wheels and little sound like little feet, you know, little rodent feet running on these wheels. And so I kind of went to flick on the light and I looked at the bottom of the stairs, and there's like two red eyes, kind of looking up at me in the dark, and I flipped the lights on. And there are, there's there's one whole room in this basement with just tons of tons of rat cages or mice cages too.

But that was only one part of this basement operation this guy had going on, there was all the reptiles and the other part of the basement that were the they're eating all of the rodents that he was raising, so he had big huge snakes. He had turtles and these big bats. He had I don't think I saw any alligators, but it's turtles and iguanas. And so it's like an exotic pet operation going on this guy's basement. This is one particular horror story. I was glad it wasn't my property and I told the guy as we walked out I said I'm not managing this property until you get rid of this tenant.

The final part of the story I'll try to make fast is that he did get the tenant notice the tenant had to leave it was like 60-90 days later when he finally got it out and we went back to the house with the same friend and we're like we walk in the front door the same front door it looks it looks empty oh okay and not so bad and we're walking down the hallway the same hallway that had the basement door and all of a sudden this massive like big you know kind of dark brown mouse rat thing like comes charging down the hallway right so we both for the living room and take off is this mouse like was not scared of us at all like runs around the corner right when that happened I was right before he said Ah not so bad.

There's this looks not so bad is this mouse comes charging down and after the mouse comes charging down we're getting ready to leave because I'm like let's just get out of this place. And I look over at my friend he's got this big huge roach crawling out of his shirt that must have dropped down from the ceiling somewhere. So long story short you know that if you get a bad tenant and that's the moral of this story was he didn't screen his tenet he didn't inspect it he didn't pay attention to what's going on and things can get out of control if you're not paying attention so that's that's the lesson there.

Michael:

Holy Smokes. I thought you're gonna say yeah, you decided to take it over and have him cut you in on the business and get 10% commission for all the animals and sales.

Chad Carson:

Oh man. I didn't touch that property I was I helped them advise them I you know from a distance so I didn't get any more roaches or or my shoes.

Emil:

Right Next up, we have Gary Beasley so roofstock co as many of you know, he has a really spooky story to share with you guys. So let's hear from Gary.

Gary Beasley:

When I was in the hotel business, this would have been back around 1997. I was in the midst of acquiring a very old hotel in Claremont Berkeley hills called the Claremont Resort and Spa. So this is right on the border of Berkeley in Oakland. It sits on top of the Hayward Fault. The really creepy thing we found out right before closing The general manager of the hotel came over the grab behind the diligence room took me in his office and said, Gary, I got to share something with you. Like, okay, what is this is the building have termites or something, he says, he hands me this file doesn't say anything. I opened it up. And it's a thick file full of handwritten notes.

These were from guests, and from people who worked at hotel, and was all very, very similar. And it all happened on the fourth floor of the Claremont hotel. So the guy's name was Henry Feldman, I could remember it like it was yesterday. And he looked at me and he really wanted to watch my reaction as I opened through and started reading some of these notes. But there were dozens and dozens of accounts of people seeing a woman in a long white flowing dress, and either hearing or seeing one or two small children. And sometimes they would look out their window and see them in the Rose Garden. And like her tending to the roses, and sometimes she'd be kind of floating the hallways and like Oh, come on is this I'm looking around for a camera. He's like, no, read more there. This is no joke. And a lot of these are pretty recent.

And then a number of things would happen in the rooms. One, sometimes the lights would go on and off unexplainably. tv would go on in the middle of the night, really blaring loud. Water would be on in the bathroom when they clearly had not been in the bathroom. drawers won't open in the dressers. And then one that was pretty freaky was a lot of people complained that they tried is when they tried to exit their hotel room, the door handle was hot, it was really hot, and it wouldn't, then they couldn't turn it. And so like this is really odd. And also, the other thing that was very common was people being awakened by someone thumping on their chest when they're sleeping, like bam. And no one's in the room.

It's like what is going on. And in fact, I heard this from when I was getting my haircut one day there. But the guy who used to cut my hair was telling the story that it just happened at someone who's the hotel, this was a few years ago, and she like, moved to a different floor or whatever. So I'm trying to say I asked him what's the commonality of all this stuff? Because you know, I have no idea. But none of these people know anything about any of the other stories. Oh, there's one more and then I'll tell you the kind of the genesis of it. And what puts the theory. There's an NBA team that used to stay there when the warriors have people in the LA Times will stay there. There was an A famous NBA player. I think you can even find this online somewhere, who was there and he was complaining about the noise in the next room, the little kids playing. And he called downstairs and they said Sir, there's no one in the room next to you. It's vacant. It's not been booked.

He's like, no, there is you could come up here right now. And so they come up open the door. Sure enough room, no one in the room, totally vacant, nothing touched. He freaks out. And I think he actually checked out of the hotel. I don't think he went to a different floor. So all this crazy, crazy stuff, right? And so I said, well, Henry, you know, what do you think that the genesis of it was? He goes well, there was a woman who lived here with her small children. Before it was a hotel, on the property. It was just a house. And she and her children died in a fire on the property

Michael:

That's wild.

Tom:

It's like all the different mediums to it's like the electrical, the water the…

Gary Beasley:

Exactly, exactly. So he said, I'm not telling you, you know not to buy the hotel. I don't know if any of its true. But I was told by my lawyers, you know, this is the kind of thing we have to let everybody know about. And he said, we've never had anybody hurt or anything like that. So if there is anything there, it's not a malevolent thing. But he said I started very much a skeptic, but with all of these things happening that are so similar, because I don't know.

Michael:

Wow, how many how many stories is that hotel here?

Gary Beasley:

It's the top floor, the fourth floor.

Michael:

The fourth floor? Okay.

Gary Beasley:

Yeah. And then there's a tower as well, that goes up. There's a bell tower. So there's one room that actually connects to the bell tower where there's been a bunch of stuff. It's kind of centers around that whole part of the hotel

Michael:

That is so wild.

Tom:

If you haven't seen the hotel, just google Claremont hotel, and you'll immediately go Yeah, that's probably haunted.

Gary Beasley:

Yeah, it’s probably the largest wood frame structure this side of the Mississippi. So another bit of trivia with this hotel, so it was owned by this great guy named Harold Schnitzer. For probably 50 years before we bought it from him back in the late 90s. And he was one of only I think three owners and the hotel was built after the 1906 earthquake. But the land for that hotel, reportedly was one in a checkers game. Back in the around the turn of the century. So there's a lot of really, really interesting colorful history around the hotel.

Pierre:

So you guys still ended up buying it?

Gary Beasley:

We did end up buying it.

Michael:

Wow.

Pierre:

Have you received reports of this kind of stuff happening since you've bought it?

Gary Beasley:

So you know, it never has been something that's been that widely reported or talked about obviously, this kind of stuff is still happening because I heard it from my the guy who was cutting my hair there probably five years ago, because I used to go there just to kind of stay connected and and all the people who work there like oh, yeah, it's just like common knowledge that this stuff happens. But But yeah, so I think if there's if there you know, there's something if there was something going on before we bought it, it's still going on.

Michael:

Wow, you just in about four and a half minutes convinced me to never stay at the Claremont

Tom:

Just avoid the fourth floor.

Gary Beasley:

Some people pay a premium and ask to stay on the fourth floor. Like I said, No one's ever been hurt. I mean, you might be a little spooked.

Michael:

Yeah, yeah.

Gary Beasley:

But this way if the TV comes on or whatever, you know what to do. It's just nothing to worry about. Just go probably turn it off. Make sure the waters not running in the bathroom. Calmly Go back to sleep calmly Go back to sleep.

Pierre:

Put a pillow on your chest.

Gary Beasley:

Yeah, no. So the whole theory is she's trying to wake up or kids or wake up whoever's there and get out of here. Yeah. Happy Halloween boys.

Emil:

Okay, next up, we have our very own Jim Barker. Jim's got another pretty spooky story for you guys. So let's hear from Jim.

Jim Barker:

There's a lot of weird stories out there and I thought seeing a giant pipe organ built into a home was really up there, that was in Long Beach California but, but this one was a trip out to Indianapolis and we had a group of houses there for the firm that I was working with that that were really in need of a lot of renovation they had purchased these sort of sight unseen really low purchase prices knowing that they needed some rehab but didn't know exactly how much they needed and and when we got into this house, I think my first experience was walking into the home it didn't have the utilities on the walls were sweating. And being a Southern California native and and at the time kind of living in Florida and going out throughout the southeast. I didn't really think about it but that was like oh, it's got a basement and I kind of went to go walk in the basement I think I was using my my cell phone flashlight and it almost stepped into like a about five feet of water their water is just full of water in this basement.

So kind of quickly realized we needed to get a waterproofing company out there and they did a good job they they pumped the water out of the basement and identified Yeah, we had this long term issue there with this house and created a plan for us to waterproof the basement with some excavation around the outside and some sump pumps and rock Okay, this is a it's already a scary rehab house but it wasn't truly scary at this point, just a little odd, but when they got the basement dry and then the next step was sort of remediate all the water damage in the basement.

And they said okay, well take us a couple days and then you can come take a look at it really scope out this house after we're done. So in the process, they they stripped this entire basement of the drywall that was around the basement walls, and let it dry out had some fans in there. And then and that's really when when I got the call from this vendor saying Hey, you got to come back. This is something weird going on at this house. And yeah, I'd seen a lot of things probably you know, a couple thousand SFR houses that had been at this point and nothing really fazed me whether it was a hoarder house or or anything else that you might run into but when I got back to this house, he's like yeah, I just you know, it's so strange you just got to go in and experience it for yourself and so this house was odd enough already man had been stripped of drywall and didn't have cabinets or anything in the kitchen. So it just kind of looked like this old creepy space.

And as you went down in the basement, it was just kind of like a split level. So as you walk down the stairs and kind of went down there like what what does he guide me into I really didn't know and like, get to the bottom and you see this like, weird, creepy. Two foot by two foot hole that's been cut in this cinderblock wall of this basement. Like, what is that and go in there and like, what were they tunneling outside of this basement for I have no idea and stick your head in the little hole and you're like this doesn't even seem safe. But sure enough, they tunneled out and kind of created this maybe six foot by four foot little room that couldn't have been more than in two or two and a half feet tall, underground, and it had nothing in it, but a foam rubber mattress and some old like 1970s floral cushions from couch cushions and like what was going on in this house if it wasn't visible? Who decides to randomly tunnel outside of their house? And what could they have possibly been hiding in here?

You know, is that their escape room? makeshift escape room? Was it a, something where somebody was being smuggled, like I really didn't know. So it's just like, I don't know what to do with it other than like, we've got to get rid of it. And so luckily, we didn't ever find out anything bad happened here. But it was a scene out of Saw or something where you look down in this basement and everything is torn up. And there's this hole in the, in the side of the foundation wall. And so we quickly just crushed it from the outside, made sure that room was gone back-filled, the dirt and patched up that basement wall, and the house turned around. But there was a lot of speculation with me and my coworkers at the time and some of the neighbors, what the house might have been used for. And the the old man that used to live there. And I think one of the neighbors speculated that he had two wives and maybe he only ever saw one of them at any given time.

So the stories is just got more and more wild as we went along. But I don't think there was much truth in any of those specular stories, but it sure was a strange room and we never did quite figure out what was really used for but it no longer exists. And now it's a perfectly functioning SFR rental house and, and yielding well for the current owner.

Tom:

Oh my gosh, just Yeah. Just perform an exorcism on that part of the house. How scary Jeez.

Jim Barker:

Yeah, just Who knows? And maybe just a little hiding room or playroom for some kids. But yeah, when when you find it like that your imagination shirt runs wild.

Emil:

I was trying to think in the background of something not ridiculous that could have gone on there. And I'm drawing a complete blank, like I can have it couldn't have been anything legitimate and had to have been something just, I don't know, really not safe or legal. Or…

Jim Barker:

I'm convinced that the weirdest stuff happens in basements. And maybe it's just a myth from not growing up having a basement but now in my experience, I'd like a whatever weird happens. It's always in a basement.

Emil:

All right, next up is our very own co host, Tom Schneider. Tom has another great, great story for you guys. Let's listen to this one.

Tom:

So I was at the time this is, I don't know 10-15 years ago, I was working in acquisitions. And there was a property that I was looking to buy. This is for a company that eventually went public but we were in major buy time. And this property was located in this area called the Iron Triangle in Richmond and you guys are familiar anyways, I go to this property with my construction manager that I work with and the property is listed as vacant per the MLS listing so vacant. We go there I have my super key so I'm able to unlock the door and me and the contractor opened the door and you know I couldn't put it into words but it was so obvious this home was not vacant. There was nothing visually you can see that really spoke to someone was there but I don't know call it intuition as soon as you open the door and stepped inside you we're not the only ones in this room.

So we continue you know we look at each other and I think he felt it as well and we are walking you know through the house I think it's like a three bedroom one bath doing our our standard process right. First we go over to the kitchen estimated costs, pretty standard, you know and still have that kind of sinking feeling that this is not we're not on our own in here. So looking through the kitchen testing the water, you know a little bit of brown spurts out of the water just like a not a good omen. You know some rust or whatnot. Anyways, continuing working our way through one bedroom, another bedroom until we finally get to the master bedroom. And, I mean, we both just looked at each other. And in the corner of the room, there was this closet. And it was just slightly opened a little bit. And, you know, we had to know, is this house empty? Or is it not.

So I walk slowly over to the closet and I, it's dark out to, you know, not a lot of windows and I open the closet door. And looking in there. And I see, in the back of the closet, this is a weird deep closet, I see two eyes looking right back at me. And I turn around at the construction manager, we got to get out of here! So we sprint out of the door. I think we forgot to put the super key on and we were just spooked called the listing agent, that house is not vacant, you got to go and take care of that and made it out alive. No major issues. But man, it's it you got to trust your intuition. If you you feel the energy of somebody or you know something, I still don't know today could have been a bear. I don't know. You got to trust that, that intuition and double check with the listing agent that your house is vacant.

Emil:

Next up, we have Michael Zuber who many of you know he's been on the show a couple times. I actually remember hearing this story on Michael's YouTube channel. And we had to invite him on to recount it here. So here it is.

Michael:

Yeah, so let me set it up. Because again, so we were probably in year eight or year nine of our investing journey, we probably had 100 doors by this point, we had probably had 500 tenants by this point. And again, while this story is truly just truly nasty, I do want to say that most tenants are just awesome people. So I don't want this one horrible event to scare anyone away. But it is it is pretty bad. So this starts in a very unusual manner. Somebody comes in to pay rent, my property manager takes the check, tries to apply the check to the unit and says innocently enough name on check doesn't match tenant in house, what's going on? Right? Not thinking any of it.

The tenant at this point, I don't know. The first error or honesty or whatever you want to call it says oh, by the way, so and so I've already forgot their name, the other tenants left. And I moved in and I want to pay the rent that he was paying. So we're like, Okay, cool. We're not going to take your rent, we have to put all tenants through an application process, right? But good news is you have the money. So you're good, good sign. We think we're gonna get through this okay. So he fills out an application right there. He again tries to pay before he leaves and we say no, right? You're not an approved tenant yet. We can't take your money. But we should have an answer in 24. Worst case, 48 hours, right process is smooth.

So lo and behold, that evening, I get a call. And I start to hear this story. Right? Because I have at this point, they're not bothering me, the owner, I'm probably somewhere in Europe or Japan or somewhere. But they call me go we got we got a problem. I'm like, Oh, crap, what problem we're going to talk about today. So they go through it much like I have with you. And now they tell me that the application that the gentleman filled out, everything is wrong on it except his name. He's lied about everything. Where he works. Past references didn't check out. Just nothing is right. Other than his name, and the only reason they think his name is right is because it matched the check. That's that's all they know, at this point. And they're like, what do you want to do? Because he's already moved in. He was already going to pay rent. And they're just not sure.

And I'm like, well, you're my property manager. What's, what do you think the process is, this is this is not an approvable tenant. Right? So call him up. See if he has a legitimate excuse, which I don't know what it'd be, but check. So, my intention is okay, the guy's got to go, right, 30 day notice, you know, get out we'll you know, we'll Park friends but you're not approved right seems to set it makes sense. So long, behold, he calls me they call and now it turns tense. He is clearly upset. Which at which point the property manager the owner of the company gets involved because he is just berating my property manager, right my point of contact and he makes a call that Okay, you've got to get out in three days, you know, just three days to pay to quit and At which point he really doesn't like it.

We think nothing of it. He's just a grouchy tenant at this point, he tried to cheat the system and get out. Lo and behold, about two or three in the morning, my property manager gets a phone call from the police. I find this out the next day at like 6am or 7am. But apparently this individual sent out a mass communication on his social media, advertising a hammer party. So you know what, I grew up in the 90s. I'm thinking MC Hammer, right? I'm like, okay, he wants to throw a big bash. Before He Leaves. I'm like, in my, my property manager goes, No. He goes, he threw a hammer party. I'm like, all right, I give up. It's not MC Hammer. What is it, he told his entire social media staff to bring a hammer to his unit. And they started putting little holes in the drywall. Right, just smashing the drywall smashing the toilet smashing the tubs with hammers.

So much so that he almost broke into the unit next door, at which point the police were called, and people were arrested, because there were people on parole that shouldn't have been there. And lo and behold, we spent, I don't know something like $20,000 because again, right, once you start putting holes in drywall, you know, stuffs got to go. And, you know, toilets got to go and sinks got to go and countertops got to go and cabinet doors were just bashed off. They were demoing a relatively nice unit. And this all started from a guy who wanted to pay rent. That's the terrible thing of this story.

Tom:

I'm never gonna hear hammer-time Just think of it and not think of that story again.

Michael Zuber:

Yeah, it was a, it was not a good experience. And I just I think about it all the time. All he wanted to do is pay rent. He I'm sure he thought he was doing the right thing. But then you start lying on your application and your job doesn't check out. And yeah, I mean, it's just like, who knows what was going on? We never had a chance to dig into that. Because he just went from, you know, trying to sneak through to I'm going to be mean, And oh, by the way, he went to jail. He went to jail that night. And we're talking,

Emil:

You and I we're joking before we started recording. But I mentioned I feel like if you've been doing this long enough, everyone who's been doing this decade or two, like they have a crazy story like that. It's impossible not to have one.

Michael Zuber:

Yeah. You will. You're in the people business. I mean, I didn't understand that for years. Right. I thought it was spreadsheets, I thought it was sticks and bricks. I thought it was stuff. It's not stuff. If you're a landlord, and you're a long term landlord, you're dealing with people, people go through life. Sometimes you're winning in life, and sometimes you're losing sometimes. You know, it's it comes up aces, and sometimes it's deuces and Damn, I mean, it's you can run into people that are having pretty bad days. And I'm sure they don't mean maliciously, maliciously, but he was angry. And he destroyed a unit and ultimately, frankly, paid the price with his freedom because he went to jail.

Emil:

Alright, thanks, everyone. Hope you didn't get too spooked out during all this. But hope you all have a great Halloween. I know it's going to be a little bit different of a year, but hope you all enjoy it. Anyway. One other quick thing to tell you guys about before you head out. We're running another Roofstock Academy promotion this month for all of our podcast listeners. And if you're not familiar with rootstock Academy, that is our online on demand training and coaching program where you can get one on one coaching with myself, Michael Tom, also in our private slack community. And we have tons and tons of hours of on demand lectures for you guys to go through to really, really power up your knowledge of real estate investing. And that code if you go to roofstockacademy.com and check out just enter the code HALLOWEEN, you'll get $151 off enrollments. So again, roofstockacademy.com, and apply the code HALLOWEEN at checkout before October 31 to get $151 off enrollment. All right, we'll check you out on the next episode. Happy investing

In this episode, we wrap up our series of finding an vetting solid vendors with the lawyer. Join Emil, Tom and Michael to learn their strategy of finding a good lawyer. 

---

Transcript

Emil:

Hey everyone, welcome back for another episode of The Remote Real Estate Investor. My name is Emil Shour, and I'm joined by,

Tom:

Tom Schneider,

Michael:

and Michael Albaum.

Emil:

And today we are going to be continuing our series on tips for finding and vetting different members of your real estate investing team. Today we will be covering the lawyer. Let's hop into it.

Michael:

Tom, what is in your hand?

Tom:

What?! What are you talking about?

Michael:

Looks like you have a tail.

Emil:

What is going on?

Michael:

Is that a crop for like a horse?

Tom:

It's this thing called an Orange Whip. It's it's actually pretty fun.

Emil:

I hope you don't use it on your child.

Tom:

No, no, no, it's a golf tool that I just kind of hold at my desk, and it has tons of wiggle waggle.

Michael:

Mm hmm.

Tom:

So when you swing, I'm kind of a gimmick guy like a golf gimmick guy so like is that they buy something you know, like a straight jacket that helps you whatever your swing, I'll buy it. I got this thing recently called. And I'm very pro Orange Whip it. So when you swing back, this orange ball that's has like a ton of wiggle waggle. It makes really good tempo and improves your swing. So you're not coming over the top, you got a nice inside out swing.

I'm funny with golf. I don't play like that often. But when I do, like, I just like, you know, go all out. And so like 10 months of the year, don't really play it. But then two months, like, oh, man, I need this gimmick. I think I figured out and yes,

Michael:

I was gonna say I've known you for a couple years and not once have I ever heard you mentioned golf.

Tom:

I mean, we must have not talked during that little month sequence that I was really into it. But as a shout out there, Orange Whip. This isn't a paid promotion. But I think if you're in a golf and you want to have good tempo, and strengthen, get an Orange Whip, I'm pro Orange Whip. So that's what's behind me.

Emil:

You're gonna love this. So my brother in law started this little it's another gimmick. It's called putt cup.

Tom:

I’m in, Ooh.

Emil:

So a mug that has a flat brim so you can lay it on the ground and just practice your putts. You know if you'll put mugs on the ground, but it has this flat side to it. So you get a nice roll in there.

Tom:

That's beautiful. At first I was thinking oh, there's a hole in the cup. So when you putt it goes in, but that doesn’t make sense.

Michael:

Wouldn't be a cup anymore would it? It’d be more of a funnel.

Tom:

Where does he sell it on?

Emil:

Amazon. You just go look up putt cup.

Tom:

I'm in.

Emil:

Another gimmick for you.

Michael:

Also not a paid promotion.

Tom:

Yeah, another amazon.com!

Emil:

Have you heard of it?

Tom:

Have you heard of it?

Michael:

It's a little book company.

Emil:

Small boutique retailer.

Tom:

Related to Amazon is this thing called fake spot. So an Amazon companies could like spam a bunch of high ratings when they have their product. But there's this thing called fake spot that you I think I posted on that Academy Slack channel that will analyze if the ratings are fake, and it gives a true ratings by looking at and getting rid of the bots. It gives you an honest take. So Orange Whip, fakespot, and Amazon. Those are my three recommendations for today.

Emil:

Okay, guys, well, we could be talking about golf and Amazon all day. But people are here for our real estate knowledge, or lack thereof. So let's talk about how you find and vet, a lawyer. We’ll break it down into three parts. So when in the process of your real estate investing journey or buying a property, should you look for this person? How do you source? So how do you go out and find a lawyer? And what are the best questions to ask to make sure they're legit, and can help you and be a valuable member of your team? So let's start with when in the process. Should you find the lawyer? Do you guys have went Have you guys done this in the past?

Tom:

All right, so I'll jump in first. If you are investing passively, you're holding properties in your own name, you know, it's not necessary that you buy them in an LLC, I would argue that within your checklist to get going as a remote real estate investor, getting an attorney in place is not high on that list. And that you don't have to do it before you start evaluating. You don't have to do it before you start buying. If you are looking to own these properties into a more complicated structure, with either LLC is sure you're going to want to have an attorney either to help you, you know, set up your LLC or using like a Legal Zoom or one of those type platforms.

But if you are like myself, and perhaps you own a couple of properties, not in an LLC, you have it in your own name. It's not necessary to have get a lawyer upfront, or even after you own. You know, it really depends on what you're doing and what your threshold for risk as it relates to having things in your own name. You know, as far as timing, I would say it depends and it's not necessary to do upfront.

Michael:

So I'm going to take the counterpoint to a slight degree. I think it depends on what your risk tolerance looks like and what your starting assets look Like, if you don't have a whole lot to your name, it's probably less important to go chat with an attorney prior to. But if you do have a lot to your name, you could have a bigger target on your back. And so, I think just understanding what you're getting into the risks you're taking on, and what structure if any might be appropriate for you, those can all be really great questions to ask on the front end, prior to purchasing. And just as if you're looking to get involved with real estate as a whole, again, good questions, to be asking questions to go get answers to just so you're coming to the table with all the information or as much information as you can.

And so having a consult with an attorney doesn't have to be yours. But one, a real estate attorney in general, can be really great, and how do I protect myself, but also understand that they are likely going to try to sell you something, all kinds of asset protection, and they often will use scare tactics. So take everything you hear with a grain of salt and go talk to other investors about what's actually happened in their world.

Tom:

Another thing to think about is, what are the different use cases that you're going to be using attorney with, so one of them would be on the front end, you're, you know, setting up a structure, maybe you're putting a fund together, maybe you're putting together a single member LLC, you know, that's a use case of using an attorney. And if you're not going through that, it's not necessarily that you find one other use cases that come in with an attorney is perhaps you buy a property, and there's an eviction with the tenant or some kind of issue like that, more likely than not, your property manager is going to have some legal, you know, representation, or kind of like a third party that they'll use to manage the process of eviction or three day notices and all that stuff. So it's not necessarily that you personally have an attorney to do this, your this is something that you're paying your property manager to do, they're gonna forward some of those costs to you, but they're going to get kind of better, better pricing, because they're like at scale, and probably have like, pre made templates for a lot of this kind of stuff. What other use cases would you be using an attorney with you guys think of?

Michael:

That's like, 85% of my experiences with it, I've used mine in an insurance issue, I had to bring in my attorney and just be like, Hey, I'm not getting the service and answers to the questions that I'm posing. And then also with a contractor that I had to fire, they were saying, they're asking for all kinds of stuff, and I ended up firing them and I copy my attorney, and you have to pay me and I said, That's not gonna work like that. And here's my attorney. And so if you'd like to say anything, you could say to both of us kind of a thing. And that solved that problem pretty quickly.

Emil:

And that was the end of that,

Tom:

On the front end, if you're buying with, you know, friends, or whatever creating a fun, so structuring that whole thing. I guess I'm repeating myself again, I did that before. But

Michael:

Yeah, I think I think structure is a huge part of it. And so making sure that you get that right on the front end is super, super important. And so I've used my attorney for that. So we were talking and it's so one word can change the meaning of an entire contract. So making sure that that's right and designed to protect everybody involved in it actually is designed to do what it's intended to do is really important. So I've used done that in the past and setting up multi member LLC partners have have her structure that and draft up those documents.

Tom:

On those documents, there are some good hybrid approaches, such as LegalZoom, and Rocket Lawyer where they have these templates that are pretty much ready to go. Be it tenant related templates, which you're not going to need if you're using a property manager, but setting up an LLC and that kind of stuff. It's a nice hybrid approach, which might be a little bit more cost effective than bringing on an attorney where you're paying $500 an hour or whatnot. Just because, you know, setting up an LLC is kind of a punch and play thing where this it's a well worn path where these hybrid approaches where you could buy these templates can be more cost effective.

Michael:

Yep, I would agree.

Emil:

I'll just, I'll speak quickly to my own personal experience, I wouldn't say this is the right or wrong way to do it. But just so our listeners kind of have an example of, you know, when in the process, one of us use it. So for me, I bought four properties in my name, no LLC, just directly in my name. And after my wife got married, had our daughter, we started really thinking about, you know, what are some of the legal implications of having all these properties in just my name, you know, we had a family member who went through probate, which again, if you want to learn more about that, Episode 41, like Michael talked about, and so I really wanted to avoid those things.

Once family came into the picture, you start thinking a lot more about these things. And so that was the point for me, which was actually earlier this year, that I decided to enlist the help of a lawyer to help us create a trust so everything you know, in case, knock on wood, anything happens to me, it flows directly to my family without much hiccup or headache. So that was kind of just my my personal journey into when I picked up working with a lawyer and..

Michael:

In episode. 40 We also talked about trust stuff. And we talked about in that episode about anyone who's investing in real estate should absolutely investigate whether or not a trust is a good fit for them. I think probably it's going to be,

Emil:

Especially if you have a family and again, you, you know a lot of these properties in your personal name. And there's all this like, legal stuff that can happen if you don't set it up properly. So good idea.

Tom:

It's interesting how much of real estate like strategy wise, it's like, next generation, you know, just like…

Michael:

Yeah, after you die.

Tom:

Totally. Yeah. But I mean, what a great gift that you can give to your family's future. I think talking about defer, defer, defer, and then you die, you know, with regards to 1031s and taxes. So anyways, short commentary, there

Micheal:

It’s the gift that keeps on giving, you know, real estate.

Tom:

Yeah.

Emil:

Anytime you talk about legal stuff, it's always just such a happy episode.

Michael:

It's always the doom and gloom and morbidity, right?

Tom:

What's consistent in life, death and taxes?

Michael:

Death and taxes.

Tom:

That's it. There we go. Next episode.

Emil:

All right. So let's, let's move on to how do you source How do you go out and find people to interview? So how have you guys in the past? You're looking for a lawyer? What did you do?

Michael:

I got super lucky, my older brother had a good friend who I'm also friends with. And one of his good friends from college was a lawyer. So I reached out to her and we've been good friends. And I've been a client of hers for a long time. So it's great that she's very young and but experienced, and so she's going to be around for a while, and looking to grow as well. So I don't have to work with someone for five years, have them retire, and then go look for another attorney. So she's been awesome to work with. She's super, super great.

So I just happen to know someone, I didn't really have to do a whole lot of interviewing, and we kind of just grew together naturally. And it was a really good fit. Tom, what about you?

Tom:

I would go back, we've talked about in some of the other episodes of the hierarchy of where to identify these type of vendors. So at the top of that is personal relationships that you may have. And when I worked at one of the single family REITs, got to know the attorney, actually, we might actually have him, come on to the episode, he didn't come on the podcast soon. He's the general counsel at Mynd Property Management, where another great resource is professional references and then looking at forums BiggerPockets, brucite, Academy members have access to our Slack channel, and then just general view, so I say those are the key spots in descending order of what I'd recommend for identifying a lawyer.

Emil:

I think the big theme, and we're hitting on it in all these episodes is the power of networking and asking either the people you work with or networking with other investors who they know because they've worked with them, they have experienced with them, right? It's not like you're just going on Google and who's the first name that comes up, or the first ad that comes up, and it's just so powerful to network and ride the coattails of others, if they found good people.

Michael:

Yeah, you don't need to reinvent the wheel.

Emil:

Alright, cool. That was a fast section. So moving on to the last part. What are some good questions that our listeners can ask? When they're interviewing a lawyer to make sure that's the right person to bring on to their team?

Michael:

For me, I think the first question is, do they work with real estate investors? Because there's all kinds of attorneys out there that specialize in different disciplines, just like you have all kinds of different doctors, specialists. You know, if you had a problem with your hearing, you wouldn't go to an orthopedic surgeon, probably I don't know, I that's my guess. There's not medical advice. So same thing with attorneys, and accountants, and really all the team members were talking about these episodes for that matter. So making sure that they specialize in real estate, and specifically working with investors I think is really important because they're going to look to do certain things for you that are going to be different than if you were an owner occupant.

They're going to treat you in a very specific way and look to structure things very specifically for you as an investor. And so when they have that experience and background, that's going to be really helpful for you. I also like asking where they can work, what states can they work in? Are they licensed in multiple places? Are you in California and the attorneys in Colorado? Does that pose any issues? also asking what their fee structure looks like? That's a big one we talk about with a lot of the vendors we speak about working with, are they hourly do they want to retain, do they charge by 15 minute increments? You know, how do they bill? And what does that look like? And then asked if they charge flat rates for certain services like setting up an LLC, asking them what their typical turnaround time is on inquiries and how they best like to communicate. If you text them a question, you get charged for that, if you call email, what's the best way to get ahold of them? Tom, I don't want to give you the scraps again. So I'll make sure you get in here

Tom:

I’m coming up with some fresh stuff. So some Attorneys Offices, there might be multiple attorneys. So here's an example of a question I like to ask him. If there's multiple attorneys, you know, is there different rates, so if the office perhaps has multiple attorneys, maybe there's a younger associate, that they do more template work, or more kind of bread and butter work at a lower rate? That's something to ask us, you know, are there many attorneys that I have resources with, because you know, with law, there are different types of specialties. So perhaps, if you are one a slightly more expertise on particular areas, it could be a bigger law office that has more resources versus a kind of a one man show or one woman show that's that's doing all the different work.

This is just a way to evaluate different attorneys and what their resources are. I would also ask them about some specific use cases that they had, in working with investors, have they done the initial contract work upfront in structuring funds? Have they done any work as it relates to dispute management with property managers or contractors? Have they done any work as it relates to eviction is just kind of go through their repertoire of what they have competency in, in law? And just let them speak? Kind of get them started? And let them talk about it?

Michael:

And I think it's fair to say, Tom, would you agree that most attorneys during this kind of interview phase are not going to charge for their time?

Tom:

No, I would be overt and clear that, hey, you know, I'm in the process of evaluating. I'm speaking to two other attorneys, and may or may not be speaking to two other attorneys, but that's between you and me. And just let them know that you're kind of in that evaluation phase.

Michael:

Yeah. Yeah. I totally agree.

Emil:

Solid.

Tom:

And references, references, get some references. Love that, you know, can't say that enough. for everybody. That's like, honestly, the biggest sort of BS detector is if you can get a reference who isn't their grandmother, or niece or nephew or whatever, you get a real reference and talk to them.

Emil:

Solid. I don't have anything to add. I'm glad you guys. One note I had was expectation setting. But I think Michael, you talked about it like, like, let's say you decide to work with them, if you email or call or text, like, are they going to charge you for those 15 minutes, or whatever it is? Or like, you know, for smaller stuff? Within reason, right? Like, if you're emailing them every week or something, okay, it's probably fair that they charge you but like, if you have a question every couple months, are they going to like charge you or that kind of just part of working with them? Anything else? Add here, guys, before we wrap up?

Tom:

I think that's good.

Michael:

I think that's good. And I would say, you know, if you're questioning it, just go reach out. It's one of those things like legal and accounting is one of the two areas where it's kind of a pain in the butt because they're expensive to deal with. But the things that they'll be able to do for you and answer for you are well worth the expense. And we are not experts, as real estate investors in the law. We are not experts, as real estate investors in accounting. So we need to go find people that are and finding good ones, they are well worth the cost. And so just kind of bite the bullet and keep track of those expenses because they are all deductions.

Tom:

Yep,

Michael:

It often ends up paying for itself in the long run. And this is your and your family's financial future. And so don't skimp out on a couple hundred bucks of an attorney to try to go do it yourself to then potentially have a get messed up down the road. It's a small expense in the grand scheme of things when it comes to the risk that's being mitigated.

Tom:

Pennywise pound foolish Don't be penny wise pound foolish.

Michael:

That's right. That's right. Man I should have been an attorney.

Tom:

Let's go study bird law.

Michael:

That's right, bird law!

Emil:

Cool. So let's wrap this one up. We're doing a little giveaway for people will leave us review right now we're at 93 ratings on Apple podcasts. And we're trying to get over 100 so the next 10 people will leave us reviews. We're going to randomly select two people and send them some cool stuff, maybe some books and some some swag and stuff like that. So if you haven't already go leave us review on Apple. We love hearing from you guys. And as always, we'll check you guys out in the next episode.

Michael:

Happy investing

Tom:

Happy investing

In this episode, we wrap up our series of finding an vetting solid vendors with the lawyer. Join Emil, Tom and Michael to learn their strategy of finding a good lawyer. 

---

Transcript

Emil:

Hey everyone, welcome back for another episode of The Remote Real Estate Investor. My name is Emil Shour, and I'm joined by,

Tom:

Tom Schneider,

Michael:

and Michael Albaum.

Emil:

And today we are going to be continuing our series on tips for finding and vetting different members of your real estate investing team. Today we will be covering the lawyer. Let's hop into it.

Michael:

Tom, what is in your hand?

Tom:

What?! What are you talking about?

Michael:

Looks like you have a tail.

Emil:

What is going on?

Michael:

Is that a crop for like a horse?

Tom:

It's this thing called an Orange Whip. It's it's actually pretty fun.

Emil:

I hope you don't use it on your child.

Tom:

No, no, no, it's a golf tool that I just kind of hold at my desk, and it has tons of wiggle waggle.

Michael:

Mm hmm.

Tom:

So when you swing, I'm kind of a gimmick guy like a golf gimmick guy so like is that they buy something you know, like a straight jacket that helps you whatever your swing, I'll buy it. I got this thing recently called. And I'm very pro Orange Whip it. So when you swing back, this orange ball that's has like a ton of wiggle waggle. It makes really good tempo and improves your swing. So you're not coming over the top, you got a nice inside out swing.

I'm funny with golf. I don't play like that often. But when I do, like, I just like, you know, go all out. And so like 10 months of the year, don't really play it. But then two months, like, oh, man, I need this gimmick. I think I figured out and yes,

Michael:

I was gonna say I've known you for a couple years and not once have I ever heard you mentioned golf.

Tom:

I mean, we must have not talked during that little month sequence that I was really into it. But as a shout out there, Orange Whip. This isn't a paid promotion. But I think if you're in a golf and you want to have good tempo, and strengthen, get an Orange Whip, I'm pro Orange Whip. So that's what's behind me.

Emil:

You're gonna love this. So my brother in law started this little it's another gimmick. It's called putt cup.

Tom:

I’m in, Ooh.

Emil:

So a mug that has a flat brim so you can lay it on the ground and just practice your putts. You know if you'll put mugs on the ground, but it has this flat side to it. So you get a nice roll in there.

Tom:

That's beautiful. At first I was thinking oh, there's a hole in the cup. So when you putt it goes in, but that doesn’t make sense.

Michael:

Wouldn't be a cup anymore would it? It’d be more of a funnel.

Tom:

Where does he sell it on?

Emil:

Amazon. You just go look up putt cup.

Tom:

I'm in.

Emil:

Another gimmick for you.

Michael:

Also not a paid promotion.

Tom:

Yeah, another amazon.com!

Emil:

Have you heard of it?

Tom:

Have you heard of it?

Michael:

It's a little book company.

Emil:

Small boutique retailer.

Tom:

Related to Amazon is this thing called fake spot. So an Amazon companies could like spam a bunch of high ratings when they have their product. But there's this thing called fake spot that you I think I posted on that Academy Slack channel that will analyze if the ratings are fake, and it gives a true ratings by looking at and getting rid of the bots. It gives you an honest take. So Orange Whip, fakespot, and Amazon. Those are my three recommendations for today.

Emil:

Okay, guys, well, we could be talking about golf and Amazon all day. But people are here for our real estate knowledge, or lack thereof. So let's talk about how you find and vet, a lawyer. We’ll break it down into three parts. So when in the process of your real estate investing journey or buying a property, should you look for this person? How do you source? So how do you go out and find a lawyer? And what are the best questions to ask to make sure they're legit, and can help you and be a valuable member of your team? So let's start with when in the process. Should you find the lawyer? Do you guys have went Have you guys done this in the past?

Tom:

All right, so I'll jump in first. If you are investing passively, you're holding properties in your own name, you know, it's not necessary that you buy them in an LLC, I would argue that within your checklist to get going as a remote real estate investor, getting an attorney in place is not high on that list. And that you don't have to do it before you start evaluating. You don't have to do it before you start buying. If you are looking to own these properties into a more complicated structure, with either LLC is sure you're going to want to have an attorney either to help you, you know, set up your LLC or using like a Legal Zoom or one of those type platforms.

But if you are like myself, and perhaps you own a couple of properties, not in an LLC, you have it in your own name. It's not necessary to have get a lawyer upfront, or even after you own. You know, it really depends on what you're doing and what your threshold for risk as it relates to having things in your own name. You know, as far as timing, I would say it depends and it's not necessary to do upfront.

Michael:

So I'm going to take the counterpoint to a slight degree. I think it depends on what your risk tolerance looks like and what your starting assets look Like, if you don't have a whole lot to your name, it's probably less important to go chat with an attorney prior to. But if you do have a lot to your name, you could have a bigger target on your back. And so, I think just understanding what you're getting into the risks you're taking on, and what structure if any might be appropriate for you, those can all be really great questions to ask on the front end, prior to purchasing. And just as if you're looking to get involved with real estate as a whole, again, good questions, to be asking questions to go get answers to just so you're coming to the table with all the information or as much information as you can.

And so having a consult with an attorney doesn't have to be yours. But one, a real estate attorney in general, can be really great, and how do I protect myself, but also understand that they are likely going to try to sell you something, all kinds of asset protection, and they often will use scare tactics. So take everything you hear with a grain of salt and go talk to other investors about what's actually happened in their world.

Tom:

Another thing to think about is, what are the different use cases that you're going to be using attorney with, so one of them would be on the front end, you're, you know, setting up a structure, maybe you're putting a fund together, maybe you're putting together a single member LLC, you know, that's a use case of using an attorney. And if you're not going through that, it's not necessarily that you find one other use cases that come in with an attorney is perhaps you buy a property, and there's an eviction with the tenant or some kind of issue like that, more likely than not, your property manager is going to have some legal, you know, representation, or kind of like a third party that they'll use to manage the process of eviction or three day notices and all that stuff. So it's not necessarily that you personally have an attorney to do this, your this is something that you're paying your property manager to do, they're gonna forward some of those costs to you, but they're going to get kind of better, better pricing, because they're like at scale, and probably have like, pre made templates for a lot of this kind of stuff. What other use cases would you be using an attorney with you guys think of?

Michael:

That's like, 85% of my experiences with it, I've used mine in an insurance issue, I had to bring in my attorney and just be like, Hey, I'm not getting the service and answers to the questions that I'm posing. And then also with a contractor that I had to fire, they were saying, they're asking for all kinds of stuff, and I ended up firing them and I copy my attorney, and you have to pay me and I said, That's not gonna work like that. And here's my attorney. And so if you'd like to say anything, you could say to both of us kind of a thing. And that solved that problem pretty quickly.

Emil:

And that was the end of that,

Tom:

On the front end, if you're buying with, you know, friends, or whatever creating a fun, so structuring that whole thing. I guess I'm repeating myself again, I did that before. But

Michael:

Yeah, I think I think structure is a huge part of it. And so making sure that you get that right on the front end is super, super important. And so I've used my attorney for that. So we were talking and it's so one word can change the meaning of an entire contract. So making sure that that's right and designed to protect everybody involved in it actually is designed to do what it's intended to do is really important. So I've used done that in the past and setting up multi member LLC partners have have her structure that and draft up those documents.

Tom:

On those documents, there are some good hybrid approaches, such as LegalZoom, and Rocket Lawyer where they have these templates that are pretty much ready to go. Be it tenant related templates, which you're not going to need if you're using a property manager, but setting up an LLC and that kind of stuff. It's a nice hybrid approach, which might be a little bit more cost effective than bringing on an attorney where you're paying $500 an hour or whatnot. Just because, you know, setting up an LLC is kind of a punch and play thing where this it's a well worn path where these hybrid approaches where you could buy these templates can be more cost effective.

Michael:

Yep, I would agree.

Emil:

I'll just, I'll speak quickly to my own personal experience, I wouldn't say this is the right or wrong way to do it. But just so our listeners kind of have an example of, you know, when in the process, one of us use it. So for me, I bought four properties in my name, no LLC, just directly in my name. And after my wife got married, had our daughter, we started really thinking about, you know, what are some of the legal implications of having all these properties in just my name, you know, we had a family member who went through probate, which again, if you want to learn more about that, Episode 41, like Michael talked about, and so I really wanted to avoid those things.

Once family came into the picture, you start thinking a lot more about these things. And so that was the point for me, which was actually earlier this year, that I decided to enlist the help of a lawyer to help us create a trust so everything you know, in case, knock on wood, anything happens to me, it flows directly to my family without much hiccup or headache. So that was kind of just my my personal journey into when I picked up working with a lawyer and..

Michael:

In episode. 40 We also talked about trust stuff. And we talked about in that episode about anyone who's investing in real estate should absolutely investigate whether or not a trust is a good fit for them. I think probably it's going to be,

Emil:

Especially if you have a family and again, you, you know a lot of these properties in your personal name. And there's all this like, legal stuff that can happen if you don't set it up properly. So good idea.

Tom:

It's interesting how much of real estate like strategy wise, it's like, next generation, you know, just like…

Michael:

Yeah, after you die.

Tom:

Totally. Yeah. But I mean, what a great gift that you can give to your family's future. I think talking about defer, defer, defer, and then you die, you know, with regards to 1031s and taxes. So anyways, short commentary, there

Micheal:

It’s the gift that keeps on giving, you know, real estate.

Tom:

Yeah.

Emil:

Anytime you talk about legal stuff, it's always just such a happy episode.

Michael:

It's always the doom and gloom and morbidity, right?

Tom:

What's consistent in life, death and taxes?

Michael:

Death and taxes.

Tom:

That's it. There we go. Next episode.

Emil:

All right. So let's, let's move on to how do you source How do you go out and find people to interview? So how have you guys in the past? You're looking for a lawyer? What did you do?

Michael:

I got super lucky, my older brother had a good friend who I'm also friends with. And one of his good friends from college was a lawyer. So I reached out to her and we've been good friends. And I've been a client of hers for a long time. So it's great that she's very young and but experienced, and so she's going to be around for a while, and looking to grow as well. So I don't have to work with someone for five years, have them retire, and then go look for another attorney. So she's been awesome to work with. She's super, super great.

So I just happen to know someone, I didn't really have to do a whole lot of interviewing, and we kind of just grew together naturally. And it was a really good fit. Tom, what about you?

Tom:

I would go back, we've talked about in some of the other episodes of the hierarchy of where to identify these type of vendors. So at the top of that is personal relationships that you may have. And when I worked at one of the single family REITs, got to know the attorney, actually, we might actually have him, come on to the episode, he didn't come on the podcast soon. He's the general counsel at Mynd Property Management, where another great resource is professional references and then looking at forums BiggerPockets, brucite, Academy members have access to our Slack channel, and then just general view, so I say those are the key spots in descending order of what I'd recommend for identifying a lawyer.

Emil:

I think the big theme, and we're hitting on it in all these episodes is the power of networking and asking either the people you work with or networking with other investors who they know because they've worked with them, they have experienced with them, right? It's not like you're just going on Google and who's the first name that comes up, or the first ad that comes up, and it's just so powerful to network and ride the coattails of others, if they found good people.

Michael:

Yeah, you don't need to reinvent the wheel.

Emil:

Alright, cool. That was a fast section. So moving on to the last part. What are some good questions that our listeners can ask? When they're interviewing a lawyer to make sure that's the right person to bring on to their team?

Michael:

For me, I think the first question is, do they work with real estate investors? Because there's all kinds of attorneys out there that specialize in different disciplines, just like you have all kinds of different doctors, specialists. You know, if you had a problem with your hearing, you wouldn't go to an orthopedic surgeon, probably I don't know, I that's my guess. There's not medical advice. So same thing with attorneys, and accountants, and really all the team members were talking about these episodes for that matter. So making sure that they specialize in real estate, and specifically working with investors I think is really important because they're going to look to do certain things for you that are going to be different than if you were an owner occupant.

They're going to treat you in a very specific way and look to structure things very specifically for you as an investor. And so when they have that experience and background, that's going to be really helpful for you. I also like asking where they can work, what states can they work in? Are they licensed in multiple places? Are you in California and the attorneys in Colorado? Does that pose any issues? also asking what their fee structure looks like? That's a big one we talk about with a lot of the vendors we speak about working with, are they hourly do they want to retain, do they charge by 15 minute increments? You know, how do they bill? And what does that look like? And then asked if they charge flat rates for certain services like setting up an LLC, asking them what their typical turnaround time is on inquiries and how they best like to communicate. If you text them a question, you get charged for that, if you call email, what's the best way to get ahold of them? Tom, I don't want to give you the scraps again. So I'll make sure you get in here

Tom:

I’m coming up with some fresh stuff. So some Attorneys Offices, there might be multiple attorneys. So here's an example of a question I like to ask him. If there's multiple attorneys, you know, is there different rates, so if the office perhaps has multiple attorneys, maybe there's a younger associate, that they do more template work, or more kind of bread and butter work at a lower rate? That's something to ask us, you know, are there many attorneys that I have resources with, because you know, with law, there are different types of specialties. So perhaps, if you are one a slightly more expertise on particular areas, it could be a bigger law office that has more resources versus a kind of a one man show or one woman show that's that's doing all the different work.

This is just a way to evaluate different attorneys and what their resources are. I would also ask them about some specific use cases that they had, in working with investors, have they done the initial contract work upfront in structuring funds? Have they done any work as it relates to dispute management with property managers or contractors? Have they done any work as it relates to eviction is just kind of go through their repertoire of what they have competency in, in law? And just let them speak? Kind of get them started? And let them talk about it?

Michael:

And I think it's fair to say, Tom, would you agree that most attorneys during this kind of interview phase are not going to charge for their time?

Tom:

No, I would be overt and clear that, hey, you know, I'm in the process of evaluating. I'm speaking to two other attorneys, and may or may not be speaking to two other attorneys, but that's between you and me. And just let them know that you're kind of in that evaluation phase.

Michael:

Yeah. Yeah. I totally agree.

Emil:

Solid.

Tom:

And references, references, get some references. Love that, you know, can't say that enough. for everybody. That's like, honestly, the biggest sort of BS detector is if you can get a reference who isn't their grandmother, or niece or nephew or whatever, you get a real reference and talk to them.

Emil:

Solid. I don't have anything to add. I'm glad you guys. One note I had was expectation setting. But I think Michael, you talked about it like, like, let's say you decide to work with them, if you email or call or text, like, are they going to charge you for those 15 minutes, or whatever it is? Or like, you know, for smaller stuff? Within reason, right? Like, if you're emailing them every week or something, okay, it's probably fair that they charge you but like, if you have a question every couple months, are they going to like charge you or that kind of just part of working with them? Anything else? Add here, guys, before we wrap up?

Tom:

I think that's good.

Michael:

I think that's good. And I would say, you know, if you're questioning it, just go reach out. It's one of those things like legal and accounting is one of the two areas where it's kind of a pain in the butt because they're expensive to deal with. But the things that they'll be able to do for you and answer for you are well worth the expense. And we are not experts, as real estate investors in the law. We are not experts, as real estate investors in accounting. So we need to go find people that are and finding good ones, they are well worth the cost. And so just kind of bite the bullet and keep track of those expenses because they are all deductions.

Tom:

Yep,

Michael:

It often ends up paying for itself in the long run. And this is your and your family's financial future. And so don't skimp out on a couple hundred bucks of an attorney to try to go do it yourself to then potentially have a get messed up down the road. It's a small expense in the grand scheme of things when it comes to the risk that's being mitigated.

Tom:

Pennywise pound foolish Don't be penny wise pound foolish.

Michael:

That's right. That's right. Man I should have been an attorney.

Tom:

Let's go study bird law.

Michael:

That's right, bird law!

Emil:

Cool. So let's wrap this one up. We're doing a little giveaway for people will leave us review right now we're at 93 ratings on Apple podcasts. And we're trying to get over 100 so the next 10 people will leave us reviews. We're going to randomly select two people and send them some cool stuff, maybe some books and some some swag and stuff like that. So if you haven't already go leave us review on Apple. We love hearing from you guys. And as always, we'll check you guys out in the next episode.

Michael:

Happy investing

Tom:

Happy investing

Michael:

Hey everybody, welcome to another episode of The Remote Real Estate Investor. This is our weekend wisdom episode. I'm Michael album and joined today by Tom Schneider and Roofstock CEO, Gary Beasley.

Theme song

Michael:

So, Gary, we want to ask you a question about what is your favorite metric to use when evaluating properties? And how do you think about that metric when it comes to total return.

Gary:

So I like to think of single family rental homes as sort of like a bond that's indexed for inflation with an equity kicker, and I'll explain what I mean by that. And the reason I think it's particularly relevant right now, is we're in a low interest rate environment, people do feel like with all the money we've been printing over the last few years, there is a potential for inflation down the road. So you want to think about what kind of investments could potentially be inflation hedges in case inflation. And the Fed has said, we're gonna keep rates low, and we're not so worried about inflation, so we're not gonna be as aggressive in raising rates.

And then you've got this equity kicker element in homes, which is really the appreciation component of it. So let me tell you what I mean. So the bond component is that the cash flow that you could generate from the home when you own it, and that's like the bond piece every year, you could raise the rent to at least keep up with inflation, because their annual contract. So if there's a lot of inflation in the market, you can raise the rent. So if you had to sign a 10 year lease that was flat and inflation went up, you would be in trouble. So you've got that annual indexing.

And then you've got the capital appreciation piece, which if the property goes up, you know, 3%, a year or 4%, a year, which is historically has done over the long term, you get that capital appreciation piece, like you would get, say, in a stock with a stock value going up, you've got the value of your underlying asset going up. And what's nice about real estate, unlike with stocks, which are harder to, in most cases, put leverage against unless you have a margin account, anyone could get a loan for a house. And so you could get a 70 or 80% loan on the house. And I like to give a you know, very simple example, if you have a home that basically just covers its costs over, say, a five year period, but it goes up at three and a half percent a year and you have an 80% loan on it, you could get a 14 or 15% annualized return on that, because you've got someone else paying down your mortgage and creating principal value, you've got, you know, you're you're riding the property value along, and you're getting kind of four to one leverage on your equity.

So when you sell it, your annualized return over that period can actually be quite high, even if you're not pulling money out or getting current return along the way. So when I look at investing in homes, the yield is one component of it. But I'm really more of a total return investor, I don't necessarily feel like I need to pull the money out every month and then spend it or put it into something else, what I'm trying to do is create value in that asset. And so I like the idea of having someone else pay down the loan balance for me, and create value over time just by getting that exposure to housing, and letting the market be your friend. And then at some point in the future, if you decide to liquidate it, you've got a lot of hopefully embedded equity value, that's when you could sort of realize the benefits of that investment.

Michael:

That's a great kind of analogy and pictorial representation. Can you talk just real briefly about how a bond works if somebody wanted to go buy a bond, so that way they can compare that investment versus real estate? How does that traditionally work?

Gary:

Yeah. So when you buy a bond, what you buy is a coupon on that that bond, and then you get your money back. So you could buy a municipal bond or Treasury, something like that. And let's say you get an interest rate on that bond of 3%. And you buy your hundred dollar bond, and you get $3, every year back. And then at the end of that term, you get your hundred dollars back. That's the entirety of your return. And that's a 3% annualized return, because you're getting your 3% every year, the difference between like a bond and a single family rental home, which you might be able to get a similar kind of return every year on a home, but the value of the underlying home is going up. And so then instead of getting $100 back, maybe you get $120 back, right and so that's where that's that equity kicker piece that I'm talking about. That's over and above that bond piece.

Michael:

Already, everyone that was our quick weekend wisdom a big big, big thank you to Gary super informative. If you enjoyed the podcast, please feel free to leave us a rating and review wherever it is you listen to your podcast. We look forward to seeing the next one. Happy investing