If I Had to Start Over in Real Estate Today: What I’d Do

If I had to start over in real estate investing today, would I take the same approach or do things completely different? With mortgage rates the way they are today, how do you even find deals or get financing that makes sense? And once you've bought your first rental, what are the next steps to go from one property to two? I'll be tackling those questions and more in today's question and answer episode. Let's get started. Hey, welcome to the podcast, Real Estate Investing with Coach Carson. I'm your host, Chad Carson. You can also call me Coach Carson. And in this show, I teach you how to use real estate investing to achieve financial freedom so you can spend your time doing more of what matters. So I'm going to jump right into these questions. And by the way, all of these questions came from those of you on Instagram and Facebook who submitted questions to me. I did another episode about a week ago. There was Q&A as well. And all of those questions were from YouTube and also from my rental property mastery community. If you haven't heard of that, that's my private community where I do coaching and teaching and we help each other on our journey to financial freedom as small money real estate investors. So if you're interested in that, you can see a link in the podcast and the YouTube description below. But this first question comes from someone on Instagram named dbull110. That's their username. And I love this question because it's all about what I would do if I started over. And so the question is, if you had to start over today, what would your strategy be? And would you take the same approach? Would you do something different? And so what I think the way I'm going to answer this question, I'm going to tell you what actually happened, kind of a summary of my journey, how I got started, how I grew and got to financial freedom, just kind of a quick version of that. I'm going to tell you the kind of pattern that I think worked that is worth replicating. And then I'm going to tell you how it might pivot and change a little bit. There's some things I think I would do the same, but there's definitely some things I would change today if I had to start over. So my story, I started in 2003. I was 23 years old. I graduated from Clemson University. I played football there. I thought I would go to the NFL. That didn't work out flat on my face. NFL was not a dream that didn't happen. But I also was a pre-med major. I thought I would go to medical school, but I was so burnt out that I decided I'm just going to take a break. And I had a family member, my dad, who had been at rental properties. And so I started reading books from his shelf and was interested and intrigued by being an entrepreneur, not having a boss, doing my own thing. And I owned my Toyota Camry free and clear, and I didn't have any debt from college because I got a college scholarship. So I had the opportunity. I didn't have a lot to lose to become an entrepreneur and just jump into it. I thought I would go back to medical school or do something, a real job down the road, but I loved it so much that I've stayed in it for 22 years. And my very first dabbling in real estate investing, though, really wasn't real estate investing at all. It was not investing because I didn't have any money. What I was really doing was being a deal finder for other people. You can call that wholesaling is one way of thinking about it. But I would find other investors. I would have a network of investors who were looking for deals, who are either buying rental properties or fix and flips or both. And I would go out and find deals for them. Sometimes I would put them under contract and then sell my contract to them for a fee. Sometimes I would just be a bird dog and say, hey, here's a deal. If you buy it, pay me a finder's fee. I would make a couple thousand bucks or a few thousand bucks on that. Other times I would buy it and then flip it to them after buying the property. So that is the business model of flipping properties, but it's more like inventory. It's like you're in the sales business. You're not necessarily owning the properties. So I had a business partner when I did that. We're still business partners 22 years later. And I survived because I lived in the spare bedroom of his house for about nine months because we didn't make any money for the first nine or 10 months of our business. And so I had to live off savings, live off, eat ramen noodles. And I loved that time looking back about it. There's not a lot to lose for me because I didn't have a family or anything else, but it was exciting because I had these dreams of one day having financial freedom and passive income. And I was just doing it. I was out there living this goal and it was not easy, but I loved it. It was a lot of fun. But eventually we started making enough money to pay some bills with flipping and wholesaling. And we got into also fixing and flipping houses. And so instead of selling it to another investor, we figured out how to get private money from other investors who were just more passive investors. They'd loan us the money at 10% interest. One of my lenders was a guy named Dr. Stone. Louis Stone was a professor of mine at Clemson, also did rentals. So I went to him with the idea of, hey, if I find a deal that's worth 150,000 and I can buy it all in for 100,000, including all the repairs, would you loan me a hundred thousand bucks at 10% interest? And he said, yes. And I taught him how to use his self-directed retirement account. So he had some money sitting in the stock market or in CDs or something. And I had learned how you can use retirement accounts and with particular custodians who let you direct it and loan it to other investors and also buy rental properties. And so he loaned me money and that became a source. He and other investors of our money to flip houses. So wholesaling, flipping houses, flipping houses allowed us to make 20 or 30,000 bucks per deal instead of like five or seven. So we're able to do fewer deals and make the same amount of money. And we accelerated that 2003 to 2007 was a great recession. We had 33 closings in one year in 2007, got really good at finding deals, but we made a bunch of mistakes too. And some of the mistakes were buying in wrong locations, getting over our skis, trying to do too much too quickly. The positive thing we did though, was we used a lot of private money, seller financing. We didn't use a lot of commercial debt. I was just nervous and kind of paranoid about that. I'd heard stories like Dave Ramsey, even back then, borrowing commercial debt and how the banks can in a bad, in a downturn could pull the rug out from under you and take it back. So we didn't have much commercial debt and we're able to sort of survive through 2007, eight and nine by pivoting our strategy and really buying and holding more. So we evolved into like from the, if you hear me talk about the stages of real estate investing, the starter phase for me was wholesaling, flipping. And then I got into rental properties two or three years after that. And especially like 2006 and seven. And we started holding them mainly with creative financing by getting like seller financing and putting a small down payment or, you know, getting lease options or private money. And we had to get creative to do that because we didn't have DSCR loans back then. That's what I'll talk about in a minute. I'm probably going to use that more, but the bottom line is we bought more rental properties as well. And in 2007, eight, nine, during the recession, we had to just become full-time property managers of our properties because we had like 60, 50 or 60 units at that point. Small multifamilies was something we sort of started dabbling in, in Clemson, where we are. And so we started doing like college student rentals and we had to learn the management business. So the active income that we were generating was still wholesaling and flipping. We also started getting a little bit of money from our cashflow on our rentals. And we also learned another strategy called wraparound financing, where we would buy a property from a seller who owner financed it to us at 5% interest. And then we would get permission in our contract to also be able to sell it to our tenant and they would give us $10,000 or $15,000 down. And maybe we sold it to them at 15 or 8% interest. So we had a spread just like the banks do between the money we were financed from the seller and then the finance that we financed to our buyer. And we would make these three to $500 spreads on those deals. So we had a lot of things going on. But eventually the thing kind of got us out of the rat race was building wealth, was owning, was doing value add, multifamily properties in Clemson where we are, and just some of our rental properties in good locations growing and growing over time, just holding them until the rents got bigger. We had fixed mortgages and the cashflow was up and down a lot early on. And we were very nervous, especially during 2007 and eight. So we never really depended on it, our cashflow until about 2017 when I really knew at that point, this is when my family and I went to Ecuador to live for 17 months. We had an internal property manager who she was, started as a bookkeeper, started helping me manage properties. And I taught her a lot of the systems we used. And so I was able to not have to work actively in the management part of the business. And I would still do these underwriting and some other things, but it might be like three to five hours a week remotely wherever I was. And then we had our rental property still generating cashflow. And so that was sort of the breakout period of being a harvester where we started focusing on simplifying our investment portfolio, selling some properties, and then also reducing risk, paying off some debt, and which still continues to today. Our portfolio looks very different today than it did back then. We have a lot less debt than we did. We still have some mortgages, but instead of 70% mortgages, we might have more like 15% or so, 15, 20% of the value of all of our portfolio in debt. And so that's a big change. So that's sort of the, there's a lot of details there, but that's the journey. The pattern that worked that I would not change was, and this is something that maybe you can think about too, is when you start, I think you have to focus on cashflow first, but you have to focus on it from an active income standpoint. I think the thing that a lot of real estate investor teachers miss is they say, well, you need to focus on cashflow deals first. Maybe, maybe you need to wholesale. Maybe you need to do what I did. I don't think most people should do what I did though. Wholesaling is a tough business. It's a sales business. Like I was having to negotiate and make dozens or hundreds of offers to get one deal. And it's very much a rollercoaster business. It's just a business. Many of you have jobs that make a hundred thousand bucks, 200,000 bucks, 300,000 bucks. I would focus on whatever the easiest way that you can make active income, regardless of whether it's real estate investing or not. That's where the first step happens. So for me, that was flipping and wholesaling. But for whatever it is, the first stage is active income. The second stage then is wealth building. So you take some of your active income and plant seeds of wealth building. So this could be long term rental properties. It could be value add deals. If you want to do like burst strategy or something, but you need to plant seeds, not just flipping houses. You need to keep some stuff so that they grow. And these, I call them fruit trees. And you plant these seeds, the fruit trees grow. It takes some time, five, 10 years sometimes or more, but eventually that fruit tree produces fruit in the form of cashflow that you can live off of. And then you get to the harvester phase where you start pruning off. You can't just keep everything. Sometimes you sell off the weaker properties, the properties that don't work so much. You pay off your debt. In some cases, I'm a big advocate of that. You reduce risk. You're not just trying to grow, grow, grow, grow. You're trying to stick around and actually survive for the rest of your life financially. So those three stages I think worked well. If I had to change though, here's the whole point of this conversation. In my active income stage, I don't think wholesaling was the best fit. Even for me, who's a pretty good negotiator, pretty good at actively finding deals. I think I would get my real estate license and be a commercial real estate agent. I think I would have been much better off doing that. Number one, it's easier to get paid when you have a license. I can still wholesale properties. I can talk to a seller and say, hey, if I find buyers, would you be willing to pay me a finder's fee? Or would you allow me to get a finder's fee of 5,000 bucks? Or just do a listing agreement with them saying, hey, if I sell it, will you pay me 10,000 bucks, 15,000 bucks, something. So it's easier. It's a more traditional path to get paid than wholesale. Wholesale has been outlawed in some states. I'm not saying it's not illegal in every state, but it's just a tougher road to hoe, I think, than just getting my license. Then I would also focus on more commercial properties. I negotiated really hard and got pretty good at negotiating on $50,000 properties, $100,000 properties. Nothing wrong with that. It's a good place to start. But I could have done the same strategy on $500,000 properties or $1 million properties or more and got commissions and brought in buyers and negotiated leases for them, negotiated purchases for them, the same seller financing I negotiated on little small single family houses I negotiated on multimillion dollar properties. And I could have made a lot more money with the same amount of effort. And that would have accelerated my journey because my goal is to buy properties for myself. And so I could have made active income with the commissions. And then while I'm looking for those deals, I could pick out some deals for myself that worked, that I could do value add, that I could keep. And I think I would have accelerated my journey by doing that, by just making that pivot. Flipping wholesaling is great. I think the commission business of real estate, especially in the commercial world, is to me the best business model for myself that would have really done well. I wouldn't have changed the middle part though. I think small multifamily value adds would have been the approach I would have taken. I probably, I would have been agnostic in terms of what type of property I bought because every market's a little bit different. Every cycle's a little bit different. I ended up buying houses, mobile homes, small multifamily properties. But these days I would be open to RV parks. I'll be open to short-term rentals. I'll be open to rent by the room. I wouldn't try to do all those at once, but if I saw a little niche in my market and that was working, I would start looking for deals. Then I would go all in on that and start focusing on it. And that might be my wealth building kind of transition from the active income of commissions to actually having some cashflow that comes in every month. Even if it's not completely active, I'm having to work to manage those properties. But that recurring income is the game changer. So commission or flipping houses or your day job, you have to go back to work to get paid. When you have a recurring income from a rental property, a short-term rental, midterm rental, long-term rental, that money can keep coming in month after month after month. And so that's the bridge to the harvester phase, which I would still do very similar. I think after seven to 10 years of working in this commercial agent, buying my own deals on the side, I think I could then start harvesting some properties. I might start paying off the properties that weren't as good. I'll call that pruning your portfolio. I'll do the same thing of paying off some debt and figuring out which properties, which debt to keep, long-term low interest debt and which properties to pay off. And I'll just start simplifying and reducing my risk. I wouldn't change anything about that. And the cool thing about once you get into the harvester phase is you're not done growing. I look at it as like you're carving off this little, you can think about like a little fortress and you're saying this part of my portfolio, I'm not going to go backwards on. This is going to be very low risk. I don't want to lose this. And then once you've got your fortress, you can leave the fortress and you can go out and flip houses again if you want, or make more money if you want, if that's what you want to do. But what I also think is cool is once you have that fortress and you have this income, I call it an income floor. I'll borrow that idea from other people, but you have this income floor, just paying for your basic expenses. Then you can choose whatever you want to do. What do you want to do when you grow up? And for me, partly it was starting new businesses, traveling with my family. I like taking many retirements. And so that's still, I would still do that as a part of my journey. Every four to five years, I would try to take some kind of break of a month, two months, a year, year and a half. That was the best decisions I made in my first, in the journey that I did take. It was so amazing. It slowed me down a little bit in the, um, technically I, you know, I stopped buying properties for a year, year and a half, but it was mentally, emotionally for my relationships, the best thing I've ever done. So I highly recommend that because this is a long journey, you know, going from scratch to financial freedom, even if it takes 10, 15 years, which is kind of short in the, in the long run, uh, compared to most people trying to retire. It's a, that's a grind. And so grinding yourself for 15, 20 years is not my chosen path. I would rather take some breaks, pause a little bit. The quote, the metaphor is you're climbing a mountain, you know, take a picnic, start, stop for a little bit, take a nap and enjoy yourself, recover a little bit, and then take off and go again. And you can always keep growing, but you can't take care of yourself, your family, your relationships. If you break those things, they're done. So that's a long story short, how I would do things differently. In summary, my pattern would be very much the same starter wealth builder harvester. I would tweak how I make my active income and I'll be opportunistic on the wealth building phase of what strategies are working today. What strategies are working my market harvester phase would be very similar. And I look at what deals I want to harvest out and then, uh, try to achieve financial freedom and have income coming in for the rest of my life. That was a long answer to that first question, but I hope you found that helpful. My second question comes from Jonathan Swanson. He was on Facebook with this question. He's also a member of my rental property mastery community. He's a coach in our community. Also a really awesome agent investor flips houses down in Wilmington, North Carolina. Anybody's looking down in that area. He's a good guy to get connected with and his question though, is what do you think will happen to mortgage interest rates and how do you get financing for long-term rentals now? So I'm going to answer this a little facetiously, kind of a little sarcastically by saying, I don't try to predict interest rates and I'm not, I'm not good at predicting in the first place. I don't know that anybody is, but I don't try to predict interest rates. I just try to prepare for whatever's going to happen. I think that's the best approach. I compare it when I used to play football, I was a linebacker and, uh, we'd have these big 350 pound linemen always trying to block me. I was right in the middle. I was a middle linebacker. And so I learned you always had to have your head on a, on a swivel, but you had to be looking because somebody's about to attack you from the side and they're really big and strong and they grabbed you. You're in trouble. Um, I find like real estate investing and preparing for economic changes is very similar. You just got to be prepared for whatever's going to happen and you don't know exactly what's going to happen. So if interest rates go down, I think we should be prepared. For example, if you've been buying properties last three or four years or two, three years, and you have seven or 8% interest rates on your mortgages, if they dip down to 5% or 5.5% or 6%, if it's a one or 2% below where you are right now, be prepared to refinance. That's, that's the game. And you want to pay off those properties and save money on interest. And then, but then if interest rates go up, then you look like a genius because you had a 7% interest rate when interest rates are 9%. And so either way, I think you have to be just prepared for the long run. You got to be prepared for them to go up, prepare for them to go down. But the main question, I think the important question that Jonathan asked that you might be asking too, is how do you get the financing to work? So, you know, it was a lot easier when you bought a property before you could put 20% down, get a four and a half, 5% loan as an investor and actually make a cashflow. And many markets today with the rent to price ratios that exist, those are the realities that you can't make a cashflow very well, putting 20% down and then trying to rent the property out. You have a negative cashflow. What do you do about that? The short answer to that is you borrow less money. You can't put 20% down on and pay retail price for it and still make a cashflow. So what do I mean by that? How do you borrow less money? Well, one way to do that is make a bigger down payment. So you could, instead of a 20% down payment, maybe like a 30% or 40% down payment. And the lower your debt gets, the lower your payment will get. And so you can then have positive cashflow. Do this mental exercise. If you paid a hundred percent cash for a property, I'm not saying you have that much money, but if you did, would that property cashflow in many cases? Yes. If you have no debt on the property, it will cashflow. Anything will cashflow almost if you just pay cash for it. Now, does that mean you should do that? What's the negative of paying a big down payment on a property? You're going to have a really low cash on cash return. Well, that is the reality of where we are today. And the reason that's the case is think about the interest rate. The interest rate is 7%, 8%. And if you look at the actual cashflow on the property, the cap rate or the unleveraged yield on that property, it's often if you're buying a single family house or something, 5%, 4%. And so you have a negative financing on that property. The property produces 5% and your financing costs 7% or 8%. So it's negative. You're losing money on your financing. That's just the reality of what the market we're in. And so the only way to reconcile that is to make a bigger down payment. And so you've got to make your money somewhere else. If you're not making money on cash on cash return, you've got to make your money by buying the property at a lower price. You can't just pay retail price all the time. Try to get it at a 10% discount, a 20% discount. Try to negotiate deals where you get a lower interest rate. There's some builders out there that you can negotiate to get instead of a 7%, 8% interest rate, they'll buy down your interest rate to 5%. I have a friend named Arion Shihai in Houston, Texas. He also works at Austin and Dallas, and he's built these little small, he's partnered with a builder, and they build these small townhouse developments or single family developments where investors buy the properties and then the builder buys down the interest rates for these investors so that they can cashflow them. And so that's one little niche that works where you negotiate down the interest rate. So you have to get the debt cheaper. That's the theme. And so getting the debt cheaper is negotiating the interest rate down, which is sometimes possible with traditional investing, or getting seller financing where you can get a lower interest rate, or just borrowing less by putting a bigger down payment or buying the property at a lower price. So if you have a $300,000 property that you can buy for $210,000, then even with a, you might be able to put 20% down and only have to borrow $150,000. And that deal could work because of that. So that you have to get more entrepreneurial, more creative. You can't just go do the regular old thing, pay the full price, put the 20% down, and still make a cashflow. That is not historically the way things have ever been in real estate investing. If you look at the traditional interest rates for many, many decades, it's actually been around 6%, 7%. That's been the long-term average. So if I were a good predictor, I would say we're probably going to be floating around these interest rates for a long time, maybe dipping down every once in a while, or at least that's what we should prepare for. And so we've got to figure out how to be good real estate investors, make it work by either buying low, borrowing low, being entrepreneurial, negotiating with lenders, negotiating with sellers. That's the name of the game. If you can't do that, if you can't make that work, you can't make real estate investments work today. The next question comes from frugally fit and natural on Instagram. The question is what are the next steps after buying your first rental property? How do you go from number one to number two? So you remember, I talked about earlier how I had these stages of real estate investing that I learned from Pete Fortunato, by the way. So give a shout out to Pete. He taught about how you always begin as a starter, doing your first deal or two, go into the wealth building phase where you grow from a small nest egg into a big nest egg. Then you get into this harvester phase where you actually start learning how to live off your rental income and harvest that equity that you have. And so the question here is about that starter phase and this kind of going from the starter phase to the builder phase in those first deal or two. And so I'm going to give you a couple of thoughts about how to go from one to number two. The first thought is to take a pause and just take a break, take a deep breath. This is advice I got from one of my mentors, John Schaub, who wrote a book called Building Wealth, One House at a Time. And his advice always that you want to give a little space between the first deal you do, the next deal. And that space could be a month, could be a couple of weeks, could be, you know, a year between a deal. He likes that the goal make at least just buy one deal per year for the rest of your life and you will become very, very wealthy. And so taking that break is actually good advice because some of us, we get so itch itchy that go by the next deal, the next deal, the next deal. But it doesn't allow you to actually do the next step that I would recommend, which is learning from your first deal. I was very guilty of this mistake. I bought a lot of properties early in my career and I never gave enough space to learn from the first deal. So I made the same mistake like a dozen times instead of learning and getting a little bit better. So my during that pause between your first deal and your second deal, take notes on things you did well, things that didn't go so well and be reflective, get advice. If you're in a community like mine and rental property mastery, get feedback from other people about your numbers, about the location you bought in. Did you estimate the cost correctly where your expenses that you put into your spreadsheet, the right ones, or did they actually a little bit under or maybe over? And so you learn a ton. I always tell people I'm an, I'm a teacher. I hope you get a lot out of my YouTube videos and podcasts, but you're going to learn a hundred times more on your first deal than you will ever learn from watching my videos. And that's just the reality of, it's called a school of hard knocks. Like you get in there and you get burned and you learn things. And so don't get burned too quickly, right? Just learn from the first deal. You're always going to make mistakes. And then my goal for you is that between that first deal and your second deal, you're learning, you're studying, you're listening to podcasts, you're in a community, maybe you're reading books and then try to improve just one or two things on your next deal. And usually those one or two improvements come into the category three, one or three categories. Acquire it, get better at acquiring properties, get better at financing, get better at property management, just rental ownership. Those are the three core skills of being a rental investor. And so you can find one little thing that you improve. And so maybe for example, when you acquire properties, last time you just paid retail price for it. Maybe you try to buy it at a 10% discount next time. So you try to get a little bit better at the discount and on the financing, maybe you, you know, you try to negotiate the interest rate down a little bit. You shop around a little bit more with your mortgage broker. Maybe you find a different product that you didn't know was out there. Maybe you learn to use seller financing and you end up buying a property with seller financing. That'd be a kind of a big leap. That's kind of a 201 level learning strategy. But the point is get a little bit better and a little bit better with every single deal. And by the time you do five or six deals, your knowledge will have compounded and gotten better. And that sixth deal is going to be much better than the first deal if you, if you take that approach. And so going from one deal to two deals is actually, I think a lot easier than doing the first deal. Probably the hardest thing is being patient with yourself because very often the gap between the first deal and the second deal occurs because number one, you have to save some more cash. Maybe you don't have enough cash, but you've burned through all your cash. And now you've got to save up some money for the next one. It just takes time to do that. Or, you know, you could buy another deal and another month or two, but you, if you don't have the cash to do it, this is how I bought properties. But what I had to do is find really good deals. And so really good deals might not come along all the time, especially if you're doing it part-time. So you might have to wait and make offers on 20 or 30 deals to find one that you can buy at a 20, 30% discount so that you can then do a bird deal, a bird strategy and, you know, fix it up, refinance it, pull all your cash back out, or most of your cash back out. And so all of those are, you know, the realities that are going to take time. So my last message about this going from one deal to two deals, just be patient with yourself, especially early on. It's like riding a bike, right? You're, it's not easy when you first start, you're going to be a little wobbly. It's going to take you longer to do it, but over time, you're going to get better. You get more confident. You're the next third time. And the fourth time you get on the bike, you'll, you'll get on a lot faster. Same way with real estate investing. So stick with it. Yeah. You've done well, getting the first deal, pat yourself on the back, learn a little bit, grow, get better and go from one to two to three to four. And just keep on rolling. The next question comes from Instagram. Again, it comes from the FI professor, who's actually Daniel Mills, who I interviewed on this podcast, not too long ago. One of my favorite interviews of the year. He lives in Japan, invested in the United States, really awesome story. So you could check out his interview, but his question is how can we optimize our portfolio? What actions can we take quarterly or yearly to do that? So I'm going to go back to my journey that I've told you about several times in this episode, where you begin as a starter, you turn into a wealth builder and grow your wealth. And then you start harvesting your wealth is the classic activity of going from a wealth builder to a harvester. You got to become more of a mature, a real estate investor is this exact question that Daniel's asking of optimizing your portfolio. So a lot of times early on in your career, you're focused on grow, grow, grow, buy, buy, buy. But as you mature, you need to start working also on optimizing, making things better. And sometimes that means selling property. Sometimes that means refinancing. Sometimes that just means working on your systems. I almost think about it like a mechanic works on a car engine. You know, they're always tinkering with the car engine, like tuning it up, making things work a little bit better. That's a lot like our portfolio. And the more you tune up and work on it, the better it'll get. Like my business partner and I, I'm going to give you a list of some of the things we've been doing for many, many years. It's been a long, you know, decades of tinkering and working on it to get to the point where the engine's humming and it's, but it's never going to stop. Like an engine always has to be tuned up, but it gets a lot easier over time. So Daniel, here's a few things I like to do on a regular basis, quarterly, monthly, yearly. The first thing I do is I have what's called a KPI spreadsheet, key performance indicators. And anybody who's in business has probably heard of this. A lot of businesses do this. And it's basically, it's almost like a dashboard for your business. And in this case, I do this for my coach Carson business. I do that for any business I'm in. But I have it by real estate vesting business. It's a spreadsheet that shows me just the key numbers. It's almost like taking a pulse of a patient. If you're a nurse or a doctor, you just want to know like the most important, like life threatening or life healthy indicators. And by the way, I have this, this KPI spreadsheet, if you want to borrow it. This is part of my 30 days to a better rental investing course is day number 30 is when I talk about how, how I do this. So if that's something you're interested in, you want to get it, I'll be linking the podcast and YouTube description to get that course. But I'll tell you what's on that spreadsheet. If you want to make your own version of that, the first column I look at is the actual amount of rent we've collected on all of our properties. So this is a summary of my entire portfolio. I'll look at total rent collected. The next column is total rent that I expected to collect. So I'm hoping that's usually in the 98 to a hundred percent range so that if it's at 90% one month or 85%, I'm like, all right, what's going on? And I'll dig in. It's called exception reporting. When you have an exception, something that looks not right, it's like a red flag. And you say, all right, that doesn't look right. Then I'm going to start calling my property manager and looking at their property manager reports, look at each property. And so I have this high level dashboard that tells you rent versus rent expected. If that's normal, then I don't do much. I just look at that and move on. The next thing I look at is all the expenses for the month. So including, we set aside taxes and insurance money every month, and we pay those once per year, but we look, you know, subtract that, all the maintenance, all the management fees, any other miscellaneous fees we have to get to a net operating income for the month of our company. And then we deduct our mortgage payments to get a net income after financing number. And so those two numbers are really important. Those are, you know, the cash flow of your business. And then we then look at the net cash flow after like all of our administration. So we pay ourselves, you know, we distribute money to the owners. We have to pay some CPA fees. We have this kind of company level expenses that aren't just their general expenses, not property expenses. And so we look at those as well. And so all these are just summaries and I get these from my QuickBooks file. So we have a bookkeeper who does our kind of month to month bookkeeping. I used to do it all myself up until a couple of years ago. I was really good to hire a bookkeeper that makes it so I can focus more on the high level stuff. And so I go through all that spreadsheet and also look at how much cash we have in the bank and cumulative cash flow for the year. So it's kind of from high level rent, expenses, NOI, net income, cash flow for the month over the company level, cumulative cash flow, and then how much money is in the bank. Those are the things that matter to me the most. If I can see those at a snapshot, that might take me 10 minutes to look at all that. And if it looks good, I just kind of move on with the month. But that's a way to optimize my portfolio in the moment. That's kind of a current optimization that I look at. The next thing I do is like kind of, this might be a quarterly, maybe a yearly basis, is I've been going through all my properties and doing what I'm just think of as like a property analysis deep dive of my existing properties. And some of these I'm actually sharing on the YouTube channel. If y'all like those, let me know in the comments. I'll do more of those. But for example, I showed my very first rental property that I bought over when I did the video was 17 years later. And I showed a few things. Here's what I look at, Dan, when I'm trying to do that deep dive. I look, number one, at the profit and loss per year for that property. So from the time I owned it all the way till today, year by year, income, expenses, including capital expenses, all the way down to the net income number at the bottom, and year by year by year. You learn a lot by seeing like the flow of cash flow. I've learned that most of my rentals didn't make much money in the first year or two because they were kind of getting stabilized. Then over time, they've done better. Sometimes they don't though, and that's where the learning comes in and the optimization comes in. You might need to tweak something or sell the property. So P&L by year, number one. And then I do a pro forma, meaning a 10-year analysis of P&Ls. So I look at year by year by year what I think will happen over the next 10 years, and I just try to use some guesses on the growth of rent, the growth of expenses, try to be conservative on that, and then see how much cash flow we're going to make for the next 10 years. That's step number two of that deep dive. Step number three is that I then do an internal rate of return, both historically and forward-looking. So I'll take historically, like how much did we invest in the first place, and then how much is the property worth today if we were to sell it today and take out all of our equity, what would that return on investment be, including all the cash flows plus what we could sell for today. And just look at that number. That's interesting. That's a historical-looking number. Probably the more important optimization number though is looking forward. And if I look forward and see that on the equity we have in the property, we're going to make a 15% return estimated going forward, that's probably pretty good. Even 10% for me these days is pretty good. If it starts looking, I have one property right now that I just ran analysis on, because we have really high maintenance expenses on this property and we haven't had the rent increases that we've had in some of our other properties, it's like a 6% to 8% depending on how aggressive I get with my numbers. That to me is kind of an alarm flag because it's like, all right, I could probably do a lot better. I need a big hurdle to sell a property and to do something different with it because there's a lot of friction there, but that's an optimization step for me. Daniel would be like, all right, I need to really think about that and see what else I want to do. The other thing I might be able to, so selling is one optimization I might do when I look at my properties. The other might be refinancing strategically, just saying, hey, that interest rate's too high or the amortization's so high now it's kind of late in the amortization, maybe I can refinance that or just pay the debt off and maybe that'll make the cashflow better. And I'll look at that and look at what would I do, how would that change the internal rate of return, my return on equity if I were to do that. So number one, KPI, number two, property deep dives, property by property. And then kind of related to the property deep dives, I have a property pruning list where it's basically the opposite of a top 10 favorite list. It's like your top 10 worst or your top five worst. Now what's your worst property that you would sell if you had to? And this is something good for you to know so that you can strategically start working on that. Or also if something were to happen to you, you might tell your spouse or your business partner, here's the ones you want to sell first, don't sell these other ones, these are our best properties. And so I kind of make a hit list, a pruning list. And over the years we've just pruned, pruned, pruned, sold those properties, either do a 1031 exchange, put that money somewhere else, or sell it, just pay the taxes in some case, pay off debt on other properties, and then in some cases strategically refinance the property to make it better but then keep the property itself. All right, the last thing, those are all about the properties. The other thing that's probably just as important is this idea that I learned from the e-myth, the first book I ever read as a real estate investor is about business. And Michael Gerber in that book used to say, you don't just need to work in your business, you need to work on your business. And so this is again thinking about your business like it's a machine. And you don't want to just be the one tinkering on the machine, you want to be like stepping back and thinking, all right, big picture, is this the right machine? Should I switch to a different machine? Or it's thinking about systems, processes, team. And so I like to think about that like when you're doing something in the business, also be making a checklist so that somebody else could do that. Or asking yourself, could I automate that? Or do I even need to do that at all? And like thinking about the business from a higher level. And then also doing the same thing with team members. I have a lot of property managers now who manage our properties. And just regularly communicating with them and thinking, did I set my expectations right? Did I tell them exactly what I wanted? Am I staying in touch with them? For example, one time I was not clear enough about tenant screening criteria, and so I just gave them my written screening criteria and said, please use this. There's no question, these are my criteria. If you do have an issue or somebody's like close, it doesn't look like it, it's going to fit. You can always ask me, but here's the criteria. And so on the team level and a systems level, if you keep tinkering with systems to get better and better, we eventually had this operating manual, it's digital now, but our whole business had systems and processes so that we could outsource it to other people and actually hand them, like, here's the system we do. Here's the process we do. And that's how we've been able to get to more where it's two hours per week, three hours per week working on the real estate business instead of 60 to 80 hours per week that it used to be. So hopefully that's helpful for Daniel and other people. That's more of a builder harvester level thoughtfulness on your business, but really, really important when you're trying to get to the point where you can actually live off your income and not have it consume your life. So the next question actually was from two different people. One on Instagram, it was Nico Garcia in Garcia official, who's also a rental property mastery community member. One of our top members, really active. He's also a real estate agent in Maryland. So get in touch with him if you're interested in that area. And then also in Facebook, Joe Franklin asked this similar question. The questions were both about tenants and Nico's is more about, do you have any lessons on working with tenants? Think problems you've had in the past that you might do differently in the early stages of real estate investing. And Joe was asking about setting tenant expectations. My answer for the both of them is going to be the same. There's one kind of practice that I learned from somebody else that was really, really helpful. And to give credit where credit is due is actually from Mike Butler. There's a book called Landlording and Autopilot. This is the old school version of it. He's done another one that's more about using your smartphone. Really good book. But the lesson I learned from Mike was to do what's called a rent talk with your tenant. And so the tendency, at least for me, maybe this is for you too, is you get a tenant who's qualified, you're ready, you're excited, you want to get them in the property. You just send them the lease online. These days you can do it digitally. You can sign it fast. And then you leave the keys at the house in a lot box and you move on. Once they pay the money, you move on. You don't really have a conversation to set expectations. That's the mistake I've made. And I think that's a mistake a lot of landlords make. They move too quickly sometimes with the tenant screening and they just put somebody in there who they shouldn't. That's one mistake people make. The second is even when they're qualified, they don't have a conversation, a rent talk with the tenant. And so Mike always recommended, if he did it in person, he actually had these little three ring binder with slides on all of the expectations. It wasn't just pushing a lease over and saying, read this legal document and that's the rules. There's no like he translate his rules into something in stories and things that are easy to understand. And you have a 30 to 45 minute, maybe a 60 minute rent talk with the tenant. Number one, to set expectations, to get to know each other about what the rules are. And I expect the rent to be on the first. If it's after this date, it's late. Here's the late fee. You know, I expect you to cut the grass. This is a single family house, you know, all these details that you want to make sure they understand, but also they get to ask you questions. And if they have concerns or things they want to know about, you know, where the, what are the utilities, where are these things? It's just, they get to know you get to know the property conversation and it's deliberately taking a little bit more time on the front end to avoid problems on the backend. That's the key. And so I highly recommend that after tenant screening criteria and taking your time with that, this is probably the second most important landlording tip that I have for working with tenants. Once you start doing it, it can avoid a lot more problems. And so I would say it would solve some of those tricky situations that Nico was mentioning. And it would also just make your life as a landlord better and also make your tenants experience better. So they know what your expectations are up front. So highly recommend that step, doing a rent talk and check out his book. It's a good book. I haven't read the newer version, but the other one has a lot of other good tips about being a landlord and making it more systematized for yourself. The last question is going to sound kind of like somebody I planted an Instagram, but I didn't, I promise. This is when one fearless wonderer, and he asked the question, how can I join your group? And so that sounds like a plug. Cause I talk about this group a lot and it's called rental property mastery. And what I want to say is by the time you're listening to this, it actually might already be full. We have a waiting list. I do things a little bit differently with this community. I capped the membership at 300 and I do that because I like small and mighty. I kind of look at this, this that I built, not as something to grow infinitely and try to get the most people in there possible. I look at it as like a little small town and I grew up in a small town. I live in a small town in Clemson, South Carolina. I like small towns because you get to know people and you get to have repeated conversations with them and you get to know them in more depth over time. And as the coach in this community and I have other people help me out too, but I want to get to know you. I want to have a conversation with you. And so that's the reason we have hit our cap, but we do have some people who choose to leave after a year or two or three. And so we have spots coming open. So we have a waiting list on the rental property mastery for the community. And so if you're interested in checking it out, see what it's all about. I'll have a link in the podcast and YouTube description below. You can just go see all the details. And then if you are interested, you can click on the button to apply for the waiting list. And then every week or two, we'll have some spots open up. And then you can, if you're ready, you can get inside the community and join at that point. So that's the process. If you have any questions, you can leave comments here on YouTube or in Spotify. If you're listening on there, I'm happy to respond and let you know more about that as well. So you might've noticed that I talked a lot about spreadsheets and analysis in this Q&A video, and that's just part of my game. I really enjoy the analysis of properties. And actually a lot of people here on this channel seem to like it as well, because one of the most popular videos that I want to recommend next to you on my whole channel is called how to analyze a duplex rental, a real life example. And so if you want to go deep and see how I use spreadsheets, see how I run the numbers and analyze a property in depth, check out that video. If you're watching on YouTube, you can click on the thumbnail above me here, or if you're listening on the podcast or watching on YouTube, there'll be a link in the podcast of the YouTube description below. You can click on that and check it out as well. Thank you so much for watching. I'll see you in the next video.