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Building Wealth Through Real Estate with Joe Fang Part II · The Academy Presents podcast

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  Did you know that 90 % of the world's millionaires
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  invest in real estate? Well, I'm Angel with the
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  Academy Presents Real Estate Investing Rocks,
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  and I'm here to help you if you want to go for
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  your piece of that pie. Are you new? Are you
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  new to this and you just don't know where to
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  start? It's okay. Are you someone that has invested,
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  but you feel stuck, you feel like you've lost
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  momentum, you don't know where to really head
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  from here? Are you a seasoned real estate investor
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  who is doing great but maybe you just want to
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  hone a few skills here and there? This is the
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  place for you. The Academy Presents Real Estate
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  Investing Rocks podcast will connect you with
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  industry experts so that you can save time, avoid
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  costly mistakes, and begin living the life you've
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  dreamed of all through real estate investing.
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  You're already taking the first step. Just by
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  joining us here today. That is wild. So, I mean,
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  you're sitting here, everybody I'll talk to,
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  because I'm in Texas and we're like, stay away
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  from California. Do not invest in California.
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  And you're sitting here saying you've like, you
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  doubled your money in two years. That's insane.
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  So from 2003 to 2005, so you If you guys recall,
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  that was right before the bubble. And so there
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  was a significant appreciation that turned into
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  a bubble. So we got to take advantage of that.
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  So we bought our first home in 03. And even after
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  the bubble and all that stuff went on, if you
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  had stuff that you owned and you had bought it
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  at a good price, you just had to hold on to it
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  through the through the rebuild. Right. So like
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  we had our house in Lubbock and we were living
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  there from 03 to 06. Jason finished up his degree
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  at the beginning of 06. We got married a couple
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  of weeks later and then we moved to Wichita Falls
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  in 07. But we just we that house became our first
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  rental in 07 and we just wrote it out. We still
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  have that house to this day, you know, 20 years
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  later and we still have that house and it's still
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  a very good rental property and it's increased
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  in value, not a ton. But I mean, I said before,
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  we're not in these high appreciation markets,
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  but we never have been and that wasn't what we
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  entered them for. But it sounds like you didn't
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  necessarily enter it for a double up in two years.
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  Yeah. So where did y 'all, what did y 'all start
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  doing? after, like, well, I know that you're
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  buying up all these lofts. What did y 'all start
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  doing next? Well, so, well, we should probably
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  talk about what happened. Oh, okay. Right? Because,
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  I mean, that was a really tough time. So, we
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  started buying up these lofts in different parts
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  of downtown and Leastonville, you know, and enjoy
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  the, you know, the rental income and all that.
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  And we bought a really nice fancy house in the
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  Hollywood Hills. Oh, wow. you know, the stock
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  market was cranking, the real estate portfolio
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  was going up, we had all this rental income,
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  and of course, you know, we know what happened
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  right after that, right? So, 2008, 2010, we went
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  through the great financial crisis, and then
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  I got to see the other side of, you know, what
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  it's like when things are not working, right?
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  It was like the complete opposite. And so, The
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  good news is that, you know, we pivoted, right?
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  So we rented out our fancy house in the Hollywood
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  Hills and got it to cash flow or got it to pay
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  for at least... At least pay for itself. Right.
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  Make the payments. And all the other ones were,
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  again, you know, break even or better. And then
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  my wife and I ended up moving back in with my
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  parents for a couple of years. And just to make
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  sure that we can cover. And we weren't one of
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  those reckless people where we bought with no
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  money down and just kept signing up for loans
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  that we couldn't qualify for. We put 20%, 30
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  % down on our properties. And luckily, we had
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  enough equity that there was enough cash flow
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  there to cover everything. But it was definitely
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  a learning experience. knowing that you've got
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  to be careful, you have to manage correctly,
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  and you've got to do what it takes to protect
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  those properties. And sure enough, we wrote it
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  through, made it through the other side, and
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  that's that, right? Now, my wife, so something
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  else I should mention is that during the great
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  financial crisis, I did lose my job in 2009,
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  the financial services, uh industry got hit really
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  hard like many other industries and you know
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  I think I think our company in its 60 years of
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  history has never laid off anybody and they laid
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  off 20 % of the workforce without a question
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  and luckily you know I was able to get away with
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  a very nice severance package but at that point
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  um I decided that you know the corporate world
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  isn't for me I kind of like doing things my own
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  way. And at that point, we decided that we want
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  to be involved in real estate full time. And
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  be open to other business ventures. We have bought
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  a couple small business as well after that. And
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  so having been back to corporate since. And so
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  we just kept. buying up more properties and renting
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  them out and just operating the couple of small
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  business that we had and just kept going for
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  a few years. And so it wasn't until 2017 when
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  we kind of became tired of being landlords. I
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  mean, you know, my wife and I were pretty hands
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  -on. She actually fielded a lot of the calls
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  because I had a W -2 job and, you know, my wife
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  would work, she would work at, she would handle
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  the calls, you know, in the daytime and then
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  being in the restaurant business, you know, she
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  would work like late afternoon to well into the
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  wee hours of the morning, right? So she handled
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  the calls when I was at my regular job before.
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  And so I took over the handling the calls and
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  eventually just got tired of the calls. Self
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  -management. Yeah, just a little bit too much,
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  right? And so once we discovered the world of
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  syndications, it just really just turbocharged.
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  our investment portfolio, our real estate portfolio,
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  where not only are we able to leverage other
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  professionals' expertise, but it was a great
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  way to invest outside of California. You had
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  mentioned California, and it's not a big secret,
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  or it's very well known that it's a tough place
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  to be a landlord. It's definitely not business
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  friendly, definitely not. not landlord friendly.
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  So we wanted to have um exposure to other markets
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  and also in different asset types. Yeah that's
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  um people who really made it through that financial
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  crisis they've they got a story to tell. There's
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  a lot of there's a lot of people that um did
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  not come out unscathed. We we were really fortunate
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  because we left we moved in 07, but it's right
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  down the street from Texas Tech. So it's not
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  too far away. And so at first we got some grad
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  students and now it's more families because the
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  areas become more family friendly. So a lot of
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  families move into the streets where our house
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  is. And so the demographic has changed a little
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  bit, but we didn't have too many problems during
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  that financial crisis. Now we did get a couple
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  more houses when we first moved here to Wichita
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  Falls and 12 to 13 was another little blip and
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  we hit some empties between you know between
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  12 and 13 and there's about six months there
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  where we had two houses that were empty and this
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  is kind of the thing that sucks about those single
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  -family homes is when they're vacant they are
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  100 % vacant. So you need to have you know 10,
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  12, 15 singles to really be able to spread some
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  of that vacancy risk. Well, we had, at that point,
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  we had three singles in our own home. So we were
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  paying three mortgages for about six months.
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  And man, was that hard. That was so hard. But
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  we managed to make it through. We did it with
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  the help of our church. We got help at Thanksgiving.
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  They helped provide our Thanksgiving meal. They
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  helped provide our Christmas meal. They helped
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  provide gifts for our kids that Christmas. We
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  had to get some help, and it was hard. you know
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  those are very humbling experiences but we made
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  it through and we were able to keep hold of everything
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  and then we got two more houses maybe last year
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  because like i said we're not letting go of the
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  residential stuff we're just not actively looking
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  for it but if something falls into our lap we're
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  going to get it i mean this was two houses it
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  was a two -house portfolio for 110 000 we walked
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  away from title with 18 000 in our hand yes we're
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  going to do that deal So that's just one of those
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  things you're going to go ahead and make that
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  deal happen. But we don't have the same stories
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  as other people. From the 07 to 09, we do have
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  some stories from that 12 to 13. But really,
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  we haven't really seen a lot of downturn since
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  then. We've been able to keep most of our stuff
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  rented. The quads and the duplexes, those have
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  all stayed rented. Or even if they haven't, there's
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  enough units there. Now we have enough units
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  that it spreads the vacancy risk. So it's not
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  nearly as traumatizing as it was in the past.
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  And then getting into multifamily has helped
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  with the vacancy risk as well. So. You know,
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  having invested in legal family and multifamily,
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  you know, since 2003, you know, being able to
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  see how they did. Certainly, you know, multifamily
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  was definitely have more cash flow. Going through
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  the great financial crisis, we really didn't
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  have any issues. And then I wasn't even like
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  a savvy landlord. I was one of those guys I was
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  always pushing for 100 % occupancy. I would always
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  discount the rent. Going back to what you were
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  saying earlier about you should definitely raise
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  rents. you know, at least, you know, keeping
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  up with inflation or whatever the right amount
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  is, you know, for that market, right? And I wasn't
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  one of those guys. I was always keeping rents
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  on the low side, or not on the low side, but
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  always at a discount to market just because I
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  have this mentality like, oh yeah, you know,
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  I want 100 % occupancy and, you know, not, you
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  know, today I'm a lot... a lot more savvier and
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  you know learning from the different operators
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  on on how to be a more effective landlord but
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  um um and just uh you know even with that you
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  know the multifamily did fine now there's um
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  there's a certain level of safety in lots of
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  units um I mean, they look sexier, right? It's
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  sexier to say, hey, yeah, now I got 200 units.
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  It's a little less sexy to say, you know, I got
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  six units and one of them probably needs to be
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  bulldozed and rebuilt. Yeah, but so, so that's
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  your, you know, you got your lot, you got some
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  multifamily and you said you got into self storage.
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  How did you get into self storage? Yeah, so you
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  know you when you go around and you start networking
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  at these local meetups and going to regional
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  Conferences you start meeting talking with other
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  investors. Oh, yeah, you know you on you you
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  want to be on you want to have exposure to mobile
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  home parks, you know, they have different fundamentals
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  than then then a multifamily and you know and
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  and So I just thought it would be good to diversify
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  and understanding, again, these different asset
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  types have their pros and cons. And so between
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  mobile home parts and self -storage, because
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  they produce sort of, well, I was really looking
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  for more recession resistant. those two asset
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  types keeps popping up. And so when I dug into
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  it, it just, they didn't have the same issues
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  that you have to necessarily deal with investing
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  in multifamily, right? The things are like the
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  mobile home parks, the tenant turnover is a lot
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  lower because it's very sticky, right? They can't
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  really move or they don't wanna pay the $6 ,000
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  to move there. to move their manufactured home,
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  right? Yeah, well, and I think it's important
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  to kind of mark something there. So he's talking
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  about the owner -owned home as opposed to the
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  park -owned home. Because with an owner -owned
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  home, what you're doing is you're coming into
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  the park and you're basically taking on, it's
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  like a lease purchase agreement. I don't know
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  exactly how they work out because some states
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  you can't do owner finance anymore. So it's like,
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  a lease to own kind of set up, but on a park
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  owned home, the park owns it and you're renting
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  it from them. But if you're doing that owner
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  finance or you're doing a lease to own when you
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  leave. You have to move your home with you because
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  you've been paying for the home at your home,
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  but you still have to make payments on it. And
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  so the majority of the time, those those residents
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  leave the home behind and the park. gets to rent
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  them out again doing the exact same thing. So
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  they start over with that 10 or 20, 10 % down
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  usually I think. And then they start doing their
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  lease ownership thing. So they're leasing to
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  own. And that means they have to keep up with
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  all the maintenance. They have to keep up with
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  all the things going wrong. They have to keep
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  it working order. And they usually have to keep
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  it up to some kind of code that the mobile home
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  community has. And that is their responsibility.
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  So that's the difference between the owner -owned
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  home and the park -owned home. And most of your
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  mobile home communities have moved over to the
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  owner -owned home model. So that's what he's
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  talking about there. Thanks for that, Angel.
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  Yeah, absolutely. And so for the self -storage,
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  the difference there versus the multifamily is
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  that you don't have to deal with it's termites
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  and toilet right these leases you know they you
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  don't yeah they basically that's it right yeah
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  my husband's been calling it uh restrooms rodents
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  and something else i don't know what the other
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  one is he changed it to three r's instead of
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  three t's Basically, those two asset types just
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  offer diversification. They have different fundamentals
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  and that's why we like them. Well, I really like
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  that you call them recession resistant, because
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  when I hear recession proof, I don't have a big
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  poker face anyway, but I'm usually like, because
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  when you say something is recession proof, and
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  I'm putting this out there to everybody that's
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  listening, When you call it recession proof,
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  you're setting yourself up for a lawsuit. There
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  is nothing out there that is recession proof,
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  nothing recession resistant. Yes. But when you
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  start saying in this recession proof, it's like
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  you're guaranteeing a return and you can't do
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  that and you're setting yourself up for a really
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  bad situation. So be very, very careful in your
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  word choice. Do not ever say something is recession
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  proof. I heard it the other day from someone
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  that was pushing an investment and I almost swallowed
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  my tongue. you can't actually do that it's an
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  absolute just passenger speech there but um I
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  it really shocked me because you generally don't
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  hear experienced investors saying something is
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  recession proof so just word out there to everybody
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  that's listening recession resistant okay yeah
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  yeah and it's super important to remember that
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  And the other thing is risk -free, right? There's
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  really nothing that's risk -free. Not even cash
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  in the bank, right?