Latest / Real Estate Investing with RealDealCrew / Should You Sell Your Rentals? Why "Never Sell" Costs Investors w/ Chris Lopez

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Should You Sell Your Rentals? Why "Never Sell" Costs Investors w/ Chris Lopez · Real Estate Investing with RealDealCrew

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Never sell. It's the most common advice in real estate.
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And according to Chris Lopez, it's the biggest lie investors tell themselves.
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Chris ran a Denver investment brokerage doing a hundred million dollars
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a year in deals, and he turned a zero-down condo into a four-plex with five times
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the cash flow.
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in this episode you'll learn the one question to ask before every lease renewal
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And how Chris sold his rentals and six X his cash flow.
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if you want systems to run your real estate investing business,
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head over to realdealcrew dot com.
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Let's get started.
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Chris Lopez joins me here today.
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It it's great to have a new guest.
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I r really appreciate your time,
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Chris. You can learn what he can help you with at two sites.
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One is propertylama.com. Got to get into how you came up with the name of that.
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And then Property Llama Capital,
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for I suppose more passive investings.
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I really appreciate your time here today,
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Chris.
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my my pleasure. And I'll I definitely got a great story for the for the domain,
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so we can jump into that. But I'm excited to be on the podcast.
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Yeah, why don't we just start there?
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Yeah, I really
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All right. So
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here here's the reality. So the property llamas are it's a it's it
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was a complex spreadsheet I had that I have some great business partners
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and we turned into like an online software.
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And it's designed for how to evaluate your hey,
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should I what should I do with my rentals?
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Not should I buy, but I've owned it for like five,
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ten years. What do I do with it?
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How to optimize it?
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And so we were building it and we're trying to figure out two things,
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like a a good domain, and you know,
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all versions of real estate analysis are are taken and and they become tongue ties
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and become very generic very quickly.
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And then good ones cost like a hundred thousand dollars.
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And we're like, okay, well, let's let's let's you know shift gears here.
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So we're just going down to those domain websites and we saw it on sale
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for for 12 bucks. We researched the spirit animal of what llamas do,
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and they are like,
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guiding animals, helping you know,
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helping shepherd people to safety and a good journey and all that.
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Like, dude, that's totally what we want to even help people understand like
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how to optimize your properties,
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help maximize your cash flow. And it aligned well.
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It's a memorable name and it was cheap.
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Yeah, that's that's that's awesome.
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It's one of those things that I I'm my my daughter actually calls
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me a digital hoarder and I'm spin sitting in on domain names for a decade
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or more and I'm finally starting to use a few of myself.
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I okay, I gotta ask you this question.
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So I I did the same I domain squad from like two thousand three to like
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two thousand fifteen. And I bought all these domains,
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I'd have like a hundred, two hundred in my bank.
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never sold one. how is your track record?
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I've I think I've sold two.
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Okay, so you're you're already beating me.
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Yeah. And and in the end though,
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I probably got back what I had spent over that that number of years,
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you know. I just kind of recouped what I what I my expense.
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I'm in the red from it. That's why I do real estate.
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But but s but but some of have
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have worked out, you know. It was probably you know,
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and I've told people to do this themselves,
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especially, you know, when my kids were born,
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I grabbed their names as soon as they were born so that,
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you know, they would have as they got older.
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That is really smart.
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So just something to to just yeah.
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'Cause I ended up paying a bit of a a bit more for my my name as
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a domain name somebody was squatting on.
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There there was
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So w
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Lopez dot com and it was a hundred thousand dollars at the time.
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I like, Nah, too too rich for just for a flashy domain right now.
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Yeah. No, that's that's understand.
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Just getting the last name would be would be hard.
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Well, you know, you you've been in this real estate world for for quite some time
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and it it eventually led to essentially a SaaS product building building this thing
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out. What was the most challenging piece of building this or converting it
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to a a solution that people could could leverage online?
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wow. So a lot that can go a lot of different ways.
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So, you know, kinda kinda give the the you know the problem it solved,
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right? I at the time was an active landlord buying rentals,
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1031, like single family res small residential stuff in Denver,
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Colorado, and I had a great like investment brokerage team.
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And we were doing like ten, ten agents and we were doing a hundred million dollars
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a year in transactions. So we were and it was a great time in the market.
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And a lot of those transactions came from
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Helping landlords understand, hey,
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different time was some cash flow and also a lot of appreciation.
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Hey, you've made a quarter million dollars in appreciation.
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Here's how we can essentially go from like a greenhouse to red hotel monopoly.
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So I had built these complex spreadsheets,
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and you know, 20 tab, 25 tab type things.
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And the problem was scale. It was phenomenal information,
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but it could not be used without me.
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and if I share with a client, they ultimately deleted sell,
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you know, 32D on tab nineteen and blew up everything.
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and then I had verse control history as I was going out there
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and teaching people because what I would do is I'd say,
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hey, once a year, let's sit down and review your portfolio.
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Let's take every property you have and just do a quick,
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hey, let's keep it. How can we improve it?
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Hey, could we refi and reinvest,
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or could you sell and you know,
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trade up? And so it's a great value add and a g and and also great
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for business because it helped people understand how to like.
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you know, create that real estate wealth and the can and the the
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the levers on there. So the hardest part for me was two things.
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It was removing me from being the choke point,
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and then finding, you know, building out the soft software app.
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and what I learned because I had built some software in the early two thousands,
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or I my my partner did, but I was in intimately involved in from a
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you know a partner's perspective.
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was that you know, I don't want to be leading any tech stuff involved.
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I gotta find an expert out there.
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And something that's always worked well for me is reaching out to like
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my real estate investment community.
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So I mentioned on one of my podcasts,
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hey, I'm looking for a guy can help me take this online.
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and actually one of my clients,
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he'd bought a a rental property a year or two ago.
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he was winding down a business,
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moving back to the States, and he's like,
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hey, I can build that for you.
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I was like, awesome, cool.
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he said, Give me a few weeks, I was like,
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cool. You know, wrote off and two weeks later or whatever he sent me something.
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He sent me like a detailed mock up.
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and so the hardest thing was how can I scale myself out of it?
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And then how can I go out there and find someone to take care of the tech solution?
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Hm. Well, we can go down all kinds of rabbit holes,
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but what you know, you mentioned that y you were trying to remove yourself
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as the choke point. What I think is really also probably beneficial there
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is that as investors, we kind of fall into this trap of falling in love with
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the deal or the property and actually leaning into a spreadsheet
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or the actual numbers. It kind of removes that emotional aspect from from that
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Hunt, if you will.
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Exactly. And and something that I see that I did for longest most real estate
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investors is they live in the past.
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And by that I mean, man, in two thousand eight I bought this amazing eleven
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cap property. great. Well that was two thousand and eight.
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You know, we're you know, we're nineteen years later now and now it's a it's
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a five cap and you got three quarters of a million dollars of equity earning
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you two percent cash. So like you have to look at like today's thing,
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I can't Hey, I wore these pants in college,
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right? They don't fit me anymore.
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So a lot it is, hey, get realistic on hey,
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what's the opportunity cost of the equity that the person has in their property?
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Because even though, like, hey,
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that was not money you put in per se,
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you know, mortgage pay down, appreciation,
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all the value add stuff, that's that's real piggy bank money go out there
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and and I think it's an opportunity to go go reinvest it.
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And a lot of the investors now,
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that's what I did. I want to tap into that and just maximize cash flow,
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right? I'm kind of phasing out of being hands on.
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all that and I want to maximize cash flow and and make my life easier.
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so I there's a huge opportunity out there.
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And that's actually what led us to you know,
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focusing on our real estate income funds because we got,
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I mean, we get amazing traction with the software.
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It's nothing like it. We have a lot of cool,
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you know, just free education YouTube videos that we walk people through here.
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So I go out there and analyze it,
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right? Everyone's like, cool, I see the problem.
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In markets like the coastal markets,
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Colorado and Austin, things like that.
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Like, cool.
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My cash flow stinks. I could sell us make more by selling,
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you know, investing in a treasury right now,
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which you know, people don't do,
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but you know, it's it's it's eye-opening when you look at it that way.
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And like, all right, well, what's the solution?
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I can't cash out refined by another rental.
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I also don't want the headache of it.
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Selling in ten thirty one, the numbers are usually like a lateral move just because
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where we are in the market cycle.
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and what I had done, this was just me as investors,
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I had started selling my rentals and like I don't know,
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2021, 2022, 2023, I started selling some on there.
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Even though I had crazy low debt on there,
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I was like, the Denver market is no longer going up and to the right.
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It's gonna be choppy and flat for years.
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Cash flow is is getting is getting you know very,
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very thin and tight. Appreciation party is over.
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So I started selling my properties and investing in in real estate income funds,
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like debt funds and things like that,
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where just no headache and double digit cash flow.
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And so
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You know, that's one of the paths that a lot of investors are going through right
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now and a lot of like the opportunities for people that like grew up
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in the last market cycle. Now they're older,
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you know, maybe retiring, spouse is retiring,
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there's something two to three million dollars of equity.
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and it's you know, it's it's marginal cash flow.
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Like, hey, sell some of the sell some of the headache properties and
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and hit the easy button.
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Yeah, I can definitely see that there would be a gap there regarding this because
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you know, we've we've talked a number of times on the show where you
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you engage a lot of these the expertise and a few other things,
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but unfortunately whether it's a property manager,
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insurance agent, you know, our interests typically aren't aligned with with
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our end goals. And to have some sort of insight or direction or some some kind
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of planning on on this is just
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Frankly lacking in the industry.
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Yeah. Yeah, and it's been I mean,
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I I I absolutely love it. If I can geek out,
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you know, with you for a minute,
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'cause my my college degrees, financial planning,
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and my whole mindset with real estate is I know I can get rich in real estate over
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a twenty to thirty year time frame,
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right? Now to get rich quick, but if I do it for twenty to thirty years,
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I think I can two to three X what I could just do in the stock market,
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right? Just through, you know,
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you know, working and and, you know,
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actively being in there. So I've always had a hey and that philosophy comes down
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to 'cause I learned this in in my
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first business which was non-real estate,
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had a great business, partnership issues,
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GFC happened, so just, you know,
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landscape changed. I spent two years grinding and I was just like
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w like running through mud. I was working harder,
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making less money each year. And I was like,
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well this stinks. And what happened is the market trends changed.
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like just the ch you know it changed.
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And and when I started my next business,
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which was, you know, real estate broker,
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investment broker, and I started buying rental properties myself.
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I I could see, hey, their prices are very low.
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Denver's a growing city, right?
10:53
I got all these tailwinds here.
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It's it's gonna be just ride the trend.
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But eventually all trends stop.
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And when they stop, I'm gonna be ready,
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you know, mentally, you know, liquidity standpoint,
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so I can go out there and go out there and pivot.
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and that's what I did in after you know,
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interest rates start going on.
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Hey, the math just stops.
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working, right? What can I go out there and do to go out there and achieve my goals?
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And going back to what you said,
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hey, I know this very well. I know buying rental note 1031ing,
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but I was like, I stopped doing it myself because the the math stopped working.
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I told clients, I don't know, I'd go invest in the stock market instead,
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right? Like I want to buy this rental.
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the numbers are you want negative cash flow.
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and so it all comes down to you gotta
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Understand where the market is going,
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and because the market does not give a damn what you know,
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how good your skill set is, all this,
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when the market changes, change with the market.
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Yeah, that's really an important lesson.
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Yeah, you w one of the lessons that I was hoping that we could spend
11:49
a little time on is I saw in twenty eighteen you ran a ten thirty
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one exchange and took a single family into a fourplex and rough roughly five
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X your property. Would you or the cash flow,
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would you mind going through th the the whole process and maybe
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how you even leverage property llama or the underlying tech to determine that?
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Maybe even give us the numbers on how that works?
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Yeah, I can definitely do that.
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Actually I'll I'll give you I'll give you the backstory and am I if
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I'm able to share my screen I can actually pull it up real fast and and
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and show you the numbers as well.
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I'll speak too for people can't watch,
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but if you're if that's able to I can do that too.
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Or just keep it verbal.
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Yeah. I it I I think it's I don't know,
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at the bottom of your screen there's a there's a box with a an up arrow.
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I think that's
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Yeah.
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how you share your screen.
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Yep. well when we get it loaded and I'll share it.
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So I'll give you the backster on here as I as I get signed in and and
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and tell you it. is that
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I bought this condo in like two thousand ten.
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It was my first real estate purchase.
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know, I bought it at a Fanny May foreclosure for like sixty-seven thousand bucks.
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It was trading two or three years earlier at like two hundred
12:58
and forty thousand bucks. So it had fallen by two thirds value.
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So just that like, you know, in insane peak to trough crash.
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I got lucky to new things were cheap.
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and then I was self employed, say grinding through my business and I
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was having my own tough time.
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but I had a older friend who gave a hundred percent note payment on there
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at five percent. fifteen years at five percent.
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because know, back then CDs and and money markets were wonky and not paying much.
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And she's like, hey, this is real estate backed,
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I trust you. Great. and so I got this property for zero down.
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And I I lived there for used my home base for a couple years and turned to a rental.
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And my mind says I bought it so low and I bought it for zero down.
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I have
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you know, an infinite return, right?
13:41
I have an infinite return on there.
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Why would I ever sell? Well, fast forward,
13:45
I don't know, five or six years.
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I moved out, rented for a couple of years,
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and I was really getting to real estate like,
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you know, just, you know, really upping my game on there.
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And yeah, at the time I was making two hundred dollars a month in cash flow
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and be and wanna when the note would pay off,
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it would make like ten thousand bucks here in cash flow.
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And I was like, Okay, that's okay,
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that's you know.
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800 bucks a month. That's okay,
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I'll I'll take it, but that's not like life changing,
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right? I'm gonna need like another twenty of these to make it life changing.
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And I was like, man, the accumulation that's gonna be be really tough.
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you know, you can only do, you know,
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buy dirt cheap and zero down deals,
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right? and so I started looking at the numbers because one of my mentors said,
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Look, you gotta look at your equity,
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not what you put down. You don't have an infinite return.
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You have I had almost two hundred thousand dollars of equity.
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We'll say two hundred thousand around up at two hundred dollars of equity is like
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That's your opportunity cost. And he posed this question to me,
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Jack. He said, because this is what he goes through.
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He goes, if I if I can make more money in the stock market,
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you know, SP 500 type returns eight to 10% a year.
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If I can make more in the stock market,
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is it worth the hassle and risk of owning a rental property?
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and that that struck me, right,
14:47
as a finan you know, kind of like a financial advisor mindset person,
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because I can do an index fund.
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That that's kind of like my my investment risk free rate of return,
14:54
right? Where hey, I'm
14:55
It's not gonna sue me. it's not gonna require a thirty thousand dollar remodel.
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and so you know, my property between cash flow and appreciation based on the equity,
15:02
I was making like six percent a year combined return.
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And so that was, you know, below it.
15:07
And I was like, that like, you know,
15:08
it it it shook my mindset. I've had many of my clients go through that same mindset
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as well. And so at the time, you know,
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I had $20,000, I was making
15:17
about two thousand dollars on cash flow and you know three percent appreciation
15:21
about a six percent total return on there and so I I could not increase
15:25
the rent anymore right it was already it's a two bedroom two bath I spent
15:29
a couple months trying to do a cash out refinance where I it's a great property
15:33
I never want to sell it right I bought for so low so I I talked to bunch
15:36
of banks and and loan brokers and all that and I could never get a loan that made
15:40
sense because the property would always end up negative cash flowing.
15:43
And that was just because the price had appreciated so much,
15:46
but rents had not, you know, kept up with it.
15:49
so you know, the rinse could not cover like any meaningful type of debt service
15:53
on there. you know, like a you know,
15:55
above a 50% LTV. So it just it never made sense.
15:58
And then that's when I realized,
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I can do a 1031 exchange. And I started running through those numbers,
16:04
which hey, I don't have to I have to pay closing costs and brokerage fees,
16:07
but I'm not paying any, you know,
16:08
any capital gains or depreciation for capture taxes.
16:12
And so I looked at that option where a I could sell it and then bought
16:17
a fourplex in Denver of about eight hundred thousand dollars.
16:21
I had about two hundred thousand dollars of equity,
16:23
I had to contribute another like maybe twenty or thirty thousand dollars just cash
16:27
to to get it to like the twenty five percent down payment.
16:29
But I went from, you know, about two thousand dollars a year in cash flow
16:33
to about a thousand dollars a month in cash flow with the fourplex.
16:37
And because I was was just able to buy a a better rental property,
16:40
right? A better rent to price ratio or,
16:42
you know, a better cap rate essentially.
16:44
and I was able to go out there and then redeploy my equity and kind
16:47
of get levered up again, right?
16:48
Because my old property was at like a twelve percent LTV.
16:53
and you know, I was in my thirties at the time,
16:55
so I don't need paid off rental properties at that age.
16:57
And so I re-levered at seventy five percent LTV,
17:00
so I got the benefits of real estate leverage.
17:03
And so that's how I you know, just completely increased my returns that
17:06
way was to the power of ten thirty one and then buying a better property
17:11
and using better leverage.
17:13
Hmm. Yeah, well this this is this is just awesome.
17:16
It it just kind of takes everything to that next level and planning things
17:20
a bit more long term than than I I think most people consider.
17:25
You know, it one of the things too that strikes me is that you've kind
17:29
of busting the the myth that you should never sell.
17:33
Like the there's this there's this kind of concept or I've run into
17:37
it quite often where people are just gonna
17:40
Hold it till they die, kind of thing.
17:42
and it it's it's probably not the best scenario there.
17:46
And before you answer that, I want to remind everybody if what we're talking about
17:50
so far intrigues you, you should take advantage of and head over
17:53
to property llama dot com. I'm gonna have that as a clickable link
17:57
in the show notes, as well as Property Llama Capital.
18:01
and if you found some value in what we're chatting about so far,
18:04
do us a favor.
18:05
Share this with one of your friends if you're watching us on YouTube,
18:07
give us a like and subscribe. So what do you what do you think
18:11
of that regarding busting the myth of never selling?
18:13
Absolutely. I mean that that was one of those like aha you know mindset shattering
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type moments I had because I was like,
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Well, I bought it, why would I ever sell it?
18:22
It's a good ass I bought for cheap.
18:24
Pay it off, hold it forever. Which again,
18:26
it's not a bad move, right? It's not a bad move,
18:28
right? paid off real estate's never a bad move.
18:30
However, it's not gonna be optimized for cash flow or optimized for growth,
18:35
depending on kind of what phase of your in career and if you're more growth
18:38
or more cash flow oriented, right?
18:40
It's not the optimal way in doing it.
18:42
And so that, you know, going back to what,
18:45
you know, the genesis of this was just all these lessons I'd learned
18:47
is I would just, you know, realize this stuff myself.
18:49
It was, you know, my obsession,
18:51
you know, I I geek out on it, kinda,
18:52
you know, my I I full time business,
18:55
full time investing focus. So just a lot of my time and energy were going
18:58
to solving these problems. Like,
18:59
hey, what's the best way to make money in the market right now in in Denver
19:02
in this time and and and then how do we extract these principles to,
19:06
you know, make it not just like a,
19:07
you know, a market specific thing.
19:09
so yeah, I am here to say everyone should go out there.
19:13
I mean, you can use a software,
19:14
you can also just build your own spreadsheet or use a AI,
19:16
right? Go out there and do something,
19:17
but analyze your portfolio today.
19:19
What's your cash loan equity? What's your what's your return on there?
19:23
'Cause for a lot of people, their cash loan equity i is very poor.
19:27
Not a bad thing, but are you happy with it?
19:28
are you happy with a three percent return on three million dollars of of equity?
19:33
And so to kinda you know, use that same mindset on like,
19:36
you know, hey, what what's the best use?
19:38
I want to kind of fast forward to a different market cycle,
19:40
right? Because I mentioned I started selling some of my properties kind
19:42
of like in the you know, 2022,
19:44
23, 24 time frame. And I did the same analysis,
19:47
hey, if I keep it, here's how things are.
19:48
And these were at the time something about a couple of condos I have in
19:52
in Denver at the time. I bought them a few years before,
19:55
you know, for about two hundred thousand dollars each.
19:58
I put, you know, maybe sixty thousand dollars in between down payment,
20:01
a little bit of value add on there.
20:02
and they were cash flowing a couple hundred bucks a month,
20:05
but now they were selling for almost three hundred thousand dollars.
20:07
so I had more than like two X my my equity even after closing costs and all that.
20:12
And I like, Okay, well, and and these are these are class C minus units.
20:16
These are not like trophy assets or anything,
20:18
but just great rental units, right?
20:20
and I was like, All right, let me do this.
20:21
Well, I've already gotten this amazing pop.
20:24
in appreciation. I also I don't see these you know appreciating more because
20:27
you know rates had already started trending up.
20:29
I was like, well they're not gonna they're not gonna keep appreciating
20:32
at best they may stay flat although probably start declining long term right
20:35
and I was like hey rent's gonna start contracting as well and so I
20:38
ran that same thing I was hey keeping it not a horrible move but it's
20:41
not gonna be an amazing journey or amazing returns.
20:45
Refi didn't make sense that those rates and also the underlying asset
20:49
no longer made sense like really hold.
20:52
And then I looked at a 1031 exchange,
20:53
or I looked at selling and looked at 1031 exchanging,
20:56
but I ran the same issues. I could just couldn't go out there and find like
20:59
a a a good deal that I could operate and own and have it have those same like,
21:04
cool, I I three, four, five X my returns,
21:06
kind of like what I did with, you know,
21:08
that's condo to the fourplex we talked about.
21:10
and so I looked at you know, something else that I think a lot of people fall
21:14
on the trap of is they fall in the 1031 until you swap.
21:20
right. And this can be next extension of sell.
21:21
Hey, I'm I I won't sell, then my next layer was ten thirty-one forever.
21:25
well then I'll you know, because you do that,
21:26
because if you if you die, you end up never paying the the taxes,
21:30
your heirs or your stake at the stepped up basis,
21:32
right? It's it's amazing for for the next generation out there.
21:35
But again, I've seen a lot of people as a broker on both sides of the table,
21:39
I saw people make dumb decisions.
21:41
They saved a dollar in taxes, but they cost them ten dollars in investment returns.
21:46
Right, 'cause they they didn't want to do 1031.
21:48
I was like, well, you know, don't just do the deal to save save a few bucks.
21:53
and so I looked at, hey, if I just cashed out,
21:55
what else could I do with it? and so I s ended up selling those and I looked at hey,
21:59
if I can go out there and invest in like a real estate hard money fund,
22:03
right? The the groups that go out there and lend money to fix and flippers
22:06
and and developers like that.
22:08
a lot of times they're paying like a you know a 10 to 15 or 10 to
22:12
15 percent type annual cash flow or cash on cash return.
22:15
All right, even after I paid taxes,
22:17
paid commissions, paid depreciation recapture,
22:19
and then I moved it over to these private real estate lending funds,
22:24
my cash flow like six X'd. It was just insane.
22:28
part of it was just because, you know,
22:29
the underlying assets are cash on a couple hundred dollars a month.
22:31
Now this was pure cash flow.
22:33
Now looking back the last three years,
22:35
because I got so much grief from other investors,
22:38
you're paying taxes. I was also doing another sin,
22:41
selling 30-year debt sub four percent.
22:44
You know, these are all three and a half,
22:45
30 year Fannie Freddy debt. And people like,
22:47
you're insane. But those condos,
22:50
the values have, you know, dropped by a third.
22:53
rents have have dropped. and then the the debt funds I invest in.
22:57
They have just been been steady eddy paying,
22:59
you know, their monthly, quarterly 10,
23:00
11, 12, 13 percent returns, you know,
23:03
plus out there, and it's been easy.
23:05
And so like that where it comes that's where it comes back to is like look
23:09
at the best opportunities in the market,
23:11
understand your goals, right?
23:14
I want cash flow and less headache right now.
23:17
That's you know, my phase in life.
23:18
I'm you know, I'm getting up there in in age and net worth,
23:20
so that's the you know, next phase of of playing this game.
23:23
And you have to align
23:25
What your goals are, what your assets are,
23:27
and then what the market is. And I viewed as like a Venn diagram where those three
23:30
things overlap, boom, that's where you go to.
23:33
Again, you're just one piece of gold nugget after another,
23:36
Chris. And that the the fact that you've taken this this outside
23:40
of yourself a little bit and and kind of does some do some sort of measurement.
23:45
Like you you mentioned some people will just kinda ride or die the whole
23:49
ten thirty one exchange and you might even have to question that.
23:52
It it's almost like the comparison of like I've s I see people will drive across
23:58
town to save a few pennies.
24:00
on on per gallon on gas, you know,
24:04
and they don't take a second to just
24:06
Yeah.
24:06
like, you know, is this actually worth it?
24:08
No, that that that's a perfect analogy.
24:11
And and that's, you know, just you know,
24:13
in general, I'm I'm a you know,
24:14
big advocate on just going out there and underwrite your assets on a yearly basis.
24:19
Another tip I give landlords out there is anytime you're about to,
24:24
you know, renew the property, ask yourself the question,
24:27
would I buy this property again?
24:29
All right, 'cause essentially you sign another twelve month lease on there,
24:32
hey, you're committing to your ownership and
24:34
Another gem of a I got from my mentors was askers of Hey,
24:37
would I buy it in today's market at today's price at today's rate?
24:41
If the answer isn't yes, well then maybe keeping it might not be the best solution,
24:45
right? and so I think it's just very good to go out there and and challenge you know
24:49
I see the you know the these fundamental real estate idi you know dogmas out there.
24:54
'cause they're not bad decisions,
24:57
but you know, you can't go to you don't go to financial advisors
25:00
and the Dave Ramsey's out there,
25:02
they're not talking how to build wealth in real estate,
25:04
right? They don't know what to do.
25:05
No, sell the stuff and buy a REIT,
25:07
right? like that's not what us real estate investors do.
25:09
So I I just encourage everyone to go out there and and have a have a
25:13
big view on that.
25:15
And where I think the the puck is going,
25:17
I think for a lot of the market,
25:18
I mean it's gonna be choppy waters for quite a few years in terms of rent growth,
25:22
appreciation, whether it's residential or multifamily,
25:24
right? Multifamilies eventually don't get to the bottom here.
25:27
is for experienced landlords out there with experience and net worth out there,
25:32
look at passive investing. use the equity,
25:34
use the knowledge you have. I think that is where so much the opportunity
25:38
is because you can
25:39
You know, it's a big difference is hey,
25:40
my property manager's making 120 bucks a month off my rental unit versus hey,
25:45
you know, that that's a certain scale to that versus hey,
25:47
there's this a hundred million dollar fund I invest in.
25:49
They're out there and they got seven A players running that business,
25:52
right? Running that real estate fund.
25:53
And then where a lot of the opportunity is,
25:55
it's in the commercial sector.
25:57
it's in the lending component.
25:58
where hey, private real or real estate investors need private money to do projects.
26:02
you know, there are starting to be some really good multifamily deals out there.
26:06
where hey, they're starting to see some banks for sales.
26:08
I've I've been in a few deals recently where it's like,
26:10
you know, starting to be a good time to buy.
26:13
And there's other asset classes like the mobile home parks and and build turn
26:16
and things like that where, you know,
26:18
I think landlords should use your knowledge,
26:20
use your experience, and then look at redeploying equity that way as well.
26:24
Cause I think that's where I think that's where the market growth is.
26:28
Mm-hmm. Well, you you talked about the the market or the or the
26:33
the landscape when it comes to real estate investing.
26:35
Talk about the landscape and how you see things changing now with the adoption
26:40
of AI and a few other things on the tech side as as an o operational impact
26:46
in real estate investing businesses.
26:48
well let's let's start with I always like to start with like hey who
26:51
you know follow the money right who who's the customer who's the consumer right
26:54
or you know or or overwork that way.
26:56
so hey we're using AI, so so are tenants using AI,
27:00
right? so they're out there, you know,
27:02
you're seeing really two things a lot more fraud,
27:05
right? Just a the you know, from property managers and sponsors I've talked with,
27:09
just the amount of fraud they get now,
27:11
it's so much better. and the
27:13
Quantity is like so much more.
27:15
And so I know a lot of people have,
27:17
you know, gotten done bad deals,
27:19
you know, or just you know, gotten burned that way and they're they're putting
27:21
the safeguards in there. There's a lot of fraud from there.
27:23
And so operators are using, you know,
27:24
AI and more human review to help like,
27:26
you know, combat that, right? and the other thing is is there's a lot more,
27:29
hey, if something goes wrong, right?
27:31
Like we do at any any points of our life,
27:33
hey, something goes wrong with a tenant,
27:34
they out there, start chat GPTing,
27:36
this or that. And then now they're getting,
27:38
you know, these, you know, very long AI generated.
27:42
you know, emails or complaints and that just creates a you know a a
27:45
lot more back and forth because you have to take,
27:46
you know, y you know, there's a lot of legitimacy.
27:48
They to you have to answer that,
27:49
right? So, you know, tenants are using a lot more.
27:52
And that means, you know, the opp the property managers have to use it a
27:56
lot more as well. so I look at the front lines there.
27:58
but like moving back to like the behind the business scenes,
28:02
like what what property a lama capital does,
28:04
like the a fund we have right now it's that we're we'll probably close out
28:08
right before the end of the year.
28:09
It's a it's a Midwest lending fund.
28:11
It pays out like mid to high teens.
28:13
It's just like a it's a really great fund.
28:15
but it'll be closing out the end of this year.
28:18
but this group has a a million dollar minimum,
28:19
right? That's just like the minimum get in because they a lot of family offices
28:23
and and ultra high net worth investors.
28:24
So that's a bigger check than most of us want to write or are able to write
28:27
at the moment. so we're like a a a supercharged LP out there where
28:31
we we've put money together and
28:33
And look at that. So I think there's opportunities out there in lending right now.
28:38
and then when you look at like,
28:40
you know, using that for AI, when you're out there like underwriting these passive
28:45
investments, you know, hey, we we do a lot of this,
28:47
but where it's shifted for us is we have a hyper AI focused work stream,
28:52
and then we have a hyper focused in person,
28:55
like human to human, right? We've gotten very distinct on there.
28:59
Because there's you know often like a line in the sand on what you can do.
29:02
So, you know, AI, like first passes,
29:04
due diligence, reading loan tapes,
29:07
helping review docs, like you do the all human.
29:09
You also use AI to get their perspective and you you set in some like,
29:12
you know, mean and disgruntled.
29:14
So it's not just the happy chipper,
29:16
everything super AI tone on there.
29:17
And so we've had amazing you know,
29:21
flow like that, and just for me personally,
29:23
and and as we we put deals together and just being able to like underwrite
29:26
so many more deals.
29:28
we've gotten, you know, a lot more effective,
29:30
a lot more efficient. our teams may be able to stay small,
29:33
but mighty. And then what we do on the other side is,
29:37
you know, same thing. you know,
29:39
investing in general, documents in general,
29:41
AI. It's just like, is this real?
29:43
Right? Is this real? and we had an epiphany years ago that like,
29:48
hey, we can do all this underwriting,
29:49
look at this stuff, but we just have to go out there and physically verify things.
29:54
In person, right? Touch it, read it,
29:56
feel it, smell it, whatever. And so,
29:58
like, we went out to this lending operation and you know,
30:00
I'm talking about this fund that we're we're closing up right
30:03
now because we're like, hey, these,
30:04
you know, everything checks out,
30:05
these numbers are like above average,
30:07
right? So it's always, hey, makes you interested and excited,
30:10
but also like, hey, some some yellow flags as well.
30:12
Is this too good to be true type stuff?
30:14
so we realized, hey, go out there and just physically verify the operations.
30:19
Let's go out there. Let me look over your shoulder.
30:21
Log into this Google Drive. Show me your files.
30:23
Okay. Now show me all these documents.
30:24
All right. Let's lock over to this room that should be locked.
30:27
Is it locked? Where's the key stored?
30:29
Who has access? Let's go pull the file.
30:31
Let's go do this. Go log in your bank account.
30:34
Let's see this. Right. So we've gotten very distinct and like,
30:37
hey, what can we need AI and automate,
30:38
which has helped us you know, do a lot more deals,
30:41
scale, deliver bus better customer service.
30:45
and then we've gotten hyper focused on,
30:47
hey, when this is like the the human advantage here,
30:49
hey, go out there and just, you know,
30:51
execute on that. And for us, it's like,
30:53
hey, AI is great for underwriting and you do all the usual stuff on there,
30:56
but then the the investment, go out there,
30:58
walk it, feel it, you know, whatever.
31:00
because AI cannot verify all that.
31:03
Mm-hmm. Yeah. That's it's interesting the the way you're you're talking about
31:08
it because this is one of those things that I've been really on my soapbox about.
31:14
You know, I I'm a strong believer in that human in the loop.
31:17
And, you know, where where I've seen the biggest lifts are removing some repetitive
31:22
things, being able to dive deeper in and analysis.
31:26
But in the end, what I'm trying to do is free up that investor time so that they can
31:31
Do the extra due diligence, do the more face to face.
31:34
The the interactions and getting some hands on or boots on the ground somewhere
31:40
is actually what we're trying to do so that they can vet things out on a
31:44
on a deeper level.
31:45
absolutely. And kind of shifting to like,
31:47
you know, the the entrepreneur business side,
31:49
you know, for our our internal team,
31:52
like, you know, from like, you know,
31:53
helping with fund administration,
31:54
accounting, investor relations,
31:56
all that, just all those repetitive tasks as you mentioned.
31:59
You can just you know, build the agents,
32:01
automate it, do all that. the you know the amount of bandwidth it frees up
32:05
i it it's amazing.
32:08
and then you get, you know, you're you I I'm a big believer in hiring A players,
32:11
right? You hire A players, you deliver A plus results,
32:13
right? So hey, small but mighty team of A players.
32:16
And when you can free up the A players' time,
32:18
you know, you have to go out there and manage a VA or build that up,
32:21
but go out there, help them do this and frees up thirty percent of their time,
32:24
but it's that sixty percent drag of that,
32:26
it's Sunday night, I gotta do my homework tomorrow,
32:28
right? Or my homework's due tomorrow feeling.
32:30
you know, people more energetic,
32:31
'cause you have to deal with just my new shone there.
32:34
So I
32:35
You know, I view it as a very positive feedback loop because it makes
32:37
us more efficient, but allows all of us to go out there and focus on what
32:41
we are talented at.
32:42
Yeah. Well, Chris, this has just been fantastic.
32:46
before we s dive into the rapid fire and start closing out this episode,
32:50
is there anything else we should have tried to hit on here today?
32:53
no, I think we're we're good.
32:56
Well, if you're ready, sir, we're gonna dive into the rapid fire and close
32:59
out this episode. But before we do one more time,
33:01
I'm gonna remind everybody it is propertylama dot com.
33:04
That's gonna be a clickable link in the show notes.
33:06
If you're wanted a more passive route,
33:09
head over to property llama capital dot com.
33:13
But if you're ready, sir, we'll dive into the rapid fire and close out this episode.
33:17
Let's do it.
33:19
What lie do real estate investors often tell themselves?
33:23
Never sell. I think we covered that one.
33:25
Never sell.
33:27
Yeah, never so.
33:28
that that's the the biggest one.
33:31
If you could go back in time and give your younger self a piece of advice,
33:34
what would it be?
33:35
scale faster, think bigger. you know,
33:37
hey, I I you know I would do one or two deals a year,
33:40
but I back then I would supercharge,
33:41
right? Hey, find the recipe, start partnering more for expertise because
33:45
I I was very much a solopreneur and and solo investor,
33:48
right? and s you know, but hey,
33:49
go out there, get some capital partners,
33:51
go out there, get some partners where hey,
33:52
we have complimentary skill sets,
33:53
we're aligned to all that stuff.
33:54
Just like scale faster, do more deals.
33:57
And you know, hey, I I I got the timing right in that in that market recovery
34:01
and just go back and and buy more and do more.
34:04
Looking back at your investing,
34:05
w what was your first hire and would you make the same one again?
34:10
for my real estate investing.
34:11
Yeah.
34:12
I say my my very first like like you know hire was a property manager
34:16
and this was two thousand thirteen,
34:18
two thousand fourteen. And absolutely yes,
34:21
I would do it again, learn my lessons in self managing.
34:24
I I'm not I'm not detail oriented,
34:27
I know that about my personality traits.
34:28
the second thing is I had you know,
34:31
you know, inadvertently you know,
34:34
rejected an applicant who had a service animal.
34:36
I said, Hey, no pets, they had a service animal.
34:39
Dumb me didn't know the difference back then.
34:41
And I was like, I'm I don't know the rules.
34:43
I don't know all this stuff. I don't wanna like accidentally do something stupid
34:47
and get in trouble or get fined,
34:48
or I'm gonna hire someone that knows the rules and and also,
34:51
you know, they know compliance.
34:52
So PM and I absolutely do it again.
34:55
And finally, what single tool or process have you implemented that
34:59
has had the biggest time saving impact?
35:01
just be AI in general. I mean,
35:03
like no, you know, the just just building on there.
35:05
to get you know, get tactic on there.
35:07
we know we use Claude. I use that for my personal stuff,
35:10
we use that for our work stuff as well.
35:11
So, you know, but really setting up all like the integrations with with Google
35:14
Drive, we use Notion, Slack, and just you know,
35:18
not just using it to help write stuff,
35:20
but go out there, build the connections,
35:21
get in in the in the workflow,
35:23
build spend the time to build out like the
35:25
the context basis for the business,
35:27
all of this, keeping it updated and relevant and not just,
35:29
you know, individual but getting a team collaborator,
35:31
like building out those channels and just all those small things
35:35
and it collecting all the real time data.
35:37
you know, my gosh, the amount of time it saves from you know all hey,
35:40
just replying to email drafts,
35:42
from helping to do the first pass underwriting documents for just doing
35:45
all this automated reporting or doing automated double checking.
35:48
it's just all these, you know,
35:50
hey, it you know, it saved a thousand paper cuts,
35:52
right?
35:53
which has been been amazing. So it's just it's just that you know,
35:57
consistent implementation of AI and not this,
35:59
my gosh, and I'm gonna go on this nine day binge and and change my life
36:02
and you know, and and be an AI cyborg.
36:04
It's just hey, how can we always just use it to make our business better
36:07
and improve, improve, improve?
36:08
And it's just a tool that we'll use for years.
36:10
and that, and that, you know, slow build out and consistent build out,
36:14
I should say just that consistent build out long term thinking is just
36:17
is starting to pay dividends and I'm excited for where it can go.
36:21
Well, Chris, this is just fantastic.
36:23
again it is property llama dot com.
36:25
Clickable link in the show notes.
36:26
But really appreciate your time here today.
36:29
This was fantastic. It was great to meet you.
36:31
Hope you'll come back again sometime.
36:34
Will do. Thank you so much, Jack.