All The Cool Ways To Invest In Real Estate | EP. 21

Foreign. Hello.

What's up, everybody? Thank you for listening to this week's episode of Real Talk. Today is podcast episode number 21, and I'm excited to go through this topic with you today. We're going to talk about all the cool ways to make money in real estate and more specifically with Freedom Real Estate Group and our family of companies, the ways that you can make money with us.

Right.

So I'm Randy Brown, recently christened CEO of the the family of companies, and I'm here with Chris Ceneno. He runs Independence Property Management, but he's a. A player in the rest of the companies as well and happens to be, and pertinent to the topic, happens to be a real estate investor.

Yeah, I'm glad to be here.

Thanks for joining me today.

Absolutely.

Yeah. Good.

For those of you or who are expecting the cost Segregation Study and 1031 Exchange Conversation Tax strategy that we teased in last week's vlog, we've had to push that a little bit. Mark is actually with family, celebrating a wedding and those kind of things, so our recording schedules didn't exactly line up. Plus, you may also notice the absence of Chris's pretty face. We're doing audio only today, and I feel like a visual representation of that walk would be appropriate. So hopefully we'll be back next week with all the nuts and bolts behind a cost segregation study, tax cut and jobs act, and the 1031 exchange. So. All right. All the cool ways to make money in real estate with Freedom Real Estate Group.

Right.

It's fun topic.

It is.

And you know what is a fun topic? It's near and dear to my heart. Hopefully it's near and dear to the heart of those who are. Are listening. But when people are investing in real estate, you know, they think of a couple of things right away.

Right, right.

Yeah. I mean, I think we call them bigger pockets investors. Honestly, there's only like a couple strategies they really brag about in those types of circles. And the biggest one I think is a fix and flip a burst strategy where you just buy it, flip it, the rest of the R's.

Right?

Yeah. Well, so buy, rehab, rehab, rent, refi, and then repeat.

Repeat.

Yeah, yeah, you rinse that bad boy. I'm a pretty big fan of the burst strategy.

Right.

In fact, until recently, and I don't want to get out ahead of topics, but until recently, we really didn't have a method for folks to participate or to help folks participate in the. In the burst strategy, but we have some, some new product lines based on our growth that will allow people to kind of participate in the value add.

Yeah, yeah, it's, I think like you said, you're going to go into more detail about what those look like for freedom. But it's been really interesting to watch it evolve as we've had conversations about, you know, even inside just IBM about what the client experiences through everything that we they experience with freedom.

So this is your. I don't want to cut you off, but this is your third, fourth, third or fourth, third or fourth podcast. Okay, so everyone knows what I P. M. Is. Yeah, right.

Oh yeah, yeah.

So IPM independence, property management.

I probably should have led with that.

No, that's okay.

That's okay. Yeah, no, so yeah, I kind of assume our base knew kind of what was going on there. But anyway, so while we're walking through like the life cycle of a client, a lot of our clients use a lot of these different strategies.

Sure.

So we're trying to figure out a way to kind of back build them back, back into freedom as well on the front end, you know, so we have all these different options. Freedom, one of which is, I mean, you guys have labeled it something other than flip because, you know, as, you know, one of our co founders names flip, so we can't just kind of trademark that name a little bit. We can't use that.

Yeah, it's still the coolest name in the game.

Right.

You know, and then, you know, it seemed like it was. He was predestined to be in this space.

Right, Absolutely.

So, all right, so the traditional methods, people think you're thinking about the ways to make money in real estate, obviously flipping. Right. So you're going to find a property that is a value add opportunity. You're going to use sweat equity or someone else's sweat equity to add that value and then get a price for it when you sell it. That's more than your acquisition price and your cost to improve the property, your rehab costs. And so you make money by flipping.

Right.

Another thing that traditional folks will think about, and you kind of alluded to this with the berschool method, is to have rental properties.

Right, Right.

And so I'm not, you know, just to break it down. You buy an asset or a property.

Right.

It's an asset in your portfolio. You buy a property where your carrying costs are going to be less than what the rent you're going to receive and you're going to get the cash flow and the equity build and those kind of things. I am a huge fan of rental property. Right.

I appreciate that, by the way.

Right.

Especially the plan that involves passing those properties off to a property management company. But rental, rental properties, you know, that is one of my preferred methods of investment. Obviously, you know, in business it's our bread and butter providing those, those rental properties. But you get the monthly cash flow, right. The tenants pay the rent.

Okay.

So you're going to have a surplus of your, of the revenue that comes in versus the outgo as long as you bought appropriately. Right, right. It is a frustrating situation when you're upside down.

Right, right.

It does happen. You know, big repairs and things like that come up, but you have cash flow that comes from that. The asset also appreciates. Right. So over time, the value of real estate in most cases goes up.

Right.

And so, you know, there have been periods of history where there's been a temporary drawback. But over the expansive time real estate, typically the value goes up. So your, your net worth is growing, right. By the value of the property. And then you're building equity on someone else's dime. Right. So every time you make that mortgage payment, you know, with the rent money you received, you've got some equity that's, that's building up there that is beyond your cash flow.

Right.

And then there's some tax advantages and those kind of things. So the rental, excuse me, the rental investment or the rental way to make money in real estate is kind of my, my favorite. And that's right along with the, you know, our turnkey model, right. We've been, that's our bread and butter. That's our, you know, what I refer to as mother and where I got that term from in a previous life for. Well, back in 1998.

Right.

I spent a few years, my first real job, grown up job was as a manager for Radio Shack. And what they referred to as mother was the parts and pieces and those kind of things. It's the thing, the stuff that built Radio Shack. And so I still, that terminology has stayed with me. So that's, that's what we do. We, we will find a property that has value add opportunity will take advantage of that value add and then provide the end product to an investor who wants to add it to their portfolio. And they can realize the rental income, that cash flow appreciation, equity, build and tax advantage from having that. And then if they want the full turnkey experience, right. They turn that property over to a property management company who will answer the phones and those kind of things.

Yeah.

Handle the tenants and all the good things that come in to make that investment as passive as possible, which is the goal.

Right.

I mean, I think you and I have even talked, Randy, about, you know, people in our positions and investors are in it to be investors, not to be landlords. So.

Right.

Removing that layer of being a landlord from it, passing it off to a PM company that knows what they're doing will definitely help with the investment. Just naturally, you know, establish that cash flow and be worth their while.

Right.

Make you do it again.

Right, right. In fact, I was just this past weekend, I was at my fantasy football draft and one of the guys there has purchased a few properties pretty quickly. And one of the first things he said was, I need property management in Cincinnati. So when we start moving south, I think I've got a lead for you. So.

Okay.

All right, awesome. I'll look for that call.

Right.

So the thing about those two methods are that you're. Even if you have a property management company, you still have some availability that you need to have.

Right.

So you need to be available. That's a better way to say that you're gonna manage and you're gonna take that call from the tenant if there's an issue late night or if you're gonna follow up the clients to collect the rent and take care of all the other things. If things have to progress a certain way, the evictions and those kind of things.

Right.

But ultimately the owner is going to pay the freight. They're going to, you know, responsible for the expenses that are incurred and those kind of things. So they need to be available.

Right.

So you can't be 100% passive in that situation. You have to be at least available.

Right.

With flipping, as soon as you stop flipping, there's no more income.

Right.

It's.

It's gone.

Right, Right. So.

Yeah. So there are ways to make money in real estate that are more passive.

Yeah, that's right. That's where I like it.

Well, you manage people's properties all day, every day, right? Yeah, yeah. So for your personal portfolio, you've participated in some more passive.

Correct?

Yeah. So tell us a little bit about some of that stuff.

Yeah, yeah. So honestly, I invest in my current market. I have not been brave enough yet to explore, you know, the Tennessee's and the Texas and the Kansas markets yet. I mentioned those because those are really good rental markets, by the way.

Okay.

For those of you that buy turnkey a lot, you'll hear those a lot. So I, yeah, as Randy said, I manage other people's properties all day long, so I get off the end of the day, I don't necessarily want to call my personal tenants and make sure everything's going well, so I choose a more passive stance. So actually I do note investing. That's what I do. At least of right now I am working my way towards syndications, which I think we're going to talk about. Yeah. So essentially I borrow money at some sort of interest rate. Sometimes there's also points attached to that, similar to a traditional mortgage. Sometimes, depending on the deal, I may structure it in a way that I participate in the active management of the rehab. And then when that property refinances or it sells, whatever me and my partners decide to do with it, then it pays out and then I just roll that right back into the next deal. One thing I do a little bit differently, I think, than some people is I actually analyze the deals myself.

Right.

Selective.

Sure.

The numbers don't work, then I gotta make sure the numbers work.

Sure.

So let me pick that out a little bit. I think you said borrow, but you meant loan.

Loan.

Yeah. So I lend your. Yeah, you, you lend money to a project, you get to look at the project before you actually decide to lend out that money.

Correct. Right.

And then based on the agreement that you have with the, with your partners, you'll make a rate of return and that gets paid out once there's an exit on the property.

Correct.

Yeah.

So they could use a flip strategy. They may use a burn method. They use some of these other strategies just generally on how they do the property. And then I think Freedom has something similar built into what, what we do as well.

Yeah. So what we do, that's a, that's a good call. Maybe we'll open up the, the burr part of it. But what we do right now, and it's a lot of this is way, a lot of investors who want to be passive get involved with us. Their first, their first ride, I like to say, with Freedom Real Estate Group as an investor, is to do a similar thing. It's a note investing or they'll get a mortgage on an actual property. So what will happen is they'll say, hey, I've got $100,000, or, you know, I have $125,000 or something like that for you to deploy in a deal. And then based on the terms that we negotiate, you'll get to look at the package before we buy it. We'll show you a property. Hey, we're going to buy 123 Main Street. We feel like the rehab is going to be x Number of dollars which is going to put us in this position on this particular property. And then we're going to ask you to fund this particular purchase and rehab. And then we will use your funds to rehab the property. And then once we sell, we will pay you your rate of return on the deal. A lot of folks like that as an entry level type of investment, because you kind of watch it. Like you said, you're selective. You like to see, you know, the deal and make sure the numbers make sense and that kind of thing.

Right.

And so we, we have that. We have a lot of investors who will underwrite deals for us. There is a need for that. I think right now we have 56 addresses that we are in various stages of rehab and coming available and those kind of things. So that's a lot of investors who are involved, right?

Absolutely.

And then, I mean, our acquisitions company is just buying like crazy.

Right.

So we've got, we've got more coming. So the horizon looks, looks really, looks really good for us there. So, so that's the, that's the first. That's how a lot of people get their feet wet. There's some logistics involved with that too.

Right.

So we got to send you out a package. You have to review the deal. You got to make sure that the deal works for you. Then you got to go through the mortgage process and signing a mortgage and the legalities of doing that so that you're secured by the property. But it makes it more, you know, makes it more secure.

Right.

So your investment is hedged and then you take the ride and wait until there's an exit. Then there's another release of mortgage and all that kind of stuff that you have to do. I'm making it sound like it's a lot. It's not a lot. People do it all the time.

Right, Right.

Yeah. But we also have another product and actually it has a higher rate of return because of the flexibility within the company. But we have another product called a masternode.

All right.

And this Master Note is another passive type of investment, but it's one where you don't have to sign a mortgage every time we get into and out of a property.

Right.

And you don't lose time. Like for instance, in that note and that note situation and the deals that you do.

Correct.

Not trying to talk you into putting your money, just. Just letting you know. So you said you want to immediately roll it into the next deal.

Yeah.

Right.

Well, sometimes there's not an immediate next deal. Right. Sometimes there's, you Got to look at a few deals before you. You find one. Those kind of things. So you lose a little bit of return on your investment because your money is not actively deployed.

Correct.

Right.

So with a masternote, this is where you'll invest with Freedom Real Estate Group, and then you'll have. We'll have a guaranteed rate of return.

Right.

And then we can use those funds to basically run our business. Now, we don't. We don't necessarily use those for operations, but where we do use those, those funds would be for things like supplies for rehabs or to supplement a rehab budget. You know, sometimes we will have the first investor, we do, the Note Investor, lend 70% ARV, which is after repair value. And sometimes that rehab is going to take us to 76% or 77. And so we can break off a small chunk of these funds and then supplement that rehab, you know, or those kind of things. But we have flexibility of where to deploy that. We have less paperwork and so we can offer a higher return on those things.

Right.

So. So just to recap what we've talked about so far, because I feel like I'm talking a lot. We've talked a little. We've talked about flips, we've talked about rentals.

Correct.

We've talked about note lending.

Correct.

We've talked about our master Note. And now with Freedom Capital Group, syndications, they're getting into syndication.

Yeah. All right.

And a syndication would be another type of deal that would be passive.

Correct. Right.

And this would be where a group of people would get together and pull their money. Usually there's a raise or something that. But they pull their money to get in much larger properties. You know, like the 384 unit in Daytona they just closed on.

Right.

Big time.

And they would collect like a preferred rate during a certain set term. And then there's a. Still an exit strategy with a. With a certain term on that too.

Sure. Yeah. So they bring in, they let us bar or let the syndication borrow the money. They'll get a guaranteed rate of return, a preferred rate in the interim, and then based on the terms of your deal, you get a payout on exit as well. Um, and so those are really attractive to folks. And so with all those methods, it really depends on folks. Temperaments as to which one of those vehicles makes. Makes the most sense. When we first started this conversation, I mentioned that you had. You talked about the BRRRR method.

Right.

The buy, rehab, rent, refi, repeat. Right. And until recently through Freedom Real Estate Group, anyway, there wasn't really a way for investors to exercise that strategy with us.

Correct.

But I mentioned a few moments ago that we have 56 addresses that are currently in various stages of rehab. Some of those are waiting for rehab and those kind of things. So we have opened up the opportunity to. To buy those properties earlier in the process.

Right.

Okay. So our bread and butter, our signature product is the turnkey. Real estate is rental.

Right.

Turnkey rental. It's been rehabbed. And then if you really want that mailbox money experience, turn that over to a property management company. The brrrr method is super strong. And because you get to participate in the value add, so you're getting two bites at the apple.

Right.

And so we have our Equity Advantage series.

All right?

And what the Equity Advantage series is is a. There are. It's a group of properties or what's available on our Equity Advantage series is a group of properties that we have identified as excellent turnkey investments.

Okay.

I mean, the numbers work.

The numbers absolutely work. Okay. And then we are going to rehab this property and sell it as a signature series.

Right.

That is our plan with this property. Okay.

Right.

But we have a finite number of crews. Right now. I think it's 10.

Right.

We have 10 crews. And only so many properties can be rehabbed at once. So we are opening this. Opening this house or duplex or multifamily. We're opening this property up to the public to participate in that value add. Now, we've done some due diligence on this property. We did that before we bought it. And we have an idea, good idea, of what it's going to cost to make it a signature series. And then there are other things that. Things that make us make it a signature series that don't necessarily have to be done to make it rent ready. So we make this property available for purchase for folks who want to take the ride a little earlier, maybe participate in that value add. Maybe they have a crew that can do the work. They don't need to hire Bulldog Renovations to do it. Maybe they don't want the roof replaced or the carpet pulled out or the H Vac done. And those kind of things, they get to decide what goes into the rehabilitation of that property. And so it's not that it's a lesser property. It's not that the numbers don't work. It's simply that we haven't assigned a crew yet. And so until we assign a crew, we're making these properties that we purchased to make signature series available for purchase at Equity Advantage.

Perfect.

For the Burr strategy.

Yeah, it's actually a really good opportunity. I've actually personally looked at a couple myself because I do flips here or there when I can find one. So, you know, this is. This is a good opportunity in our market for people that are itching for properties. We've already, like you said, we've already done some due diligence. We've already kind of run some rough estimates for rehabs at our level of what we would normally put into it and kind of done some of the numbers in a nice, pretty little way. So it's easy to read and understand and all that good stuff. And then investors in our market can determine whether or not it fits their strategy. I'm sure, I'm not sure we've done actually analysis of how many of, like, how many of those have gone out to local investors or people just buy locally. But it would be interesting to see that at some point.

Yeah, actually, we should do that. It's a relatively new program, so over the last couple of months, it's maybe been 30% of our activity. There's a big interest for it. It has to be the right type of investor. You know, sometimes some folks are just, you know, they're. They don't want to take the ride and they don't want to manage a rehab and do those kind of things. And so there are a lot of time those folks are just hiring bul dog to do it and saying, give me signature series and then I'll take the little extra equity that comes with buying it earlier, which is perfectly okay, which is fine, by the way. Yeah, yeah, we like that. You know, but, you know, there's some opportunity here for someone who would be a do it yourselfer or someone who had their own crew or those kind of things as well. You know, obviously we would prefer you hire Bulldog, but that's that. And so then even earlier in the. In the process, we sometimes we acquire properties with the intention of eventually rehabbing and then making that, you know, turnkey finished product. But there are tenants in there already.

Right, right.

And based on where we were able to buy it and what the tenant is paying in rent, it makes sense to sell this as an instant cash flow play. So this is something where you would buy a property, probably a reduced price, almost always a reduced price, and the rents make sense right now. You know, they're one and a half percent of, you know, of the purchase price and, you know, there are higher. And it's just a really good position to be in. You buy the property. Now you collect 6, 8, 10, 12, 24, 60, 180, who knows how many months of rent right now before you do the rehab at the turn.

Right.

And then at the turn, you know, for folks who may not know, I think most people would know, but a turn would be when a tenant moves out and we make the property rent ready again.

Yeah, normally not a full scale rehab, it's a, it's a lesser version of that just to make sure the, it checks the major boxes for renting.

Yeah, right, right. So in some of these cases, it might end up being a full rehab. In fact, I personally invested one of these in one of these. And it's a, the idea is that we'll collect rent on this property as long as it makes sense, the tenants comfortable and you know, that kind of thing. And then when this tenant decides she no longer wants to live there, she'll move out and then we'll do the complete rehab. And at that point we will finish the brrrr strategy. But the instant cash flow, the fact that we're collecting $916 a month and rent, not to give away too much information, I guess, changes my numbers.

Right, right.

Because now I'm, I'm getting good cash flow immediately. I don't have to wait the time, you know, for it to be rehabbed and stuff. So. So those are relatively new programs for us. It was just another way to get into the rental real estate game. Now if you bought an equity Advantage series, there's nothing that says you can't flip that.

Right.

If the numbers work for you and you can make money.

Absolutely.

Go ahead and flip it. You know, do the work yourself and flip it, you know, make it available.

So yeah, we may, you know, like you said earlier, like we may present a rehab budget that's, you know, $30,000. And after you trim it up now the numbers work for you and what your strategy is because you may only do 10 to 15,000 depending on what you want to do for that rehab.

Right.

So I mean, numbers can be flexed a little bit depending on what your need is for that property.

Sure, sure. So a lot of this is gauged by temperament.

Right.

So what, what helps you sleep at night, you know, what is going to allow you to be comfortable in your investments? How much control do you want to have? There's all kinds of ways that we can help, you know, folks to get to, you know, the financial freedom to the second and third and fourth avenues of, of receiving income.

Right.

And that's what's that's the key.

Yeah. I mean, you mentioned temperament, and part of it's just. Just knowing what you want. You know, for me, for the longest time, I thought, oh, I'm gonna have 100 doors and I'm gonna rest easy on a beach somewhere. And then I realized, you know, it might be better for me long term to do some more passive stuff where I can be a little more involved that way. But I do know people. I manage for people that have hundreds of doors, and that's what they want, and that's perfectly okay. And then the more we dove into what client wants, we realize that there's other options, that they can get more involved in different ways. And then some people do multiple different strategies all at once, so.

Right.

That doesn't hurt anything either.

Yeah. So I lean toward the doors myself. Right. I. I understand your. What you're. Where you're coming from and the, you know, the person, property management angle. I am a. I. I want the doors. You know, Danny has been talking about getting a thousand doors. You know, that's a little aggressive for me, but I am. I am about accumulating the doors and then passing those management opportunities off or the management responsibilities off. Because I do want to be an investor and not a landlord. But there are folks who want to be landlords.

That's okay, too.

Yeah, there's. There are folks who don't want to deal with any of it. Right. They want to put their money with a, you know, good, reputable, consistent, reliable company. And then when the interest payout time comes, they just want to get their return on their investment. So we have a strategy for almost everyone.

Right.

They don't want to have their money at risk in the stock market, the ebbs and flows and things like that. They want to, you know, more millionaires have been made from real estate than any other method, so they want to be involved, and we have those opportunities.

Now.

I feel like we flew through a lot in a short period of time, but we've been talking for a long time and we. We don't. We don't have the camera going to keep any in everybody's interest either.

Right.

We just do this all day, man.

We could do this all day. In fact, I wanted. I want to see all the deals that you maybe you.

Right.

So if you have any questions, I strongly encourage you to reach out to someone here. We definitely love to help you get involved any way that you feel like you'd be comfortable or maybe if you want to get more details about talking through some of these programs, especially like the EA and the icf, Equity Advantage and Instant Cash Flow, since those are my baby. But C.J. and Mark or myself, Shoot. I'm sure Chris would be more than willing to talk strategy with anybody who. Who wanted to just kind of chew the fat a little bit, so.

Absolutely.

All right.

I love this stuff. I love talking this stuff.

Live for it.

Live for. All right, So I think that's a good place to end the podcast. I appreciate you coming here today and being and doing this with me, you know, walking the 40 steps it is. To your office.

Yeah.

Yeah. Oh, it's such a long haul down the hallway.

Right.

And as always, we're going to invest.

Smart and live happy.

Thank you.

Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions and information on this show are not guaranteed. All investment strategies have the potential for profit or loss.