41) Stop with the Keys Already & Rent Control

Real Estate Investing with House Money

House Money Weekly

In this week’s House Money Weekly segment, Lauren and Alan get together with their special guest, Dion. They discuss blog 139, 3 Outdated Property Management Things You Can Stop Doing. Number 1 is putting out a physical rent sign. These are the signs that you can buy at Home Depot or Lowe's that say For Rent with a handwritten phone number on it. These signs attract tire kickers, other investors (driving for dollars), and realtors, but NOT prospective tenants. Lauren confirms this by sharing her recent experience on one of her properties where she put a For Rent sign out front. Number 2 is having a giant ring of “landlord keys.” This is a mom and pop from the 1990s way of doing real estate. Alan shares one product he uses for all his keys which provides a lockset where every one of the units have different locks, but he holds one master key for all of it. Lauren uses an electronic keypad. The lock connects to the Wi-Fi and if the Wi-Fi goes out and comes back on, it will reconnect again. It is so easy and quick for their short-term rental properties where they also started adding these to their long-term rentals. Dion doesn’t own one key, instead he buys the Schlage coded locks where you enter the code and then it engages the mechanism so that the human has to turn the dial to engage or disengage the default. His tenants are responsible for changing the batteries. The number 3 outdated thing is tracking everything in a spreadsheet. There are many property management software options that will track your finances, rents, and other needs instead of putting it manually to an excel or Google sheet. Dion uses Hemlane.

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Mortgage Minute: Jasmine answers the question: What is the difference between a recast and a refinance?

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Real Estate Is Easy Interview

Lauren interviews Vanessa Pannozzo, the co-founder and director of operations of Generational Wealth Inc group of companies. They are a real estate investment firm based near Ontario, Canada. They specialize in the BRRRR strategy, they do construction and property management in house as well as capital raising. Lauren asks Vanessa what is a BRRRR strategy and Vanessa shares the meaning of BRRRR: Buy, Renovate, Refinance, Rent, and Repeat. This strategy allows you to rinse and repeat your capital, and you're adding the lift and you're forcing the appreciation of the value of the home/property which then allows you to pull out a percentage of the capital that you put into your project at the point of refinance. You can use the BRRRR strategy from a single family up to a 100- or 200-unit apartment building timeline. Vanessa also shared an example of one of their recent projects, a 6-unit building they spent $2.8 million to acquire and then spent about $900,000 in renovations, which includes the upgrades to the actual units as well as doing some bigger items like upgrading the boiler, electrical, plumbing and other bigger pieces. In total, they spent $1.962 million, and were able to re-fi for $4.54 million. In short, their re-fi proceeds were more than they put in. Lauren asks Vanessa about the biggest risks they encounter. The main one is a changing market, where you aren’t able to re-finance when and for how much you predicted you would be able to. Another is having a bad contractor because the construction piece is huge when it comes to the BRRRR so working with somebody that you know and trust is a big factor and a big contributor to the success of the project. Poor underwriting can sink deals too. Vanessa shares how they navigated the rapidly increasing interest rates. They ended up leaving more money in some of the deals than they originally thought they would. They also leveraged a lending program. Lauren asks Vanessa when they decide to sell a property. They sell when it doesn’t fit on their portfolio any longer or when a property is not performing. And lastly, Vanessa makes real estate easy by surrounding herself with a power team. Alan agrees that having the team you trust is huge. Rockstars hang out with rockstars. Dion points out that there’s no right way or wrong way to invest in real estate, there’s just a right one for you.

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Guest Host Dion brings up the topic of rent control, which is a hot topic in Washington, where Dion’s rentals are. According to Dion, rent control makes landlords rich and more tenants homeless. Dion asks the Hosts if the rent control has been proposed in their own areas? Alan is familiar with rent control because when he lived in New York City, everyone he knew in a rent-controlled building were incentivized not to leave and those people are typically people who had been there for 50 years. Lauren sold her duplex in St. Petersburg, Florida, when they were discussing rent controls on a citywide basis only due to Covid. As of March 1st, Dion is making $3200 more a month now because rent control was talked about in his state. It basically forces owners to raise rent by the maximum allowable because they won’t be able to make adjustments later. The solution to the housing problem is on the supply side. Alan talks a bit about what rent control was like when he lived in NYC. Dion reminds us to understand local laws.

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