Justin Pogue - Rental Property Secrets: How to Protect Your Investment and Increase Cash Flow | Real Estate Educators Podcast with Kevin Amolsch

Description

What do you do when a contractor tells you that you need a brand-new HVAC system, boiler, or water heater? How do you know if you're getting good advice—or getting taken advantage of?

In this episode of the Real Estate Educators Podcast, Kevin Amolsch sits down with Justin Pogue to discuss what every real estate investor should know about managing rental properties, choosing contractors, working with tenants, and protecting your investment.

Justin shares lessons from building a 72-unit portfolio, managing apartments firsthand, and writing his book, Rental Secrets. They cover how to avoid overpaying contractors, why strong relationships with vendors matter, and how better communication with tenants can actually lower your expenses and improve returns.

If you own rentals—or want to—this episode is packed with practical advice you can use immediately.

00:00 How Justin got started in real estate investing
07:04 How to know if you actually need a new HVAC system
12:18 Why real estate seminars leave out the hard part
25:09 How renters can actually help lower your costs
28:31 What Rich Dad Poor Dad taught about rent increases
33:04 Month-to-month leases vs. annual leases
38:13 Why property managers don’t always think long-term
44:03 Where to find Justin and his book

Connect with Justin Pogue:
Website: RentalSecrets.net
Book: Rental Secrets on Amazon

Learn more about Pine Financial Group:
pinefinancialgroup.com

Hosted on Ausha. See ausha.co/privacy-policy for more information.

Transcription

Speaker #0
Just because somebody is an expert, that doesn't mean they're going to use their expertise for you. It's one of those ways that helps me as an investor keep my risk down. It helps me keep my expenses down because we could do repairs earlier as opposed to later when they ballooned out of all proportion. And if I can keep my risk and expenses down, I can charge you less. But it takes a shift in the mindset. to look at the situation from that perspective. But the worst part is I can't get money. I can't get that money back. Nobody's going to rent use of an apartment from last week.
Speaker #1
Yeah.
Speaker #0
The sentence doesn't even make any sense.
Speaker #2
Investing in real estate, they're winning, they're making money.
Speaker #1
What's up, everyone? Welcome to the Real Estate Educators Podcast, where we provide the education you can build on. I am your host, Kevin Amos. We're having so much fun with this podcast. We're helping real estate investors. and real estate educators. Are you out there building a portfolio, maybe fixing and flipping some houses, or are you providing content to real estate investors, maybe to try to get some business? This is the podcast for you. I have a super special guest, something a little bit different than what we've had on the show up to this point. So I'm happy to introduce Justin Pogue. Now, Justin, you are in the property management side, but it sounds like maybe a little bit on the tenant. I don't want to say advocacy, but on the tenant side of things a little bit. You're a consultant. You're an author. You've been quoted in, was it Fox News, I think you said. Long you've been doing this, but I'm really excited to get to know you, man. So welcome to the show.
Speaker #0
Thanks for having me, Kevin. I'm glad to be here. So we've been in this real estate thing for 20 plus years now. So it's been a while. And yeah, so I started on the, well, actually, let me back up. I started in grad school. And I was trying to become a management consultant. I graduated into the dot-com bubble. It was probably the worst time to try and get into management consulting that I could have possibly chosen. So that didn't work out. Came back home. And my mom, who had been a real estate agent back in the 80s, she wanted to start investing in real estate. So she says to me, Justin, why don't you just come look at this one property with me? Just the one. And that turned into a 20-year career. Oh, that's amazing. In real estate. And we started out with zero units. And we went down to Florida and bought a few properties off of the lands available list. Got control of those, flipped those to developers. And then we started actually investing in multifamily housing, duplexes, fourplexes, that kind of thing. And a 32 unit apartment building. We worked our way up from zero to 72 units that we had invested in. And we weren't just investors. We jumped in feet first managing. We lived on that. We lived in that 32 unit apartment complex for a while as we managed it. And we were not only finding tenants, but we were also working on remodeling units. and I have this we We first started, we went down to Home Depot and we bought this thick orange book, the Home Depot 123 Home Improvement Book. Because when you go to these real estate seminars, they don't teach you about tile and drywall and cabinets and all of this other stuff that comes along with renovating property. So we kind of went through that learning process and it was actually really good. So when we hired subcontractors later on, we knew what tools they should bring with them. them we knew kind of how those uh those projects should go and if you didn't bring the tools with you you got sent home and we hired somebody else yeah good idea it sounds like you might have learned that one the hard way huh yeah yeah and it's interesting so we had one uh we had we hired a plumber to come in and install a sink and my mother hadn't done that before so she was watching to see how he did it and all of that. And he proceeded not to do the job because he's and I believe his direct quote was, ma'am, I'm not a teacher. He did not want to let her watch him do the work that she had hired him to do.
Speaker #1
That's interesting, Justin. So do you think that was because he wanted it like job preservation or is it more of a I'm kind of cutting corners here and I don't want you to see that?
Speaker #0
I don't know. Initially, I took it as job preservation. Um, but it may very well have been the opportunity to cut corners because one of the things I've learned is that just because somebody is an expert, that doesn't mean they're going to use their expertise. for you. And I've had that experience where a perfect example, we've had, we have an air conditioner go out and we hired some, an HVAC person come in and look at it and they're like, oh, oh no, you did, you need to replace this whole system. This is wrong. That's wrong.
Speaker #1
Yeah.
Speaker #0
And it's just because they didn't want to take the time to figure out how the older system worked to actually do the repair. It was, it was easier for them to just tear it out and install. the new systems that they had trained on. Yeah.
Speaker #1
So I want to get into this. So I actually, I want to get into your story also a little bit more, but going down this and I'm very interested in this now.
Speaker #0
Absolutely.
Speaker #1
What's the lesson here for our listener? Like how would we know if we called an HVAC company to do a furnace or an AC or whatever it is, how do we know we're not getting ripped off and we actually do need a brand new unit?
Speaker #0
Well, the first thing is you're talking to more than one vendor. OK, so you're going to typically you're going to get approximately three repair vendors to come out and look at your situation. Number one. Number two, ask specifically what is wrong. You're paying them for a service call. They're coming out to diagnose your system. OK, a detailed diagnosis needs to be provided. it. Okay. And That diagnosis should, when you ask each of those vendors about that diagnosis, the information you get should be the same. You shouldn't get different stories from each of them. So those are a couple of ways to test this. And also, like, talk to the manufacturer. I had a consulting client, and we'll get into the consulting part later, but I had a consulting client who... Her water heater went out. She had a boiler for her whole building. And the boiler went out and everybody's taking cold showers and they're calling her and complaining and all of that. So she has two plumbers go out. They tell her the same thing. You need to replace the whole system. It's going to cost you eight grand, blah, But she's like, it's just outside of the warranty. Let me call the manufacturer. The first question the manufacturer asks her is. What diagnostic code is it displaying on the LCD screen? She's like, what do you mean code? He's like, there's a diagnostic code. What code did the plumber say is it showing? The plumbers didn't say anything about a code. So she goes out, looks at the code, calls them back, and they're like, oh, that's a filter on the back. It needs to be replaced. It's $200. You can do it yourself. Yeah.
Speaker #3
Seriously?
Speaker #0
Yeah. I mean, and it happens all the time because they think you don't know.
Speaker #3
Yeah.
Speaker #0
And in many cases, they're not wrong because these real estate seminars are not about how to operate property.
Speaker #1
Yeah, right.
Speaker #0
They're about how to invest in property.
Speaker #1
Buy it. Yeah.
Speaker #0
Right.
Speaker #1
Some of our stops when you buy the property, right?
Speaker #0
Yeah. I mean,
Speaker #1
very little.
Speaker #0
They talk, they sing all the praises of real estate, the depreciation, tax benefits, appreciation, residual income. They make it sound so great, but they never talk about it. They make it sound so great. Like it's a bond. Like you just put money in and money flows out, you know, at the, you know, after a certain period of time. But it has to be managed. You have to repair things. You have to rent to people. You have to market to people. You have to adjudicate disagreements between renters who are neighbors because. this kid's making too much noise or somebody's playing drums or whatever it is that's going on. There's a whole, that whole aspect is left out of all of these real estate seminars. And it does the investor a disservice because they get into it and they're like, oh, this is going to be great. And this is good. It's going to work this way. And it doesn't. And, and, and also. By extension, it does a disservice to the renters, too, because fewer people invest in housing and now housing is more expensive.
Speaker #1
Yeah, that's interesting. That's taking a very macro look. So I want to get back to this contractor thing because I've managed a lot of rentals also. At my peak, I was at 55, but they were fourplexes or less. I didn't have any of the units, so I can imagine that adds some economies of scale. and some problems because you're right, neighbors fight with each other. I've experienced that with more clients. It's probably a little balance there. But what I've learned with dealing with contractors on the rental properties is if you have a good handyman that can do most things, then it makes it so much easier to manage, right? Then you have to trust them. But here's a piece of advice for the listener. And I want you to elaborate on this or share with me your opinion, Justin. Contractors will get comfortable with you. And they will give you great deals and they'll be reliable and all of this. And then as they get comfortable, prices start increasing and time gets a little bit slower. So it's a good idea every once in a while to just... price check. I'm not an advocate of getting three opinions on every repair that needs to be made, but every once in a while, and maybe on the major ones like you're describing, you should do that. So what do you think?
Speaker #0
I do think you should price check, most notably because the contractor is not one of those industries that's known for being up. on the latest and greatest technologies that are out there on the latest and greatest efficiencies that are available. I mean, construction is being dragged into the 21st century, kicking and screaming, honestly. So, you know, and there's, and there's new technologies and new materials and new things coming out all the time. And as an investor, I want to be able to take advantage of those. And not every contractor. takes the time to dig in and really learn what's going on in the industry, how things are changing, and to make those resources available to their clients. So I absolutely recommend going out and checking. Although I will also say that not only is this a relationship business with your renters, it's also a relationship business with your contractors. And contractors have saved you my behind many, many times. And I'll give you a perfect example. So at this 32-unit apartment building, okay, and it was two buildings with a parking lot in the middle, and there was a drainage canal behind the property. One summer, we get torrential downpour of rain. That drainage canal filled up and the first floor of both buildings was flooded.
Speaker #3
Oh, shoot.
Speaker #0
The carpets are all wet, drywall. I've never been through a flood before. They didn't cover that in any of the real estate seminars. So I'm trying to figure out what to, well, first, there's this feeling of I'm standing on the second floor balcony watching the water rise. not having no way to stop it so there's that um then after that the water recedes and now these residents are coming to me like what are you gonna do are you gonna put us up in hotels i'm like okay i'll get to the contractor part in a moment i'm like okay i do have a couple of vacant apartments that are clean and dry you can share those while we get yours together i didn't No. legally obligated to offer that, but I offered that to them so they would have someplace dry to sleep. Nobody wanted that because they didn't want to share. And my budget did not allow me to pay for all of them to be in hotel rooms. So I had to kind of leave them to their own devices while we got this straightened out. Now. Because of my contractor, I was able to get this whole thing straightened out in three days and everybody was back in. So the contractor that I'm specifically referring to was our carpet cleaner. They actually had water extraction equipment that they brought in the night this happened.
Speaker #3
It's amazing.
Speaker #0
Now, I know there are other people in that community that were calling them for help.
Speaker #3
Yeah.
Speaker #0
But they showed up for me. And there's no other reason than that for that other than the relationship.
Speaker #1
I love what you're saying. And I couldn't agree more. That's why it's very tricky because you want to price check. That's absolutely true. But if you're price checking every time you're not building that relationship, there's no trust. Right. So how do you I mean, how do you balance that or manage that?
Speaker #0
It's well. Price checking is not what stops the relationship. The relationship is based on who you choose to do the work. And that's where the interaction comes from. So you may have other people come and look and price check and all of that. But the contractor cares that whether they were chosen to do the work or not. That's where that's those are the pieces upon which the relationship is built. And really, by price checking, you're just keeping them honest, you know, as as Ronald Reagan would say, trust, but verify.
Speaker #1
I do find it tricky to maintain a relationship and do that, even though I am recommending that you price check. But if it comes in a little bit off and you're you're you're a contractor, certainly. increase their pricing a little bit. I mean, you have to tell them, right? Like, hey, I just got into the price and you're a little bit high. I just feel like that might damage that trust a little bit.
Speaker #0
So we live in a capitalist system. That's the other side of the capitalist part. People focus on the businesses that are supplying the goods and services, but they don't focus on the role that the consumer plays. you're more, you're there for more than just to write the check. You're also verifying the quality of the service, verifying the quality of the experience, and you have to give them that feedback. If you don't give them the feedback, they're not going to, they're not going to make any changes.
Speaker #1
Yeah, that's true. Okay. Well, you have something in your, your form here that I wanted to ask you about because you, you said something about. Teaching renters to use market-based strategies to obtain lower rent. I guess I've never had a guest on the show, Justin, that was advocating for renters. I think it's great. We just haven't had that yet. It's more about how do we as investors make the highest ROI? So help me understand what you're talking about here, where you work with tenants to help them lower their rent.
Speaker #0
So like most real estate investors, My conversations with tenants about rent has always been this emotional roller coaster where the landlord is the bad guy who's trying to take advantage of me and just extract everything that's possible out of me, financially speaking. Okay. And that, I mean, that's the conversation that's happening nationally. But when we kind of get down to it, renters are never going to put hammer to nail to build the places they live in. And most real estate investors are investing for their retirement. Let's face it. They're investing for their retirement. So this renter is literally living in your retirement plan. You might want to have a good relationship with them. So in the book, I really am really. trying to do multiple things. One is to change this conversation to one of cooperation and collaboration because renters and landlords are two sides of the same coin. They need each other. And do it by providing some education that people do not get in school. There's really no training on negotiation or how negotiation works or why. why people might be successful in negotiation that people get in school. So the idea behind the book is as a landlord, as a real estate investor, you are basically becoming a small business when you buy a property. And because of that, you are taking on problems and challenges and situations that come with being a small business owner. You have maintenance problems, you have marketing problems, you have competition in the marketplace. And these are all things that your renter may be able to actually help you with. Earlier, we talked about maintenance. One of the chapters in my book talks about, as a renter, you're living on the property. You see what's going on with the property. You know what appliances don't work. You know which pipe is leaking. Tell me. Help me keep my property together.
Speaker #1
I wish my tenants did that.
Speaker #0
Yeah. I mean, it's... And it's one of those ways that helps me as a investor keep my risk down. It helps me keep my expenses down because we could do repairs earlier as opposed to later when they ballooned out of all proportion. And if I can keep my risk and expenses down, I can charge you less. But it takes a shift in the mindset to look at the situation from that perspective. And that's... what I'm trying to do in this book is shift renters mindsets too. So they actually understand what goes into providing this product to them that they're paying. a third or more of their take-home pay to cover every month.
Speaker #3
In your retirement plan.
Speaker #0
Yeah. To be honest, I had never really thought about writing a book before. And when somebody suggested it, I'd go to the bookstore and I'm looking at the real estate section and I see books for real estate agents and investors and insurance brokers and mortgage people, all of these people in the industry, except the renters. And I'm like, well, the renters are bringing over half a trillion with a T dollars to the table every year to float the entire industry and all these people who have books for them. And the renters don't have a book written to help them. And that's kind of really where the book came out of. And kind of talking about this relationship between landlords and renters. It's important because that's how the value actually creates. That's where the profit comes from. That's where investors get what they're looking for out of this investment from. That relationship is key.
Speaker #1
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Speaker #2
That's pinefinancialgroup.com.
Speaker #1
So you keep saying the book. I think that's right behind you, the Rental Secrets book. But why don't you tell me about the book?
Speaker #0
Yeah, yeah.
Speaker #1
You sort of already have, but...
Speaker #0
A little bit, yeah. So in the book, can we talk about how most people, when they deal with landlords, they feel disempowered. They feel like the landlord has all the power in this relationship.
Speaker #1
because they have the roof that they're looking for. Like, am I hearing this right?
Speaker #0
This book is, the book is written at the tenants, but from an investor standpoint, there are valuable things in there too. Because the book is talking about the different levers that renters can pull to help real estate investors solve those problems that I mentioned earlier. So. As a property manager, and I'm marketing my property, right? So I'll kind of take a map. I'll put a pin in the map where my property is. And I'll kind of draw a circle about a mile out. And I'll like, these are the buildings that I'm competing against. Okay? It's kind of how I look at it from a property management perspective. But what I talk about in the book is as a renter, That really has nothing to do with you. You're just looking for someplace that's a half hour from your job. Okay. So their idea of what the market is, in a sense, it's not real because I'm the renter. I decide what market I'm in and you're trying to get me to rent. So you need to know what you're competing against, whether it's within that circle or outside of that circle. And that's the information that I need renters to bring to me as a property manager so I can price appropriately for the competition that I have in the marketplace. OK, so those are the kinds of when I say market based, those are the kinds of things I'm thinking about. If you can help me maintain my property and keep my curb appeal up, then we can have a conversation. If you can bring me market information that I don't have and can't get any other way. we can have a conversation about lower rent and getting, also getting renters to think about like the nature of what the nature of this landlord business. There are two elements to my product space and time. Okay. If my apartment's vacant, I'm not getting any money, but the worst part is I can't get money. I can't get that money back. nobody's going to rent Yusuf an apartment from last week. The sentence doesn't even make any sense. So, so... I need to get people to sign on the dotted line as soon as possible. And understanding that bias towards taking action, then renters can understand why landlords are trying to avoid vacancy almost at all costs. And that renters are in charge of, well, let me back up. When you send somebody a renewal notice, if they say no. you are going to incur cleaning costs, repair costs, marketing costs, and vacancy costs. And you have no idea how long that vacancy is going to be for. And you're going to have to roll the dice on a whole new situation. Whatever income, kids, whatever's going on in that family dynamic that you're going to have to roll the dice on. And the renter that you sent the renewal notice to, they are in charge of whether you have to deal with all of that or not. And you have to decide if it's worth it to you or not. But I want renters to be in that strategic mindset to have that conversation. So Kim Kiyosaki, the wife of Robert Kiyosaki, author of Rich Dad, Poor Dad. Tells the story about how she she she's had this rental. The leases are up. Tenants have been in there for a year. She sends them a renewal notice for twenty five bucks higher on the rent. One of them decides to move out. So she has to go through that process. I just described cleaning, maintenance, all that stuff. Vacancy. The place was vacant for six months until she found another person. So now for twenty five dollars, she lost. six months of rental income. Now, that's not to say that it's always going to be six months. It might be two weeks. It might be a month. It might be three months. You don't really know, but that's the deal. That's the nature of the business. That's how things happen. So from the renter standpoint, that's the conversation we need to have. Don't come into my office and whine about how high rents are. Talk to me about how you're going to help keep my vacancy expense down. Talk to me about how if you stay, I don't have to incur marketing expenses because apartments.com doesn't work for free. Talk to me from that perspective. And when you talk to property owners and investors from that perspective, I don't care if you are the most hard-nosed spreadsheet Wall Street finance guy there is. When you're talking to me that way, I'm going to listen.
Speaker #3
Yeah.
Speaker #0
And if I'm a property manager and I report to an owner, you're giving me information that I can now use and take to that owner and have an intelligent conversation about what they want to do.
Speaker #1
So I have a strategy here I want to run by you. It's kind of controversial. So I'm curious what you think. This is something that I've used, Justin, with a lot of success. So I hate annual leases. I really prefer month to month. And the reason for that is very, it's very often that a tenant doesn't care if they're in a lease or not. If they want to leave, they're just going to leave. So if I, so a year lease locks me in, but they still feel like they have the flexibility in a lot of cases. And that's my opinion. Okay. On a month to month, I could raise rents anytime I want. Just 30 days notice. If I need to get them out, I can get them out. which was hugely beneficial during COVID when there was a moratorium because I couldn't evict for not paying rent. Right. But I could evict for a lease expiring. So it gave me a lot of flexibility there. And then when I want to increase rents, the way I would do it is say I want that twenty five dollars like Kim wanted. I would send a notice saying, hey, I want 50 bucks a month. But I understand times are probably really tough right now. If fifty dollars is too much. Give me a call. Let's talk about it. I really want to keep you in there and I could be flexible. So that's basically what I would say. Maybe 20 percent of the time I'd get a phone call. Say the rent is too high. Very simple question. Cool. What's up? What's a good happy medium? You know, taxes, insurance, everything's going up. What's a good, you know, middle ground? And they would say, what do you think they're going to say, Justin? Twenty five bucks. So it's like, OK, cool. Let's do twenty five. I don't need to do twenty five. Your idea. So now they feel like they're winning because they beat me up.
Speaker #0
I still get my 25 bucks and the other 80% now I'm getting 50 bucks. So that was a strategy that I've implemented with a lot of success. And we need to wrap up here in a minute now, but I'm very curious based on what you just said about the Kim story. What do you think about that?
Speaker #1
A couple of things. One is if you are in a situation where you are trying to refinance or work with some kind of financial institution or that kind of thing, They typically frown on month-to-month leases. They prefer to see that one-year lease, some commitment on the part of the people that you're renting to. So there is that. And transitioning into that when you need to can be dicey. Because I haven't been locked in for all this time. Now you want to lock me in because the bank says. That can be dicey. Typically, now I'm speaking not when I was working for a property management company, but when I was managing my own properties, I would lock people in for the year. And then after the year was up, it would go month to month.
Speaker #0
Yeah,
Speaker #1
that's how my business is written. Right, So, I mean, there is some value in what you're saying. And there is value in being able to sever those relationships when need be. And the COVID thing kind of really touches on how people don't understand how this market works. politicians are locking you in on this eviction moratorium thing um and they still think people are going to invest in in more housing and i can't like when the people who aren't paying can't get out and you would like want me to invest more in housing yeah i've got to pay my mortgage payment right yeah and you still got to pay your property taxes too taxes yeah yeah yeah so like all of the people don't understand how the pieces fit together Um, and that was, that was very, a very clear example of that.
Speaker #0
Yeah. That's cool. Hey man, I'm learning a lot. Um, you also do some consulting now. I'm a little afraid to ask you because I almost feel like, are you, are you a friend or foe here? Because, so I've actually get for the tenants, but what's the consulting service they'd like?
Speaker #1
I've actually consulted on both sides. So I've consulted for a, a brother and sister duo who invested in the property in Illinois. Right. And. Property management company just stopped sending them their residual check at the end of the month. And we kind of went through it. We kind of went through a process of getting those payments restarted and applying some pressure to property management company without going to court. So I had that situation. Another situation where I had a tenant call me and he was like, the landlord is giving me pressure to sign another 12 month lease, but I'm in a. I'm working as a contractor. I don't know if my contract is going to be renewed. And we started talking about his, his, his, the property that he was renting. It was an off. So it wasn't originally an apartment. It's, it was an office that got turned into an apartment. So then I started questioning, asking questions about, well, is this actually a legal apartment? Like, was it registered with emergency services and all that kind of stuff? And he didn't know. So. Coming at it from that perspective gave him leverage in having that conversation with his landlord about signing a new lease and getting the time that he needed and all of that. So basically, I've helped a lot of people in and around the real estate space who have fallen through the cracks in one way or another. I've also done a project for a property management company where I went through every property in their portfolio. What's highest, what's working, what's not working, what's highest and best use for this property. Because honestly, property managers, they don't have time for that. They're putting out fires on a daily basis. They're not thinking like long-term what should be happening here and how it's happening. And another interesting thing is as I was doing that, and this was in California, it's so expensive there. People were using rooms for different purposes. So you had people who were using a living room as a bedroom or a dining room as a bedroom. And some of these rooms had gas appliances in them and all of that. So they weren't really designed to be used that way. So part of my thing was if it's being used as a bedroom, it needs to be treated as a bedroom. You need to add smoke and CO detectors in this space. If somebody's sleeping in here.
Speaker #0
Yeah.
Speaker #1
It's like, but the renter's not thinking about that. They're just thinking I need space for bodies and they're putting people in these different rooms, not thinking about the ramifications of the different appliances that are in those spaces. But from a, from an investor standpoint, You need to understand that people are going to use the space in that way and structure it accordingly. So you're covered from a liability standpoint. And that's really what putting those smoke detectors in is.
Speaker #0
I have this property. You're going to think this is funny, Justin. I have this property that had access to a crawl space from outside, you know, outside. I'm sure you can picture it. You only open up the little thing and you go. And so that was like the furnace was down there. Just ran. It was dirt floor, you know. Can you picture what I'm talking about? Yeah. Dallas, maybe not. I don't know if you have crawl space there. But I had people move into that. It's like a four-foot clearance. I mean, it's crawl space. And I had people move into that. How do I protect myself from that one?
Speaker #1
Not housing.
Speaker #0
You probably have crazy tenant stories, too. But that was just one of them. Yeah.
Speaker #1
but I never would have thought the only way to just off the top of my head, the best way to protect yourself from that is to actually tour your properties, like go to your properties, look and see what's going on on your properties, who's using what and how they're using it. And all of that, because
Speaker #0
push come to shove if something happens to that person in that crawl space and they've been there any length of time the assumption is going to be well you should have known that that person gets down there it was a sublease it was against the it was obviously against my lease you can't sublease yeah that's what they that's what they were doing um so they anyway we don't need to go into it yeah yeah
Speaker #1
I mean, that's a whole consulting project in and of itself. Well,
Speaker #0
we were able to get them out. Yeah. Yeah. I have way. You have stories too, but it's maybe. And you and me should just hang out sometime and just share stories.
Speaker #1
But I will add this. During COVID and this whole immigration situation, there was one person who came across the board, created this. YouTube video about how you can squat. You can come to America. You can squat in a house and get ownership of the house.
Speaker #0
Yeah. Yeah,
Speaker #1
I know. Go ahead. Just the sheer audacity to create that video.
Speaker #0
I read this article that it was in California. This guy is like a squatter for hire. And so in California, it's a big problem. Like it's really hard to get a squatter out. Now I'm in Colorado. I would never buy property in California because of the political environment. And this is an example of that. Like you can't do anything about it. They just live there. It's like so hard to get them out. So this guy, he'll get in there and say, move in with the squatter and start eating their food and start using their appliances, maybe put their toothbrush in, whatever.
Speaker #1
Yeah. Place them loud.
Speaker #0
play some live music or or like classical music opera music whatever and yeah yeah i mean he's creative that's brave but that is creative man and there's a need for that business there is there is um
Speaker #1
yeah and none of this was covered in any of the real estate seminars ah go figure
Speaker #0
All right, man, we're wrapping up here. What I want to do real quick is go through my notes. I always like to take notes when I do an episode, especially with someone super smart like you and just share what I learned so that the listener can get like a little summary of our conversation and then you could share anything that I missed. And then from there, I'd like maybe one final piece of advice for the listener, someone who's excited about real estate investing, maybe they own some properties, maybe they're just trying to get started. And then obviously get your contact information. So my notes here. We didn't really get into your story. You started off with your, because your mom wanted you to buy a house and then quickly got into multifamily and then quickly built a portfolio of over seven units. This is coming right out of your graduate school and you never even really wanted to be in real estate. So I was hoping to get to that, but that's how we started the episode. And then you said one of the things you said that got us off track immediately was talking about contractors and are they bringing the right tools? So you need to understand as a property owner or manager, what job is and are the right tools there? Did you hire the right guy? If they don't have the right tools, you send them home. If you don't hear what you want to hear, get another opinion. And you said maybe even up to three opinions. So that way, you know, you're not getting ripped off. Detail what is wrong. OK, you need to replace the furnace. OK, give me details. What exactly is wrong? And then also call the manufacturer. There's codes on a lot of these appliances. that will tell you exactly what's wrong. You might not even need a contractor to come out and help you with it. Price check your contractors. We talked a lot about that. This is a relationship business, not only for your tenants, which is your customer, but also with your contractors and other vendors. All your vendors having their relationships is super important as a real estate investor. Renters are living in your retirement plan. I love that one. I've never heard someone actually phrase it like that. So that one was great. You're a small business owner. When you buy a rental property, treat it as a business. This isn't a hobby, guys. We're out there trying to create wealth, but we've got to treat each, especially, well, treat it as a business. But even one little property is still treated as a business, Justin said. So your tenant can provide you tremendous market information. I experienced that when I was showing my own properties. I would always ask, what are you seeing out there? What's for rent? They know better than you do. Consult, what did I say? Consider financing. I when I see made the suggestion of month to month. I didn't think about that. I've never had the problem because Fannie and Freddie mortgages don't care about that. But maybe on a 32 unit, your lender might care about that. So consider what your exit strategy is to get into your permanent loan before you go into a bunch of month to month leases. So thank you for that. And then your property managers are way too busy guys. So if you're expecting your property manager to go out there and have the highest and best use for your property, And let's face it, there's way more to it than this. If you have a vacancy, I find this all the time. The property managers don't care as much as you do about your vacancy. So what are you doing to push them forward so that you're getting your vacancies filled? But what Justin said is your property managers are just too busy to care about any specific properties, basically how I interpreted that. So those are my notes. How did I do?
Speaker #1
Yeah, that's a pretty good summary. And as far as a property manager, I would add that if you're an investor and you're especially if you're just starting out or you're a small real estate investor, you may have somebody managing five, 10 properties for you. They've got other clients that have hundreds of properties with them. So they're going to, the larger clients are going to get more of their attention. So just understand that when you place your properties with a property manager. The other thing I'd add is, and we could do a whole... whole episode on choosing property managers, is that not all property managers are created equal. Some of them will understand your clientele better than others. So definitely do your due diligence. Ask a lot of questions when you're looking to hire a property manager.
Speaker #0
Get referrals if you can.
Speaker #1
Yes. Yes.
Speaker #0
All right, cool. So what's one final, and maybe that was it, but is there any other final pieces of advice for a real estate investor?
Speaker #1
Yeah. So we'll pull another one from Kim Kiyosaki, who talks about how when she signed for her first, knowing who her husband is in her background, and even she, when she signed for her first investment property, her hand was shaking so much as she signed all of the documents. to take on this responsibility. And so she had the same butterflies that you did, even though she had this other person with all of this experience behind her. But I will say this, those butterflies will go away. All that stuff in the interior of your stomach, it will go away after you sign on the dotted line, but they will go away.
Speaker #0
And that's the time to get to work, right? It's so hard to find the property, but that's when the work even starts, right?
Speaker #1
Yeah. Yeah. Yeah.
Speaker #0
Cool, man. Well, how do we get ahold of you? How do we find your book? You didn't even, you talked about your book, Rental Secrets.
Speaker #1
Absolutely. So Rental Secrets is available on Amazon. You can also find me at rentalsecrets.net, which is where the official website is. And then I also post tips for renters and investors on Instagram, Twitter, Facebook, and LinkedIn as well.
Speaker #0
So we'll put those in the show notes. Justin, you're a busy guy. You still have 70-something units?
Speaker #1
So that's another interesting little story. So very quickly, I was investing with my mother. And as I mentioned, we dove in feet first, managing all of that. My father's risk tolerance level is not that high. So we ended up selling those units. And now we're... investors in real estate syndications, which is another interesting way to invest in property where you don't take on the full load of management or the full load of the investment. You're investing with a group of people into a larger property that gets you not only access to the expertise of the group, but also more economies of scale as well. which that could also be a whole nother episode.
Speaker #0
We actually get, that's pretty popular right now, right? So we get a lot of syndicators trying to get on the show. So every once in a while we'll let some in and hang out with them. So, but that's good. I invest in syndications as well as my own properties. I think a good diverse portfolio is safe.
Speaker #1
Yeah.
Speaker #0
But look, I know you're busy, man. And you came on here and hung out with me for a good amount of time, right? We're 45 minutes in here. You're hanging out.
Speaker #1
And since we brought up the syndications, I just got to say one thing.
Speaker #0
Okay, go ahead.
Speaker #1
If you're going to invest in syndication, watch and make sure they don't juice the returns artificially by not building in repair expenses. Oh,
Speaker #0
you're talking about on the pro forma.
Speaker #1
Yeah. Or another trick is to use adjustable rate financing instead of fixed. Yeah. I just want to put those things out there. Syndications can be great, but just make sure that you're looking at real. The pro forma is as real as possible.
Speaker #0
Yeah, that's great. I mean, that's true no matter if you're looking at a property individually or the syndication. Syndication is a little trickier because you want to underwrite the property, right? You want to know that that's a good deal, but you also underwrite the jock. So you're really looking at a couple of different things. So I think the diligence process is maybe a tad more intense on a syndication if you're doing it right.
Speaker #1
Yeah.
Speaker #0
Yeah. Anyway, thank you so much for your time. I know you're busy and you came out on a knee, so thank you. I really appreciate it, Justin.
Speaker #1
No, I appreciate it. We had a great conversation, lots of fun. And I hope people can check out the book because it's good for you, whether you're a renter or a landlord. It gives you some new perspectives.
Speaker #0
Okay. For the listener, thank you so much for checking out this episode. I know you have a lot of… options when it comes to podcasts and you chose the Real Estate Educators Podcast. And for that, I am so grateful. I hope you got a lot of value out of this one like I did. If you did, please five-star review, share it with a friend, and I hope you make this day a great one.
Speaker #1
I really hope you enjoyed this episode as much as I did. If you did,
Speaker #0
please be sure to follow and leave a five-star review. Oh yeah, and tell a friend.

Description

What do you do when a contractor tells you that you need a brand-new HVAC system, boiler, or water heater? How do you know if you're getting good advice—or getting taken advantage of?

If you own rentals—or want to—this episode is packed with practical advice you can use immediately.

Connect with Justin Pogue:
Website: RentalSecrets.net
Book: Rental Secrets on Amazon

Learn more about Pine Financial Group:
pinefinancialgroup.com

Hosted on Ausha. See ausha.co/privacy-policy for more information.

Transcription

Speaker #0
Just because somebody is an expert, that doesn't mean they're going to use their expertise for you. It's one of those ways that helps me as an investor keep my risk down. It helps me keep my expenses down because we could do repairs earlier as opposed to later when they ballooned out of all proportion. And if I can keep my risk and expenses down, I can charge you less. But it takes a shift in the mindset. to look at the situation from that perspective. But the worst part is I can't get money. I can't get that money back. Nobody's going to rent use of an apartment from last week.
Speaker #1
Yeah.
Speaker #0
The sentence doesn't even make any sense.
Speaker #2
Investing in real estate, they're winning, they're making money.
Speaker #1
What's up, everyone? Welcome to the Real Estate Educators Podcast, where we provide the education you can build on. I am your host, Kevin Amos. We're having so much fun with this podcast. We're helping real estate investors. and real estate educators. Are you out there building a portfolio, maybe fixing and flipping some houses, or are you providing content to real estate investors, maybe to try to get some business? This is the podcast for you. I have a super special guest, something a little bit different than what we've had on the show up to this point. So I'm happy to introduce Justin Pogue. Now, Justin, you are in the property management side, but it sounds like maybe a little bit on the tenant. I don't want to say advocacy, but on the tenant side of things a little bit. You're a consultant. You're an author. You've been quoted in, was it Fox News, I think you said. Long you've been doing this, but I'm really excited to get to know you, man. So welcome to the show.
Speaker #0
Thanks for having me, Kevin. I'm glad to be here. So we've been in this real estate thing for 20 plus years now. So it's been a while. And yeah, so I started on the, well, actually, let me back up. I started in grad school. And I was trying to become a management consultant. I graduated into the dot-com bubble. It was probably the worst time to try and get into management consulting that I could have possibly chosen. So that didn't work out. Came back home. And my mom, who had been a real estate agent back in the 80s, she wanted to start investing in real estate. So she says to me, Justin, why don't you just come look at this one property with me? Just the one. And that turned into a 20-year career. Oh, that's amazing. In real estate. And we started out with zero units. And we went down to Florida and bought a few properties off of the lands available list. Got control of those, flipped those to developers. And then we started actually investing in multifamily housing, duplexes, fourplexes, that kind of thing. And a 32 unit apartment building. We worked our way up from zero to 72 units that we had invested in. And we weren't just investors. We jumped in feet first managing. We lived on that. We lived in that 32 unit apartment complex for a while as we managed it. And we were not only finding tenants, but we were also working on remodeling units. and I have this we We first started, we went down to Home Depot and we bought this thick orange book, the Home Depot 123 Home Improvement Book. Because when you go to these real estate seminars, they don't teach you about tile and drywall and cabinets and all of this other stuff that comes along with renovating property. So we kind of went through that learning process and it was actually really good. So when we hired subcontractors later on, we knew what tools they should bring with them. them we knew kind of how those uh those projects should go and if you didn't bring the tools with you you got sent home and we hired somebody else yeah good idea it sounds like you might have learned that one the hard way huh yeah yeah and it's interesting so we had one uh we had we hired a plumber to come in and install a sink and my mother hadn't done that before so she was watching to see how he did it and all of that. And he proceeded not to do the job because he's and I believe his direct quote was, ma'am, I'm not a teacher. He did not want to let her watch him do the work that she had hired him to do.
Speaker #1
That's interesting, Justin. So do you think that was because he wanted it like job preservation or is it more of a I'm kind of cutting corners here and I don't want you to see that?
Speaker #0
I don't know. Initially, I took it as job preservation. Um, but it may very well have been the opportunity to cut corners because one of the things I've learned is that just because somebody is an expert, that doesn't mean they're going to use their expertise. for you. And I've had that experience where a perfect example, we've had, we have an air conditioner go out and we hired some, an HVAC person come in and look at it and they're like, oh, oh no, you did, you need to replace this whole system. This is wrong. That's wrong.
Speaker #1
Yeah.
Speaker #0
And it's just because they didn't want to take the time to figure out how the older system worked to actually do the repair. It was, it was easier for them to just tear it out and install. the new systems that they had trained on. Yeah.
Speaker #1
So I want to get into this. So I actually, I want to get into your story also a little bit more, but going down this and I'm very interested in this now.
Speaker #0
Absolutely.
Speaker #1
What's the lesson here for our listener? Like how would we know if we called an HVAC company to do a furnace or an AC or whatever it is, how do we know we're not getting ripped off and we actually do need a brand new unit?
Speaker #0
Well, the first thing is you're talking to more than one vendor. OK, so you're going to typically you're going to get approximately three repair vendors to come out and look at your situation. Number one. Number two, ask specifically what is wrong. You're paying them for a service call. They're coming out to diagnose your system. OK, a detailed diagnosis needs to be provided. it. Okay. And That diagnosis should, when you ask each of those vendors about that diagnosis, the information you get should be the same. You shouldn't get different stories from each of them. So those are a couple of ways to test this. And also, like, talk to the manufacturer. I had a consulting client, and we'll get into the consulting part later, but I had a consulting client who... Her water heater went out. She had a boiler for her whole building. And the boiler went out and everybody's taking cold showers and they're calling her and complaining and all of that. So she has two plumbers go out. They tell her the same thing. You need to replace the whole system. It's going to cost you eight grand, blah, But she's like, it's just outside of the warranty. Let me call the manufacturer. The first question the manufacturer asks her is. What diagnostic code is it displaying on the LCD screen? She's like, what do you mean code? He's like, there's a diagnostic code. What code did the plumber say is it showing? The plumbers didn't say anything about a code. So she goes out, looks at the code, calls them back, and they're like, oh, that's a filter on the back. It needs to be replaced. It's $200. You can do it yourself. Yeah.
Speaker #3
Seriously?
Speaker #0
Yeah. I mean, and it happens all the time because they think you don't know.
Speaker #3
Yeah.
Speaker #0
And in many cases, they're not wrong because these real estate seminars are not about how to operate property.
Speaker #1
Yeah, right.
Speaker #0
They're about how to invest in property.
Speaker #1
Buy it. Yeah.
Speaker #0
Right.
Speaker #1
Some of our stops when you buy the property, right?
Speaker #0
Yeah. I mean,
Speaker #1
very little.
Speaker #0
They talk, they sing all the praises of real estate, the depreciation, tax benefits, appreciation, residual income. They make it sound so great, but they never talk about it. They make it sound so great. Like it's a bond. Like you just put money in and money flows out, you know, at the, you know, after a certain period of time. But it has to be managed. You have to repair things. You have to rent to people. You have to market to people. You have to adjudicate disagreements between renters who are neighbors because. this kid's making too much noise or somebody's playing drums or whatever it is that's going on. There's a whole, that whole aspect is left out of all of these real estate seminars. And it does the investor a disservice because they get into it and they're like, oh, this is going to be great. And this is good. It's going to work this way. And it doesn't. And, and, and also. By extension, it does a disservice to the renters, too, because fewer people invest in housing and now housing is more expensive.
Speaker #1
Yeah, that's interesting. That's taking a very macro look. So I want to get back to this contractor thing because I've managed a lot of rentals also. At my peak, I was at 55, but they were fourplexes or less. I didn't have any of the units, so I can imagine that adds some economies of scale. and some problems because you're right, neighbors fight with each other. I've experienced that with more clients. It's probably a little balance there. But what I've learned with dealing with contractors on the rental properties is if you have a good handyman that can do most things, then it makes it so much easier to manage, right? Then you have to trust them. But here's a piece of advice for the listener. And I want you to elaborate on this or share with me your opinion, Justin. Contractors will get comfortable with you. And they will give you great deals and they'll be reliable and all of this. And then as they get comfortable, prices start increasing and time gets a little bit slower. So it's a good idea every once in a while to just... price check. I'm not an advocate of getting three opinions on every repair that needs to be made, but every once in a while, and maybe on the major ones like you're describing, you should do that. So what do you think?
Speaker #0
I do think you should price check, most notably because the contractor is not one of those industries that's known for being up. on the latest and greatest technologies that are out there on the latest and greatest efficiencies that are available. I mean, construction is being dragged into the 21st century, kicking and screaming, honestly. So, you know, and there's, and there's new technologies and new materials and new things coming out all the time. And as an investor, I want to be able to take advantage of those. And not every contractor. takes the time to dig in and really learn what's going on in the industry, how things are changing, and to make those resources available to their clients. So I absolutely recommend going out and checking. Although I will also say that not only is this a relationship business with your renters, it's also a relationship business with your contractors. And contractors have saved you my behind many, many times. And I'll give you a perfect example. So at this 32-unit apartment building, okay, and it was two buildings with a parking lot in the middle, and there was a drainage canal behind the property. One summer, we get torrential downpour of rain. That drainage canal filled up and the first floor of both buildings was flooded.
Speaker #3
Oh, shoot.
Speaker #0
The carpets are all wet, drywall. I've never been through a flood before. They didn't cover that in any of the real estate seminars. So I'm trying to figure out what to, well, first, there's this feeling of I'm standing on the second floor balcony watching the water rise. not having no way to stop it so there's that um then after that the water recedes and now these residents are coming to me like what are you gonna do are you gonna put us up in hotels i'm like okay i'll get to the contractor part in a moment i'm like okay i do have a couple of vacant apartments that are clean and dry you can share those while we get yours together i didn't No. legally obligated to offer that, but I offered that to them so they would have someplace dry to sleep. Nobody wanted that because they didn't want to share. And my budget did not allow me to pay for all of them to be in hotel rooms. So I had to kind of leave them to their own devices while we got this straightened out. Now. Because of my contractor, I was able to get this whole thing straightened out in three days and everybody was back in. So the contractor that I'm specifically referring to was our carpet cleaner. They actually had water extraction equipment that they brought in the night this happened.
Speaker #3
It's amazing.
Speaker #0
Now, I know there are other people in that community that were calling them for help.
Speaker #3
Yeah.
Speaker #0
But they showed up for me. And there's no other reason than that for that other than the relationship.
Speaker #1
I love what you're saying. And I couldn't agree more. That's why it's very tricky because you want to price check. That's absolutely true. But if you're price checking every time you're not building that relationship, there's no trust. Right. So how do you I mean, how do you balance that or manage that?
Speaker #0
It's well. Price checking is not what stops the relationship. The relationship is based on who you choose to do the work. And that's where the interaction comes from. So you may have other people come and look and price check and all of that. But the contractor cares that whether they were chosen to do the work or not. That's where that's those are the pieces upon which the relationship is built. And really, by price checking, you're just keeping them honest, you know, as as Ronald Reagan would say, trust, but verify.
Speaker #1
I do find it tricky to maintain a relationship and do that, even though I am recommending that you price check. But if it comes in a little bit off and you're you're you're a contractor, certainly. increase their pricing a little bit. I mean, you have to tell them, right? Like, hey, I just got into the price and you're a little bit high. I just feel like that might damage that trust a little bit.
Speaker #0
So we live in a capitalist system. That's the other side of the capitalist part. People focus on the businesses that are supplying the goods and services, but they don't focus on the role that the consumer plays. you're more, you're there for more than just to write the check. You're also verifying the quality of the service, verifying the quality of the experience, and you have to give them that feedback. If you don't give them the feedback, they're not going to, they're not going to make any changes.
Speaker #1
Yeah, that's true. Okay. Well, you have something in your, your form here that I wanted to ask you about because you, you said something about. Teaching renters to use market-based strategies to obtain lower rent. I guess I've never had a guest on the show, Justin, that was advocating for renters. I think it's great. We just haven't had that yet. It's more about how do we as investors make the highest ROI? So help me understand what you're talking about here, where you work with tenants to help them lower their rent.
Speaker #0
So like most real estate investors, My conversations with tenants about rent has always been this emotional roller coaster where the landlord is the bad guy who's trying to take advantage of me and just extract everything that's possible out of me, financially speaking. Okay. And that, I mean, that's the conversation that's happening nationally. But when we kind of get down to it, renters are never going to put hammer to nail to build the places they live in. And most real estate investors are investing for their retirement. Let's face it. They're investing for their retirement. So this renter is literally living in your retirement plan. You might want to have a good relationship with them. So in the book, I really am really. trying to do multiple things. One is to change this conversation to one of cooperation and collaboration because renters and landlords are two sides of the same coin. They need each other. And do it by providing some education that people do not get in school. There's really no training on negotiation or how negotiation works or why. why people might be successful in negotiation that people get in school. So the idea behind the book is as a landlord, as a real estate investor, you are basically becoming a small business when you buy a property. And because of that, you are taking on problems and challenges and situations that come with being a small business owner. You have maintenance problems, you have marketing problems, you have competition in the marketplace. And these are all things that your renter may be able to actually help you with. Earlier, we talked about maintenance. One of the chapters in my book talks about, as a renter, you're living on the property. You see what's going on with the property. You know what appliances don't work. You know which pipe is leaking. Tell me. Help me keep my property together.
Speaker #1
I wish my tenants did that.
Speaker #0
Yeah. I mean, it's... And it's one of those ways that helps me as a investor keep my risk down. It helps me keep my expenses down because we could do repairs earlier as opposed to later when they ballooned out of all proportion. And if I can keep my risk and expenses down, I can charge you less. But it takes a shift in the mindset to look at the situation from that perspective. And that's... what I'm trying to do in this book is shift renters mindsets too. So they actually understand what goes into providing this product to them that they're paying. a third or more of their take-home pay to cover every month.
Speaker #3
In your retirement plan.
Speaker #0
Yeah. To be honest, I had never really thought about writing a book before. And when somebody suggested it, I'd go to the bookstore and I'm looking at the real estate section and I see books for real estate agents and investors and insurance brokers and mortgage people, all of these people in the industry, except the renters. And I'm like, well, the renters are bringing over half a trillion with a T dollars to the table every year to float the entire industry and all these people who have books for them. And the renters don't have a book written to help them. And that's kind of really where the book came out of. And kind of talking about this relationship between landlords and renters. It's important because that's how the value actually creates. That's where the profit comes from. That's where investors get what they're looking for out of this investment from. That relationship is key.
Speaker #1
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Speaker #2
That's pinefinancialgroup.com.
Speaker #1
So you keep saying the book. I think that's right behind you, the Rental Secrets book. But why don't you tell me about the book?
Speaker #0
Yeah, yeah.
Speaker #1
You sort of already have, but...
Speaker #0
A little bit, yeah. So in the book, can we talk about how most people, when they deal with landlords, they feel disempowered. They feel like the landlord has all the power in this relationship.
Speaker #1
because they have the roof that they're looking for. Like, am I hearing this right?
Speaker #0
This book is, the book is written at the tenants, but from an investor standpoint, there are valuable things in there too. Because the book is talking about the different levers that renters can pull to help real estate investors solve those problems that I mentioned earlier. So. As a property manager, and I'm marketing my property, right? So I'll kind of take a map. I'll put a pin in the map where my property is. And I'll kind of draw a circle about a mile out. And I'll like, these are the buildings that I'm competing against. Okay? It's kind of how I look at it from a property management perspective. But what I talk about in the book is as a renter, That really has nothing to do with you. You're just looking for someplace that's a half hour from your job. Okay. So their idea of what the market is, in a sense, it's not real because I'm the renter. I decide what market I'm in and you're trying to get me to rent. So you need to know what you're competing against, whether it's within that circle or outside of that circle. And that's the information that I need renters to bring to me as a property manager so I can price appropriately for the competition that I have in the marketplace. OK, so those are the kinds of when I say market based, those are the kinds of things I'm thinking about. If you can help me maintain my property and keep my curb appeal up, then we can have a conversation. If you can bring me market information that I don't have and can't get any other way. we can have a conversation about lower rent and getting, also getting renters to think about like the nature of what the nature of this landlord business. There are two elements to my product space and time. Okay. If my apartment's vacant, I'm not getting any money, but the worst part is I can't get money. I can't get that money back. nobody's going to rent Yusuf an apartment from last week. The sentence doesn't even make any sense. So, so... I need to get people to sign on the dotted line as soon as possible. And understanding that bias towards taking action, then renters can understand why landlords are trying to avoid vacancy almost at all costs. And that renters are in charge of, well, let me back up. When you send somebody a renewal notice, if they say no. you are going to incur cleaning costs, repair costs, marketing costs, and vacancy costs. And you have no idea how long that vacancy is going to be for. And you're going to have to roll the dice on a whole new situation. Whatever income, kids, whatever's going on in that family dynamic that you're going to have to roll the dice on. And the renter that you sent the renewal notice to, they are in charge of whether you have to deal with all of that or not. And you have to decide if it's worth it to you or not. But I want renters to be in that strategic mindset to have that conversation. So Kim Kiyosaki, the wife of Robert Kiyosaki, author of Rich Dad, Poor Dad. Tells the story about how she she she's had this rental. The leases are up. Tenants have been in there for a year. She sends them a renewal notice for twenty five bucks higher on the rent. One of them decides to move out. So she has to go through that process. I just described cleaning, maintenance, all that stuff. Vacancy. The place was vacant for six months until she found another person. So now for twenty five dollars, she lost. six months of rental income. Now, that's not to say that it's always going to be six months. It might be two weeks. It might be a month. It might be three months. You don't really know, but that's the deal. That's the nature of the business. That's how things happen. So from the renter standpoint, that's the conversation we need to have. Don't come into my office and whine about how high rents are. Talk to me about how you're going to help keep my vacancy expense down. Talk to me about how if you stay, I don't have to incur marketing expenses because apartments.com doesn't work for free. Talk to me from that perspective. And when you talk to property owners and investors from that perspective, I don't care if you are the most hard-nosed spreadsheet Wall Street finance guy there is. When you're talking to me that way, I'm going to listen.
Speaker #3
Yeah.
Speaker #0
And if I'm a property manager and I report to an owner, you're giving me information that I can now use and take to that owner and have an intelligent conversation about what they want to do.
Speaker #1
So I have a strategy here I want to run by you. It's kind of controversial. So I'm curious what you think. This is something that I've used, Justin, with a lot of success. So I hate annual leases. I really prefer month to month. And the reason for that is very, it's very often that a tenant doesn't care if they're in a lease or not. If they want to leave, they're just going to leave. So if I, so a year lease locks me in, but they still feel like they have the flexibility in a lot of cases. And that's my opinion. Okay. On a month to month, I could raise rents anytime I want. Just 30 days notice. If I need to get them out, I can get them out. which was hugely beneficial during COVID when there was a moratorium because I couldn't evict for not paying rent. Right. But I could evict for a lease expiring. So it gave me a lot of flexibility there. And then when I want to increase rents, the way I would do it is say I want that twenty five dollars like Kim wanted. I would send a notice saying, hey, I want 50 bucks a month. But I understand times are probably really tough right now. If fifty dollars is too much. Give me a call. Let's talk about it. I really want to keep you in there and I could be flexible. So that's basically what I would say. Maybe 20 percent of the time I'd get a phone call. Say the rent is too high. Very simple question. Cool. What's up? What's a good happy medium? You know, taxes, insurance, everything's going up. What's a good, you know, middle ground? And they would say, what do you think they're going to say, Justin? Twenty five bucks. So it's like, OK, cool. Let's do twenty five. I don't need to do twenty five. Your idea. So now they feel like they're winning because they beat me up.
Speaker #0
I still get my 25 bucks and the other 80% now I'm getting 50 bucks. So that was a strategy that I've implemented with a lot of success. And we need to wrap up here in a minute now, but I'm very curious based on what you just said about the Kim story. What do you think about that?
Speaker #1
A couple of things. One is if you are in a situation where you are trying to refinance or work with some kind of financial institution or that kind of thing, They typically frown on month-to-month leases. They prefer to see that one-year lease, some commitment on the part of the people that you're renting to. So there is that. And transitioning into that when you need to can be dicey. Because I haven't been locked in for all this time. Now you want to lock me in because the bank says. That can be dicey. Typically, now I'm speaking not when I was working for a property management company, but when I was managing my own properties, I would lock people in for the year. And then after the year was up, it would go month to month.
Speaker #0
Yeah,
Speaker #1
that's how my business is written. Right, So, I mean, there is some value in what you're saying. And there is value in being able to sever those relationships when need be. And the COVID thing kind of really touches on how people don't understand how this market works. politicians are locking you in on this eviction moratorium thing um and they still think people are going to invest in in more housing and i can't like when the people who aren't paying can't get out and you would like want me to invest more in housing yeah i've got to pay my mortgage payment right yeah and you still got to pay your property taxes too taxes yeah yeah yeah so like all of the people don't understand how the pieces fit together Um, and that was, that was very, a very clear example of that.
Speaker #0
Yeah. That's cool. Hey man, I'm learning a lot. Um, you also do some consulting now. I'm a little afraid to ask you because I almost feel like, are you, are you a friend or foe here? Because, so I've actually get for the tenants, but what's the consulting service they'd like?
Speaker #1
I've actually consulted on both sides. So I've consulted for a, a brother and sister duo who invested in the property in Illinois. Right. And. Property management company just stopped sending them their residual check at the end of the month. And we kind of went through it. We kind of went through a process of getting those payments restarted and applying some pressure to property management company without going to court. So I had that situation. Another situation where I had a tenant call me and he was like, the landlord is giving me pressure to sign another 12 month lease, but I'm in a. I'm working as a contractor. I don't know if my contract is going to be renewed. And we started talking about his, his, his, the property that he was renting. It was an off. So it wasn't originally an apartment. It's, it was an office that got turned into an apartment. So then I started questioning, asking questions about, well, is this actually a legal apartment? Like, was it registered with emergency services and all that kind of stuff? And he didn't know. So. Coming at it from that perspective gave him leverage in having that conversation with his landlord about signing a new lease and getting the time that he needed and all of that. So basically, I've helped a lot of people in and around the real estate space who have fallen through the cracks in one way or another. I've also done a project for a property management company where I went through every property in their portfolio. What's highest, what's working, what's not working, what's highest and best use for this property. Because honestly, property managers, they don't have time for that. They're putting out fires on a daily basis. They're not thinking like long-term what should be happening here and how it's happening. And another interesting thing is as I was doing that, and this was in California, it's so expensive there. People were using rooms for different purposes. So you had people who were using a living room as a bedroom or a dining room as a bedroom. And some of these rooms had gas appliances in them and all of that. So they weren't really designed to be used that way. So part of my thing was if it's being used as a bedroom, it needs to be treated as a bedroom. You need to add smoke and CO detectors in this space. If somebody's sleeping in here.
Speaker #0
Yeah.
Speaker #1
It's like, but the renter's not thinking about that. They're just thinking I need space for bodies and they're putting people in these different rooms, not thinking about the ramifications of the different appliances that are in those spaces. But from a, from an investor standpoint, You need to understand that people are going to use the space in that way and structure it accordingly. So you're covered from a liability standpoint. And that's really what putting those smoke detectors in is.
Speaker #0
I have this property. You're going to think this is funny, Justin. I have this property that had access to a crawl space from outside, you know, outside. I'm sure you can picture it. You only open up the little thing and you go. And so that was like the furnace was down there. Just ran. It was dirt floor, you know. Can you picture what I'm talking about? Yeah. Dallas, maybe not. I don't know if you have crawl space there. But I had people move into that. It's like a four-foot clearance. I mean, it's crawl space. And I had people move into that. How do I protect myself from that one?
Speaker #1
Not housing.
Speaker #0
You probably have crazy tenant stories, too. But that was just one of them. Yeah.
Speaker #1
but I never would have thought the only way to just off the top of my head, the best way to protect yourself from that is to actually tour your properties, like go to your properties, look and see what's going on on your properties, who's using what and how they're using it. And all of that, because
Speaker #0
push come to shove if something happens to that person in that crawl space and they've been there any length of time the assumption is going to be well you should have known that that person gets down there it was a sublease it was against the it was obviously against my lease you can't sublease yeah that's what they that's what they were doing um so they anyway we don't need to go into it yeah yeah
Speaker #1
I mean, that's a whole consulting project in and of itself. Well,
Speaker #0
we were able to get them out. Yeah. Yeah. I have way. You have stories too, but it's maybe. And you and me should just hang out sometime and just share stories.
Speaker #1
But I will add this. During COVID and this whole immigration situation, there was one person who came across the board, created this. YouTube video about how you can squat. You can come to America. You can squat in a house and get ownership of the house.
Speaker #0
Yeah. Yeah,
Speaker #1
I know. Go ahead. Just the sheer audacity to create that video.
Speaker #0
I read this article that it was in California. This guy is like a squatter for hire. And so in California, it's a big problem. Like it's really hard to get a squatter out. Now I'm in Colorado. I would never buy property in California because of the political environment. And this is an example of that. Like you can't do anything about it. They just live there. It's like so hard to get them out. So this guy, he'll get in there and say, move in with the squatter and start eating their food and start using their appliances, maybe put their toothbrush in, whatever.
Speaker #1
Yeah. Place them loud.
Speaker #0
play some live music or or like classical music opera music whatever and yeah yeah i mean he's creative that's brave but that is creative man and there's a need for that business there is there is um
Speaker #1
yeah and none of this was covered in any of the real estate seminars ah go figure
Speaker #0
All right, man, we're wrapping up here. What I want to do real quick is go through my notes. I always like to take notes when I do an episode, especially with someone super smart like you and just share what I learned so that the listener can get like a little summary of our conversation and then you could share anything that I missed. And then from there, I'd like maybe one final piece of advice for the listener, someone who's excited about real estate investing, maybe they own some properties, maybe they're just trying to get started. And then obviously get your contact information. So my notes here. We didn't really get into your story. You started off with your, because your mom wanted you to buy a house and then quickly got into multifamily and then quickly built a portfolio of over seven units. This is coming right out of your graduate school and you never even really wanted to be in real estate. So I was hoping to get to that, but that's how we started the episode. And then you said one of the things you said that got us off track immediately was talking about contractors and are they bringing the right tools? So you need to understand as a property owner or manager, what job is and are the right tools there? Did you hire the right guy? If they don't have the right tools, you send them home. If you don't hear what you want to hear, get another opinion. And you said maybe even up to three opinions. So that way, you know, you're not getting ripped off. Detail what is wrong. OK, you need to replace the furnace. OK, give me details. What exactly is wrong? And then also call the manufacturer. There's codes on a lot of these appliances. that will tell you exactly what's wrong. You might not even need a contractor to come out and help you with it. Price check your contractors. We talked a lot about that. This is a relationship business, not only for your tenants, which is your customer, but also with your contractors and other vendors. All your vendors having their relationships is super important as a real estate investor. Renters are living in your retirement plan. I love that one. I've never heard someone actually phrase it like that. So that one was great. You're a small business owner. When you buy a rental property, treat it as a business. This isn't a hobby, guys. We're out there trying to create wealth, but we've got to treat each, especially, well, treat it as a business. But even one little property is still treated as a business, Justin said. So your tenant can provide you tremendous market information. I experienced that when I was showing my own properties. I would always ask, what are you seeing out there? What's for rent? They know better than you do. Consult, what did I say? Consider financing. I when I see made the suggestion of month to month. I didn't think about that. I've never had the problem because Fannie and Freddie mortgages don't care about that. But maybe on a 32 unit, your lender might care about that. So consider what your exit strategy is to get into your permanent loan before you go into a bunch of month to month leases. So thank you for that. And then your property managers are way too busy guys. So if you're expecting your property manager to go out there and have the highest and best use for your property, And let's face it, there's way more to it than this. If you have a vacancy, I find this all the time. The property managers don't care as much as you do about your vacancy. So what are you doing to push them forward so that you're getting your vacancies filled? But what Justin said is your property managers are just too busy to care about any specific properties, basically how I interpreted that. So those are my notes. How did I do?
Speaker #1
Yeah, that's a pretty good summary. And as far as a property manager, I would add that if you're an investor and you're especially if you're just starting out or you're a small real estate investor, you may have somebody managing five, 10 properties for you. They've got other clients that have hundreds of properties with them. So they're going to, the larger clients are going to get more of their attention. So just understand that when you place your properties with a property manager. The other thing I'd add is, and we could do a whole... whole episode on choosing property managers, is that not all property managers are created equal. Some of them will understand your clientele better than others. So definitely do your due diligence. Ask a lot of questions when you're looking to hire a property manager.
Speaker #0
Get referrals if you can.
Speaker #1
Yes. Yes.
Speaker #0
All right, cool. So what's one final, and maybe that was it, but is there any other final pieces of advice for a real estate investor?
Speaker #1
Yeah. So we'll pull another one from Kim Kiyosaki, who talks about how when she signed for her first, knowing who her husband is in her background, and even she, when she signed for her first investment property, her hand was shaking so much as she signed all of the documents. to take on this responsibility. And so she had the same butterflies that you did, even though she had this other person with all of this experience behind her. But I will say this, those butterflies will go away. All that stuff in the interior of your stomach, it will go away after you sign on the dotted line, but they will go away.
Speaker #0
And that's the time to get to work, right? It's so hard to find the property, but that's when the work even starts, right?
Speaker #1
Yeah. Yeah. Yeah.
Speaker #0
Cool, man. Well, how do we get ahold of you? How do we find your book? You didn't even, you talked about your book, Rental Secrets.
Speaker #1
Absolutely. So Rental Secrets is available on Amazon. You can also find me at rentalsecrets.net, which is where the official website is. And then I also post tips for renters and investors on Instagram, Twitter, Facebook, and LinkedIn as well.
Speaker #0
So we'll put those in the show notes. Justin, you're a busy guy. You still have 70-something units?
Speaker #1
So that's another interesting little story. So very quickly, I was investing with my mother. And as I mentioned, we dove in feet first, managing all of that. My father's risk tolerance level is not that high. So we ended up selling those units. And now we're... investors in real estate syndications, which is another interesting way to invest in property where you don't take on the full load of management or the full load of the investment. You're investing with a group of people into a larger property that gets you not only access to the expertise of the group, but also more economies of scale as well. which that could also be a whole nother episode.
Speaker #0
We actually get, that's pretty popular right now, right? So we get a lot of syndicators trying to get on the show. So every once in a while we'll let some in and hang out with them. So, but that's good. I invest in syndications as well as my own properties. I think a good diverse portfolio is safe.
Speaker #1
Yeah.
Speaker #0
But look, I know you're busy, man. And you came on here and hung out with me for a good amount of time, right? We're 45 minutes in here. You're hanging out.
Speaker #1
And since we brought up the syndications, I just got to say one thing.
Speaker #0
Okay, go ahead.
Speaker #1
If you're going to invest in syndication, watch and make sure they don't juice the returns artificially by not building in repair expenses. Oh,
Speaker #0
you're talking about on the pro forma.
Speaker #1
Yeah. Or another trick is to use adjustable rate financing instead of fixed. Yeah. I just want to put those things out there. Syndications can be great, but just make sure that you're looking at real. The pro forma is as real as possible.
Speaker #0
Yeah, that's great. I mean, that's true no matter if you're looking at a property individually or the syndication. Syndication is a little trickier because you want to underwrite the property, right? You want to know that that's a good deal, but you also underwrite the jock. So you're really looking at a couple of different things. So I think the diligence process is maybe a tad more intense on a syndication if you're doing it right.
Speaker #1
Yeah.
Speaker #0
Yeah. Anyway, thank you so much for your time. I know you're busy and you came out on a knee, so thank you. I really appreciate it, Justin.
Speaker #1
No, I appreciate it. We had a great conversation, lots of fun. And I hope people can check out the book because it's good for you, whether you're a renter or a landlord. It gives you some new perspectives.
Speaker #0
Okay. For the listener, thank you so much for checking out this episode. I know you have a lot of… options when it comes to podcasts and you chose the Real Estate Educators Podcast. And for that, I am so grateful. I hope you got a lot of value out of this one like I did. If you did, please five-star review, share it with a friend, and I hope you make this day a great one.
Speaker #1
I really hope you enjoyed this episode as much as I did. If you did,
Speaker #0
please be sure to follow and leave a five-star review. Oh yeah, and tell a friend.

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