Speaker #0Hey, 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 are done. That is a wrap. Season number six in the books. Can you believe it? Six seasons. Here we go. Season number seven. Here we come. July 8th. Be sure to check it out. July 8th. And also share this with a friend. We would love some comments too, and some five-star review. We're not getting enough of those. And I get a lot of great feedback. People come up to me constantly. I'm loving the podcast, but not enough of you are giving us five-star reviews. So please help us out. Five-star review. We want to help more real estate investors just like you. So it's going to be a pretty short episode today. I want to just go through some of the top takeaways and then let's keep going with season number seven. So season number six, we talked a lot about Some of the mistakes investors are making, we talked a lot about AI as well, but first for the mistakes, mistake number one, it's not unique to season number six. In fact, all the seasons have had this same theme and I suspect it's going to continue going forward. But the number one mistake real estate investors make is not taking action. Look, we are going to make mistakes. I know it's a little bit scary to go out and make that offer or to close on that first investment property. But we have to do that if we're going to hit the success we want. So take action. Make those offers. Make those phone calls. Make those mistakes and fall forward and fail fast. That's what my recommendation would be, and that's shared amongst all of our guests. So I know it's a little scary, like I talked about, especially in an economy and a market like we're in right now. It's a little scary to go out and take that plunge and get going. But if you don't, what's scarier? that? or being in the exact same place you are right now in five years time. So I know it's scary. We have to overcome that fear and take some action. Okay. Some of the other top mistakes we see investors make, one is quitting your day job. Now I'm guilty. I've done that exact same thing. I wanted to be a real estate investor full time. So I ended up quitting my job and started buying properties probably a little bit before I should have. So that is not a mistake that that I'm immune to or that I don't make. I've absolutely made that mistake, but I guess, what do they say? Do as I say, not as I do, right? What I do know is it would have been a little bit easier for me had I not made that mistake. And here's why. Cash flow is king. If you have an income stream coming in, then you qualify for loans better. You can overcome some challenges with your investment properties easier. And so it just helps build that foundation and get that launch going for you now. Eventually, if you want to get into real estate full time, you can do that. I'm just suggesting that you wait until it's the right time. Now, if you have a W-2 and you don't want the W-2 and you want to get into real estate and maybe you want to do a realtor or something that's a fee base and generate some income that way while you're building your portfolio, that's totally acceptable. It's just make sure we have some income coming in. And then a W-2, quite honestly, is the easiest one to use if you're trying to qualify for bank loans. or conventional loans. So mistake we see people make quitting their job too soon. Another mistake that we see and we talk about on this podcast is underwriting. Now we could find quality deals, but before we close on it, let's make sure it actually is a quality deal because look, not everything is as it seems or is as it appears. So mistakes in underwriting, some of them is let's look at the very top line, your rental income. Are you underwriting your income at the very top of the market. And two, are you adding in rent escalations or increase in rent over time? I think those are two mistakes I see investors make. So I would suggest you underwrite your deals with slightly lower income. If it's a fix and flip, maybe a little bit under what you think you might sell it for. If it's a rental property or commercial property with leases, maybe underneath what the market rent is telling you. That way, by the time you get it stabilized and get some rents coming in and you get tenants, If you have to reduce the rent a little bit to get it full, then you could do that. And it's not going to kill your pro forma. As far as underwriting rent escalations, I think it's normal to see that. And especially if you're looking at a five or 10 year horizon, rents will go up. That's especially true if you build that into your lease. But look, guys, they have come down and a lot of rents and a lot of markets are staying pretty flat. So it's hard to increase rent. If you're underwriting with rent bumps and you're not able to get those rent bumps, that's going to kill your projections, what you thought you were going to do. So I would just suggest, especially in a market like we're in now. to underwrite these with very little or no rent increases, at least in the shorter term, say three to five, maybe three to four years. So that's a mistake. Then there's a lot of mistakes on the expenses. We just take whatever the seller tells us is true, and it's never true. So what expenses are often missed? Well, maintenance is a big one. It's always higher than what you're told. So be sure you're writing in the correct amount of maintenance. On a single-family, straight-up rental property, it's probably going to be around 10%. Okay. It could be less than that. You could do a better job or you could have a nicer home in a nicer area. That's a little bit less than that, but it's going to be roughly 10%. So if you see a pro forma, that's three or 4% of your rent as maintenance. I think that's a, you're going to be in for a shock. That's especially true in a year where you have a turnover. So are you doing a good job of underwriting your turnovers? And I think a good, healthy maintenance budget will account for that. But let's be careful with our turnovers. Another one is a reserve to replace. Like what are you doing if there's an AC unit or a furnace that goes out? And that's not that's going to kill like a month or depending on the price point, maybe a couple of months of income, that one repair. So are you budgeting for that over time to handle those larger expenses or larger capital improvements? So my suggestion is to use 1.5% of gross income. That seems to be a pretty accurate number, especially if you start getting into commercial properties or multifamily properties. But one of the guests on this episode said something very interesting, and they say budget a flat expense. So he says for every door or every unit, budget $200 per month for your CapEx or your capital improvements. That seems like it might be a little high depending on the price point again or might be a little low if it's a pretty expensive property. So that was his suggestion. I thought that was very interesting. Usually you use a percentage of income. But either way, as long as you have a formula that you're comfortable with and you're underwriting that reserve to replace the number in there, that will help you get to a more accurate performance of the property. And so it'll help you analyze it more appropriately. So be careful of the income. Be careful of the expenses. That goes for fix and flips or rentals or anything. All of that is important in your pro form. This episode is brought to you by Pine Financial Group. Pine Financial is a private lender specializing in short-term rehab lending to real estate investors. Got a property that needs some love? We can help. We are able to offer funding solutions because we raise private money from individual investors. With more than 15 years of experience, Pine offers passive investors an alternative that provides stability, consistency, and security to your portfolio. If you like real estate but want to avoid the ups and downs and effort, A Pine Mortgage Fund could be a perfect fit for you. Accredited investors will experience an 8% preferred return and profit sharing. Diversify your portfolio out of Wall Street and into Main Street with a Pine Financial Group Fund. To get more information at pinefinancialgroup.com. That's pinefinancialgroup.com. Okay, we talked a lot about AI. What are we doing for AI? Seems like all the successful investors are using it and I'm not. excluded from this, I am terrified by AI, not only because I think that it's going to take over a lot of jobs and it's going to take over a lot of processes and procedures. Attorneys are in big trouble. We know that. So I'm nervous for all of that, but I'm also nervous because it's so hard for me to learn. So I'm just going to open up or peel back the curtain here a little bit, but I'm not very good with this sort of thing. It just doesn't come naturally to me like real estate does. So I have to put an extra effort for it. But here's some of the things that we're doing at Pine to use AI. So it's helping us in our underwriting. It's looking at credit reports. It's looking at appraisals. It's looking at files. It's helping us identify red flags or potential pitfalls or problems. So it's not replacing it. It's just helping us speed up the process. The faster we can get to a decision, the better it is for our client because they have earnest money at risk. So we want to identify these problems as quickly as possible. And AI is helping us do that. We're using it for, I know Dan in our office is creating a robot that's going to help us with our entire server. So if we need anything like loan level detail, if we need to find a file, if we need anything, we can just ask this robot, Pinebot, I guess. And it's going to go out and find it and get us the answers for it. So that's in development now. But can you imagine how much time something like that is going to save? Like how many loans are in default right now? And it's just going to be able to tell us that. For you, it's maybe like, okay, which properties are not producing to the pro forma? And then you can identify like maybe areas to improve, that sort of thing. So that's what we're creating right now. We're also using it for content. So it'll help us draft emails or articles or blog posts. Now, it's not just like Okay, ChatGBT creates a post and we just put it online. Now we read it and we make sure it is our voice and it is what we want to say because sometimes the AI will say stuff that you don't agree with or you don't want to say. So use it. It's a great way to come up with ideas and help draft professional content and be sure to review it, okay? Lastly, we're using it for legal. Now I gotta be careful here because it's not replacing our legal team. We are using it to review documents. It does red lines. So it's really great for leases. If you're reviewing leases, it'll suggest changes and that sort of thing. And it can draft. So if you want a clause to help you with whatever rule is changing and you need to add something to a lease or a contract with a contractor, for example, it can help create that clause. Now, again, that does not replace your attorneys. It just helps speed up the process. As this gets better, I could see a point, and it's probably not that far away, guys, that it will be replacing attorneys and you can have some confidence in the AI. It's not quite there yet. So use it to help you. Read it. Make sure it's accurate. Run it by your legal team, your attorney. But it is really good at the legal stuff. So we're learning about AI. Something else that came up on the season a lot of people are doing is Claude. Now, there's a couple things with Claude, but it is the top. AI for business use. At least that's what I'm told. Okay. There's a couple of different things that you could do with AI with Claude. So Claude chat is very similar to a chat GBT, and that's very basic. You could ask it questions. You could brainstorm with it. You could have it do some research for you, help you with an article. For example, all of the things that I just said, you could do with Claude chat. Okay. But outside of Claude chat, the next level up is going to be your cloud co-work. So co-work. It's more for business and it's on your desktop and has access to all of your computer, your files. You give it access. But it could help you go out and find stuff. It could help you, you know, if you need to say, did I write an LOI on this property? And it could go find it and tell you, yeah, you wrote it on this date, right? So Claude, Co-Work is a very powerful tool for investors. It creates pitch decks for you. It creates your PowerPoints. It could help with your podcast. It could help with your content creation. Um, so Claude is, seems to be a really great tool. Now I was told this season that if you're just using Claude, you're way behind. You're like, you can't catch up basically, because you gotta be using AI agents. So this is the next level. And I'm super confused by this, by the way. But what I do know is that Claude code writes code for you. So you don't need to be a programmer. You could just have Claude program it for you. So it can create the agents for you, whatever you want the agent. So if you want to say, hey, agent, can you text my buddy that I will be there at whatever time? Claude can go in and find his number and text him. Or you could send an email or you could say, hey, send whoever a copy of his lease. And Claude can go and grab the lease and email it to that person. So these are the agents that we're talking about now. And Claude Code can create those. So we're just starting to explore Claude Code and AI agents. But those are some of the things that we're working on and some of the things that I've learned through season six. Now, one thing that was not that I didn't learn but is a common theme outside of taking action is people. This is a people business. I know real estate is a commodity, but real estate is a people business, and you have to respect that and understand that. Some examples are your tenants. So tenant retention, resident retention is vital for your bottom line. It's very expensive to turn a property over. So what are you doing to retain that tenant? So answering maintenance requests and checking in and seeing how they're doing, you know, maybe even sending them little gifts on their birthday or on holidays. Those things go a long way at keeping tenants happy and keeping tenants in your property. So focus in on retention and not turnover. Now, what about your vendors? Do you have great relationships with your vendors. You have great vendors, CPAs. attorneys, are they giving you the answers that you want and timely? One thing that I really struggle with with attorneys is they don't return phone calls, right? So if I don't get... If I have an attorney that I love and I'm using and they're not returning phone calls, I'm sorry, I can't work with you. And so we have to fire fast and find new attorneys, new CPAs, new vendors to help us with our goals. This is very true with contractors on your fix and flips too. Do you have the right contractors on your team? So fire fast, find the right ones. Sometimes it does take several to get there. But outside of your vendors and your tenants and the obvious, who is in your corner? Who's got your back? We talk about mastermind groups a lot. And are you, are you able to get on a phone call and talk to somebody and get help and support? And are they encouraging you? Because look, as your success increases, the people you could talk to about that shrinks. You can't go to your, your family Thanksgiving dinner and talk about these amazing deals and all of this that you're working on because either they're going to, they're going to want to pull you back down. They're not going to quite understand. So do you have the right people to help push you and, and, and help you in this business. So I think masterminds is one of the top reasons for success. And I'm not alone in this. A lot of the guests said the exact same thing. So either build a mastermind group, a group of friends that all have the same mentality, or you could find one that you could buy into. I really am. I know I write about it a lot. I talk about it a lot, but I really am a believer in the people in your sphere, your, your close, your close group of friends. and the people that support you in the business. So those are the big takeaways from season number six. Again, season number seven, get ready. July 8th, season seven starts. We're going to continue with some solos. We're going to continue with the interviews. We're going to continue with the market pulse. The pulse is probably the most popular episodes. And for good reason, it's very current, very accurate information on what's going on in the economy. So we talk macro and micro. So if you're in Denver or if you're in Minneapolis, we go into detail about those markets because that's where we have our heavy presence. So Joe Massey, Mike Jacka, we get on a call and we just talk economy and what we're seeing and what kind of investments we're making and where we should be. Is there blind spots? What are we missing in what's going on in the economy? All of this to help you make better investment decisions. So I hope you tune into that. If so, well, even if not. Give us a five-star review. Look, we're trying to help more investors just like you. We could do that by more reviews. I know I say this sometimes, but look, I get hit up all the time, man. This podcast is so amazing and people tell me or send me emails, but I don't see the reviews on the platform. So I would really love that if you guys are open to a quick five-star review, share this with a friend and I hope you make this day a great one. I really hope you enjoyed this episode as much as I did. If you did, please be sure to follow and leave a five-star review. Oh yeah, and tell a friend.
