Financial Freedom with Real Estate Investing

More money, more problems.

One of the major pain points for high net worth individuals involves taxes. Today’s guest was hit hard with a $497K bill in 2010, and that’s when he decided stop giving his money away to the IRS and start investing in multi-family properties!

David Zook is a wildly successful entrepreneur and experienced investor in the multi-family space who has syndicated over $50M worth of real estate in his career. His portfolio includes 3,000 apartment units in several states as well as Ambergris Caye, the largest resort in Belize. David has entered the ATM market as well, capitalizing on another investment that offers tax-advantage cashflow.

David is also a sought-after speaker and published author who has presented at venues such as the International Business Conference, The Jason Hartman Real Estate Mastermind, and The Cash Flow Wealth Summit. He credits his success to working with world-class teams, and today he discusses why it’s patriotic to take advantage of available tax breaks, the AHA moment that initiated his transition from passive investor to real estate syndicator, and how multi-family investing has evolved over time. Whether you’re a high net worth individual looking to reduce your tab with the IRS or a syndicator looking to raise money, this episode is for you. Listen in as David shares how he leverages paper loss and cost segregation to reduce his tax bill from $475K to nearly zero.

Key Takeaways

[5:43] Why it’s patriotic to take advantage of tax breaks

  • Incentives encourage certain activities (e.g.: oil exploration)
  • Government rewards for engagement

[7:27] The tax benefits associated with multi-family investing

  • Without creativity, can write off in 27½ years
  • Take ‘paper loss’ (allows to claim 3.6% annual loss)
  • Cost segregation study accelerates depreciation
  • Reinvest capital would have given to government

[10:49] How to exercise cost segregation

  • Licensed professional evaluates property
  • Report breaks down depreciation of component parts (i.e.: washer/dryer, pavement, plumbing)
  • Write off 70% of physical asset in five to seven years

[13:07] David’s advice around choosing syndicator (as a passive investor)

  • Find competent people with track record of success
  • Watch syndicator closely in early stages
  • Start small

 [15:08] How David transitioned from passive investor to syndicator

  • Came into market with cash, partner brought opportunities
  • Ran out of cash, invited family to invest
  • Finally had to slow down as ran out of cash
  • AHA moment on board of local startup bank, discussing .5% interest on CD
  • Realized could offer others double-digit returns via multi-family

[18:02] David’s approach to passive investing

  • Not involved in daily headaches
  • Must trust, believe in partners
  • ‘Team is more important than asset’

[20:24] How David raised money for his first deals as a syndicator

  • Psychological challenge (reputation in business)
  • Lived in Amish country, visited successful farmers
  • Listened to stories, identified pain points
  • Shared own successes
  • Raised $850K
  • Now can send email, get funding in two hours

[24:51] How David structures a deal

  • 5-10% range of cash-on-cash return
  • Investors concerned with consistent quarterly cashflow
  • Keep it simple

[26:28] How multi-family investing has evolved

  • Fewer deals today, must hustle
  • David’s team no longer aggressively chasing deals
  • Good broker, reputation for closing can procure 5-10% discount

[29:52] David’s ATM investing opportunity

  • Started as passive investor in 2012
  • Became partner last year, raised $9M in seven months
  • Introduces investors to exclusive asset class
  • Fits philosophy of investing for tax-advantage cashflow

Connect with David

The Real Asset Investor

Email info@therealassetinvestor.com

Email atm@therealassetinvestor.com

Resources

Email infor@therealassetinvestor.com

  • 8 Real Life Lessons for Syndicators and Their Investors
  • K-1 Sample (How Depreciation Works)

Robert Kiyosaki Books

Review the Podcast on iTunes

Free eBook: The Secret to Raising Money to Buy Your First Apartment Building


Real estate is no longer a local game, and smart apartment building investors have properties all over the country. The tricky part is finding a way to consolidate the data so that you can manage and analyze your portfolio all in one place. Is it possible to streamline the important property management processes when your investments are operated by different property managers using different software in different states? Today’s guest says, ‘Yes, you can,’ as she reveals how to remotely self-manage your real estate portfolio.

Dana Dunford is a real estate management specialist, licensed agent, and technology guru out of San Francisco. After earning her MBA from Harvard Business School in 2015, Dana co-founded Hemlane, a technology-enabled property management solution designed to support real estate investors in the remote management of their rentals. As CEO of the company, Dana understands that the best investments may not be in your backyard, and she is on a mission to provide investors with a single platform that consolidates and manages properties using intelligent software, virtual maintenance coordinators and local support.

Dana’s impressive resume includes positions at Apple, where she was a part of the worldwide financial planning and analysis team, and tech startup Nest, which was acquired by Google for $3.2 billion in 2014. Today she shares her expertise with the Apartment Building Investing audience, discussing the role of a property manager and the pros and cons of self-management. She covers the metrics you should be tracking as an owner, the benefits of property management software, and the processes that should be centralized across your portfolio. If you have between two and fifty properties, this is a must-listen interview that uncovers the tools available to help you remotely manage your investments.

Key Takeaways

 [3:25] The costliest expense in the property management space

  • Bad tenants
  • Turnover costs
  • Eviction expenses
  • Vacancy during inopportune months

[4:39] How to avoid the expenses associated with turnover

  • Advertise early and often (good tenants look 30 days out)
  • Advertise on as many sites as possible
  • Respond quickly, schedule showings asap
  • Screen thoroughly via comprehensive background/credit checks on every applicant (not just primary)

[6:28] The pros and cons of self-management vs. hiring a property manager

  • Makes financial sense to hire property manager for class C and D properties
  • Consider self-management in case of class A properties
  • Good idea to have licensed professional you trust ‘on the ground’
  • Maintain a sense of control by having access to financials, business records

[8:23] The role of a property manager

  • First to blame, last to get credit
  • Must be jack of all trades (finance/accounting, maintenance/repair, salesperson)

[10:17] Dana’s guidance around making property managers ‘offensive players’

  • Open communication, transparency in decision-making
  • Establish owner’s criteria for approving tenants
  • Collaborative partner when problems arise

[11:41] Dana’s advice about interacting with your property manager

  • Frequently in beginning to establish expectations, any time issues arise
  • Weekly call if oversee more than 200 units
  • Email weekly summary (# of tenant applications, leads)

[13:18] The benefits of property management software

  • Provides owner with real-time insight
  • Long-term savings offset $30 monthly investment

[14:28] The metrics owners should be tracking

  • Income statement is crucial (profit/loss, expenses, ROI)
  • Should be able to answer general questions about portfolio
  • Reasons for vacancies
  • Tenant risk mitigation (Following policies? Inspection reports?)
  • Financial risk (Autopay? Late payments? Late fees?)
  • May shift based on need (maintenance, marketing)

[16:17] The processes an owner should prioritize

  • Tenant selection
  • Legal contracts
  • Maintenance management

[17:39] How to incentivize tenants to pay on time

  • Daily late fees
  • Require payment of late fees before rent
  • Report late payments to credit bureau
  • Check state/county laws

[19:34] The processes Dana recommends centralizing across your portfolio

  • Marketing
  • Application
  • Financials, bookkeeping
  • Maintenance tracking

[21:15] How to consolidate your records

  • Newer software allows for integration (email support team with questions)
  • Export all data to single platform (e.g.: QuickBooksSmartMove, Excel)
  • Enlist help of VA only after processes in place

[24:45] The free tools Dana recommends for managing your portfolio

  • Trello (project management)
  • Slack (team communication)
  • Google Sheets
  • Dedicated email, phone number and business bank account

[25:59] The fundamentals of Hemlane software

  • ‘Best investments not in backyard’
  • Add any property to platform
  • Consolidates data for entire portfolio
  • Streamlines property marketing, applicant screening, lease tracking, rent/payments and maintenance

Connect with Dana

Hemlane

Hemlane on Twitter

Hemlane on Facebook

Email: dana@hemlane.com

Phone 385-355-4361

Resources

QuickBooks

smart move

Upwork

Trello

Slack

Google Sheets

Review the Podcast on iTunes

Free eBook: The Secret to Raising Money to Buy Your First Apartment Building


1