From The Ground Up | AA Real Estate Group

I had a really rough workout today — probably the roughest one I’ve ever had. I guess that’s what happens when I go a week or two of no activity and then try to get back into the swing of things all at once. I mean, not that I’m not already an embodiment of men’s physique that everyone swoons over! As I was catching my breath and contemplating this reality, it dawned on me that this was a special year for me.

I wrote down my 10-year work goal, 10 years ago this October. It was a plan I had to become JOB OPTIONAL by 2016 — where everything I planned on growing and doing would finally offset all my expenses by the end of October 2016. In that exercise, I wrote out my ideal day of leisure and day of work, and as I approached this deadline this prompted me to look back on what I had written.

What I didn’t realize those long years ago, is that lifestyle changes, including starting to enjoy life more and having a family would increase those expenses tenfold, and I find myself not quite at that target I set for myself. AND YET, I am super close. In looking back, I can’t believe all the crap I’ve been put through, the struggling, the successes and MANY failures I’ve had to get to this point — but holy cow, I’m SUPER close to the end goal I made. What an awesome feeling.

This is exactly why I set laserlike targets and goals for myself and my business every January and February. Even if I just come CLOSE to meeting the targets, I have achieved what I set out to do. And what an amazing, almost incredulous thing for absolutely anyone — to visualize something in your head, write it down on a piece of paper, set up an action plan, and literally get it done, every single year, every single month, every single week and boil it down to every single day.

I’m exceedingly grateful for everyone in my life who believes in me and who works alongside me on these goals, and for everything we have achieved together — especially all those who know the struggle, who know what sacrifices have been made by us entrepreneurs, who KNOW the long days and loneliness and the strife when things don’t go as planned — or when your world is completely shaken. THANK YOU, my colleagues, fans, and my team, for believing and for continuing on in our great mission to better neighborhoods all across the East Coast (for now), one at a time.

How are you doing on your 3, 5, 7 or 10-year target for yourself? Oh, you don’t have one? Make that your first step — get out a notebook or open a new document on your computer and write out your ideal day of work in 5 years, as well as your ideal day of leisure. Once you’ve visualized it, break it down into goals and action steps, which we’ll discuss in a future post.

; – )

In whatever you’re doing — slaving away at a corporate job, slaving away at your own business, working hard to build a legacy, or loving/playing hard with your families, kids, and friends — go seize the day, friends!

“Make it Legit.” #ShutUpAndDoIt

As I’ve gained experience in the real estate world and my business has grown, I have expanded my focus to include as many steps in the real estate process as possible — acquiring distressed properties, expediting short sales, rehabbing and selling properties, and I also include rentals and property management as part of my business model. Some call this ADD. I call it smart growth! And since people have asked me recently why we’re putting such a focus on rentals, I figured an article was due!

So, why include rentals?

Once purchased and renovated, rentals provide stability and cash flow to ALL lines of business, smoothing the months between the sale of our rehabbed properties. Rental properties as we acquire them are intended to be held long-term and provide a “passive” (though anyone who believes rentals are completely passive, has never actually held any!) system of generating cash flow for the long-term operations.

I’ve always recognized that rehabbing was just one facet of the business and that if the market changes, deal flow dries up, or a loss is sustained on a rehab deal, without a foundation of rental properties, there would be nothing left. So my goal was to include rentals as one piece of the pyramid to sustain longer term operations. They also provide some peace of mind and a break from managing the time-consuming contractor/ management roles and day-to-day tasks of rehab projects. I firmly believe that if you do rentals right and set up your processes from the beginning, they’re less time intensive or stressful as some rehabs and development projects turn out to be.

I’ve always believed in the concept of turning “quick cash” into “long-term wealth building,” but I had to accomplish this slowly and in different ways than many other investors have done. My strategy was to pick up one rental building for every 4 rehabs, which sounds easy enough, but it was very rarely simple. Because of my rough start in the beginning, I was out of the credit game for a long time and had to find other avenues for generating rental income.

So, working with private money and cash generated from my wholesale and rehab deals, I began buying single family homes in markets outside MA. And let me stop here for a minute to give some street cred to local power couple Linda and Nyrik Huuskonnen, who introduced me to my first “out-of-state” experience beyond MA and NH — welcome to the Pittsburgh market! It was here that I could invest some cash from my rehabs without having to chase down bank financing, and began purchasing single family homes for between $5-15K, investing an additional $20-30K per unit, and then renting them out for $500/month. Pretty good deal, right? There’s a separate story on the challenges of running an out-of-state investment company (Coming soon!), but it certainly beat paying $300K in Mass to only make $3000/month in gross income.

Now that I have re-established my credit and my business is financeable, AARE Group is acquiring both local and out-of-state rental units at a more aggressive pace, making sure that we set aside the cash to cover down payments. Our typical rental lending relationship will fund 75% of the acquisition price as an investment.

Another key to the success of this process is property management, which we have folded into the AARE Group as well (while not publicly marketed as of yet). As with everything that we do, I find a solid system makes all the difference. Key points we exercise here are all about tenant screening and pulling from a greater tenant base to ensure we get the best of the best. Our goal is to attract better tenants with better properties. This, along with treating everyone as customers instead of just “tenants,” are a couple of the ways we are able to retain our good customers and, when we have a turnover, we use it as an opportunity to refresh the unit and bring it one step closer to “flip quality.”

I’ll wrap up with an analogy. In our office, we talk about the difference between firing cannons and pistols. A rehab is like shooting a cannon ball’s worth of cash at a project, expecting a return of 1 1/2 cannon balls, roughly 12 – 20% ROI, or 25 – 50% Cash on Cash ROI (depending on location, and market conditions).

A rental is like firing a small bullet of cash at a project to create a net cash flow of $150-300/month per unit (after expenses, repairs, mortgage, taxes). THEN, we work to make money on the cash flow, as well as getting a slight benefit from the depreciation we claim through the investment and principal paydown, and over time, the asset increases in value (although we NEVER count on this happening) — a win – win – win – win!

If you have the resources and are willing to set up a system to maintain your properties, rentals will serve your real estate investment business well.

Hope this helps, and as always,

Keep calm and rehab (or rent!) on!

Why Goals Make a Difference Every Day

Why Include Rentals in Your Real Estate Portfolio?

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