Ep025: The Seasons of Real Estate Investing (Part Two)

Chris McAllister: Welcome back to the Landlord Profitability Playbook podcast. I’m Chris McAllister with ROOST Estate Company and I’m here today with my podcast partner, Laci LeBlanc. Good morning, Laci. 

Laci LeBlanc: Good morning. Today 

Chris McAllister: we’re gonna continue our conversation about investor seasons.

So real estate investing moves in seasons or cycles and never in a straight line. So the last time we got together in part one and part for part one of this two part series, we discussed the three investor seasons. Seasons. There’s the buying season, the neutral season, and the seller season as well as we talked about.

How to tell what season you’re in based on the three dials. And the three dials are price, momentum, supply, and borrowing costs. And finally, in the first episode, we dug into the six mindsets that the most successful residential real estate investors among us share. And they are patients. Preparedness, discipline, adaptability, stewardship, and conviction.

So today we’re gonna get tactical and we’re gonna talk about how to make money when the deals dry up. We’re also gonna talk about a concept I call the long burr or the her, and we’re gonna walk you through a history of real estate seasons in Columbus, Ohio, going back 30 years. How’s that sound, Laci?

Laci LeBlanc: It sounds great. You know, I’m a strategy person myself as a marketer. I love the kind of big strategy conversations, but I think most people think about things in terms of tactics. I think they think about things in terms of, you know, what are the practical steps I can take? Or what do I do next? And so I’m excited to, to get folks kinda where they meet folks where they are and talk about what they can do.

Chris McAllister: Okay, perfect. So first segment today is how to make money when the deals dry up. And the first tactic I wanna talk about is you protect and optimize the portfolio you already own. So when acquisitions are slow, right? When the opportunities are few and far between operations, which is not sexy, I get that, but operations becomes your highest return activity.

You know, if you can lower your vacancy rates, if you can streamline maintenance, if you can renegotiate contract services, you know, the, these aren’t glamorous, but they, but any improvement that you can make from an operational perspective always goes straight to the bottom line. So if there’s not, a slew of deals coming your way to evaluate.

Take some of that time, get an extra cup of coffee, and go back through your budget line by line and see where you can make some adjustments. Even small improvements matter. You know, just a 1% decrease in vacancy across 10 units. You know, that’s a rent check, you know, that you weren’t collecting before.

You know, trimming a vendor contract by. You know, even a few dollars, you know, it compounds over months and, and over, you know, years for the long term, it could be hundreds or even thousands of dollars. And the last place you wanna look as you, you know, think about protecting and optimizing what you already have, don’t overlook debt.

Refinancing or restructuring loans when the opportunity arises, you know that it’s rates are high right now, right? But that doesn’t mean there isn’t an opportunity to lock in better terms, or even if you get the same terms, to do a refinance and free up some cash so you can set it aside for when the deals do start coming your way, protecting what you already have as the first line of defense.

In a market like this, 

Laci LeBlanc: I feel like for a lot of folks, that’s probably like this area. Is very rehab and maintenance centric, and maybe we’ll talk about that more in depth later. But I feel like that’s kind of an area, like Nana has a lot of properties and right now she’s waiting on a guy right to come and do some cabinets, or she’s waiting on a guy to come and do some floors or some siding.

And while she’s waiting, nothing else is happening. So it’s really just a delay in her collecting a rent check and her getting somebody back in that property. So I, I feel like a, for a lot of folks. The area where you can optimize might be rehab and maintenance related. 

Chris McAllister: Yeah. And we are gonna talk about that here in a, in a second or so.

But you know, just to touch on that, you know, we just hired our seventh. W2 maintenance person this week. He started on Monday. And, um, all of that is because, you know, we have clients, myself included, that are actively looking at, w you know, houses within our properties, within our portfolios that make sense to do some upgrades right now, while, while there’s, not much else going on.

So tactic number two is build cash. Build liquidity. Patience is only powerful if you’re liquid, right? It’s one thing to be there. There’s two ways to look at this, right? It would only, it would be worse if you had deals covering your way and you had no, no cash to act on them, right? So at least this is a time where.

You know, there’s no deals coming your way, which means it’s the perfect time to figure out how do we create some cash? How do we build a stockpile? How do we set up some reserves so that when the market does change, that we have some dry powder, as they say, to act upon them. And dry powder doesn’t have to sit idle.

You know, many investors park cash and short term treasuries, money market accounts. Some people even, you know, start investigating real estate investment trusts or REITs to earn money while they wait. Others use the time to just aggressively save, trimming, personal spending. It’s almost like, you know, the first tactic is trimming your current operations.

Look for ways to. Optimize cash flow and so forth. But you can do the same exercise in your personal spending and on your personal budget. So the whole idea is what can I do to set aside more cash right now so that when the market changes and it will change, that you’ve got, you’ve got money in the bank so that you’re gonna be ready, right?

You’ve got fuel for future AC acquisitions, obviously, when the next buying season comes around, that investor with cash on hand. That’s the one that’s gonna be writing offers while, you know, others are gonna be sitting around just wishing they had some, uh, had some reserves in place. 

Laci LeBlanc: Yeah. I don’t think that’s very unlike life in general.

Right. The preparedness portion of it is you have to be looking ahead. You have to be looking at, at what’s gonna come next, which just happens to be where we are here. But I think it’s a, it’s a difficult thing when you start talking about it. In terms of trimming, personal spending, I think people get a lot more queasy.

Chris McAllister: Yeah. Well, I think there’s a lot of folks right now that, that feel like, you know, this is a tough economic environment we’re in across the board, not just for real estate. So, you know, I think a lot of people are already having these thoughts and conversations, you know, with the family that, okay, maybe this is the time that we go back and take a look at our personal expenditures.

Maybe this is the time that we go back and figure out which of those, uh, streaming services we don’t watch every week. Right. You know, 

Laci LeBlanc: we just had that conversation in our house. Hold. So because we, you know, or maybe it’s just the time where we look back and see where we’re being a little, um, superfluous.

Do we really need every streaming service known to man is more the question. 

Chris McAllister: Yeah. But the whole idea is that we’ve gotta figure out how do we. Live and work more efficiently. How can we set aside cash? How can we be ready? We’re not doing it for a rainy day. We’re doing it for when opportunity comes our way.

So to me that’s a little 

Laci LeBlanc: bit, yeah, that’s it. That’s, that’s the difference I think when you start to have this conversation out of a, a mindset of, um, abundance where you are not doing it because you’re scared. Of, you know, not having enough. It’s not a scarcity mindset. You’re entering into this conversation with, you’re doing it so that you’re ready for when the opportunities arise.

So I think that’s a really important distinction to make is when you have this conversation, don’t do it from the mindset of. Scarcity. Don’t do it for like, well what if this terrible thing happens? Or what if you know this, that terrible thing happens? Or there is no, not the rainy day, but do it from the perspective of what if this opportunity comes along?

How do we need to be prepared for that? Because I think that really changes. It really, you can let go of the queasiness then, and you can do it, from a positive perspective where you’re preparing yourself for the next opportunity that comes your way versus, 

Chris McAllister: yeah, 

Laci LeBlanc: you know, for the next traumatic incident that comes your way.

Chris McAllister: I think that’s a great distinction because I can be motivated to do that if I know it’s because something great’s coming around the bend. So the third tactic is expand your pipeline and expand your relationships. In hot markets deals sometimes find you in slow markets. You have to hunt. This is where relationships become everything.

So a couple suggestions. Work with wholesalers, make friends with wholesalers who know where you know, distress is hiding, where the distressed properties are. Stay close to attorneys who see properties moving through probate or divorce. Build trust with property managers who know which landlords are.

Are burned out or cash strapped or, you know, just ready to get out. And, you know, this one’s a little bit out there, but don’t be afraid to go direct to owners with letters or phone calls. That one’s a little tougher for me to get behind because I think I still get at least half a dozen unsolicited texts every day about people wanting to buy this address or that address.

You know, we buy houses, guys, and so forth. So that one might be a little bit. Tougher. But I, you know, I have to tell you, and, and I think this, yes, I’m in the real estate business, but I think this applies to every other investor. You know, I, I’ve worked closely with. Several attorneys in town, but you know, one in particular has been a great client, a great attorney for me.

He is my personal attorney and so forth. And this was coincidental, but we had, he had a client who also owns a plumbing company that our property management company works with. And he was the executor of an estate. And Tom, my attorney, had talked to me about, you know, getting an, uh. Opinion of value on the house so that he could file, you know, for probate and all that.

And out of the blue a couple of weeks ago, john called and he said, you know, I know we talked about selling the house, but if you’re interested, I’m, I’m happy to sell it to you. And, and the price he quoted was, perfect for me. The house is in, pretty rough shape, but we’re prepared to fix it up and, and so forth.

But honestly, I think this might be. Literally the best buy I’ve made in the past three or four years, and it came down to, relationships. Like everything else we talk about in all of these podcasts, everything comes down to relationships. But I can’t stress enough how important it is that anybody that, that you work with, anybody that you know, you, you want to help them remember or keep it top of mind that you’re a real estate investor and you’re always looking for an opportunity.

This is also the time to nurture real estate broker relationships and blender relationships. You know, deals and financing options often surface through people who are closest to the action. And I, and I think this is a good time also to, to make a shameless plug Laci Fur ROOST investor gateway. You know, that you can get that, you can reach that from our ROOST real estate site, but the ROOST investor gateway, you know, that helps create.

Pipelines and helps make, what do we say, invisible opportunities. Visible. It helps. It’s a great tool for looking at literally every listing that’s on the, uh, open market right now. And it runs it through an algorithm and helps you to, helps you see whether or not it’s a potential investment or not.

So looking for tools like that, if you’re in our market areas, you can go find it on the website. Um, I’m sure there’s other tools out there in the world, but that’s a great tip for, you know, expanding your pipeline, keeping your eye on the market, and making sure you know, you have a good feeling for the pulse of the market and the relationships you build in the dry season, right?

In this, uh, winter. These, those, those relationships I’m telling you are gonna be lifelines when the next opportunity strikes because they’re gonna think of you first. 

Laci LeBlanc: Well, I do love a shameless plug. Um, and I can say that because I know that everything we do at ROOST is relationship based. Um, and I feel the same way honestly, about, you know, going direct to owner.

You know, I, I think I’ve joked before about how my best friend wants to move into my neighborhood and I’m about to go door to door and tell all my neighbors if they’re thinking of selling, I’d love it if you’d like, let me know first so I can let her know. But I think that. You can only do it if it’s sincere, right?

You can’t do it if you 

Chris McAllister: don wanna. It has to be authentic. It has to be real. You’re not trying to buy their house for, you know, 70 cents on the dollar. You’ve got a, a friend who’s a retail buyer That’s right. Wants to get in the neighborhood. They’re willing to pay what it’s worth. That, that, that’s two different things.

There’s nothing, 

Laci LeBlanc: right? The, the, we buy houses, guys are not, there’s nothing. Sincere or authentic about them, but also they’re very aggressive, right? And, and I don’t fault them. They’re just doing what they, you know, have figured out how to do to make it work. And as a marketer, I think that’s probably not the worst tactic from a, like an ROI perspective.

But if you’re worried about relationships, if you, if you want long-term, right, which they don’t, they want the transactional relationship with you. But if you want a long-term relationship, like I would want with the neighbors who don’t end up. Selling their houses, right to my friend Lindsay. Right. Then you want to make sure that it’s, it’s sincere and it’s authentic and that the goal is, mutually beneficial, which is what we do at ROOST, and especially with the investor gateway.

You don’t have to be. A client to look at our featured investor properties. You know, we just are trying to get ’em out there so that, that people will find them. And do we hope that because, you know, maybe they found ’em on the investor gateway that they’ll come to us to manage them? Absolutely. But we’re not withholding anything if they don’t.

No. Uh, it’s very authentic and very sincere from our perspective, so I think that’s important. 

Chris McAllister: Absolutely. The next tactic I wanna touch on is sharpen your strategy and skills. Just because you aren’t buying right now doesn’t mean you stop practicing. So keep analyzing deals, even if you know you won’t pull the trigger.

It keeps your instincts sharp and your numbers honest. You know, this is also the time to study some maybe alternative approaches. Maybe this is the time you investigate, you know? Seller financing structures or subject to deals or lease options. You know, there’s a lot of different ways to approach the world of real estate, and this is the time to get a few more tools in your toolbox before you know, the next buying season comes along.

You know, a deal that looks. Unworkable at first blush may become interesting when you start thinking about some alternative approaches. Um, one place that comes to mind to learn about these is, uh, BiggerPockets. You know, we have a lot of investors that, uh, spend a lot of time in the BiggerPockets community and, and learning, uh, different approaches to real estate.

So that might be someplace that you may want to take a look. And, and the other thing I want everybody to keep in mind is not every deal. It has to be a home run, you know, a com, a career built on singles and doubles, steady, consistent wins, often outperforms the investor who only swings for the fences.

And, you know, I think I’ve learned that over time, the hard way. You know, I do feel like in this market, you know, the, this house I’m gonna be closing on later in the month feels like a home run because there’s so few opportunities out there. But three, four years ago, I would’ve counted it as a, as a great single or a double.

Laci LeBlanc: I don’t know if, if anybody listening, please. Place, and I use that term loosely, fantasy football. I’m gonna say touchdown instead of home run here. Because if you’re, if you’ve played fantasy football, then you’ve been disappointed by your roster. And I think that when you’re drafting that’s the approach that you take.

Right? What’s the biggest name guy and I got Sequan Barkley this year, which if you know anything about football last year was just, does. I mean, he, it was a blowout. Every game has scored just barely any points for me this season. But the David Montgomery’s of the World who came in and saved me last year by just consistently scoring a good number of points.

It didn’t have to be, like you said, a home run or a touchdown, but that’s saved my team. I wasn’t in last. I wasn’t in first, but I wasn’t in last. 

Chris McAllister: Yeah, there you 

go. 

Laci LeBlanc: This year I swung for the fences with Saquon and I’m in dead last by myself and I, I think that’s a really important point because I do think that that’s how a lot of, especially new investors approach things, is they’re looking for.

That steal of a deal. Uh, and I think it’s like that across the board. You know, if you, if you resell vintage items, if you, are a car dealer, you’re looking for that steal of a deal. But those only come every so often. So I think you’re right. Focusing on how you’re performing, in when it’s not a home run or touchdown is, is probably far more important than just focusing on those.

Individual home run deals that you get, 

Chris McAllister: you know what feels like a, a single right now? And when I say a solid single, it, it, it cash flows, you know, it’s, it’s gonna appreciate and value, you know, all the basics. It’s just not gonna make you rich overnight. But when you’re in it for the long term, right?

Those singles, 10 years from. A lot of times they look like home runs. And that brings us to the, the next tactic that I’m excited to touch on, and that’s using this time to reinvest in current assets. So one of the very best uses of capital in a down cycle is reinvesting in properties you already own.

And I, you know, I only kind of got, became conscious of this with my own portfolio maybe in the last nine months to a year or so, because there’s so many opportunities that I’m finding in my own portfolio to do some strategic upgrades that allow me not just to increase the rent, but they’re increasing the value of the property and it’s allowing me to attract.

Better tenants. And all that’s gonna do is, and, and as you know, I’m gonna hold onto these properties, you know, hopefully for another 20, 30, whatever years. It’s only gonna boost that terminal value. And this whole idea of reinvesting, you know, in what you already have, you know, I’ve been having a lot of conversations like this with, you know, a lot of our owners who, have two to 9, 10, 10 to 20, 20 plus properties and so forth.

And I think this is the idea. This is actually what’s exciting about this fallow period, so to speak. So I, I’ll give you some rough numbers with, uh, and I’ve actually done this. I’m in the midst of doing it on two more properties, but I have a, a triplex in Springfield, and I have one unit that’s a decent sized unit.

And, the rents have run about six to $700 and I never upgraded the property and I never really pushed hard on raising the rents. Right. We had, you know, long-term tenants and, you know, everything was going fine. I was making money that was all fine and dandy, but this year, the tenant moved out.

I went in and I, I never do this, but I ended up spending. Almost $12,000 upgrading the property. I replaced a couple of windows. We did a full paint job. We we also did some work that would’ve had to been done anyway, uh, with the plumbing and so forth. But I, I added, uh, an air conditioning unit.

And this is not a building where it’s necessarily, you know, part of the neighborhood standard are expected that, uh. You know, the rental units there have air conditioning, but I did all of that. I spent about three grand, but I was able to take the rent from roughly $700 to $950 a month, right on this one unit in a triplex.

So help me do the mess. So two 50, just to make sure I’m doing this right, that’s two 50 a month, right? Times 12 months. That’s $3,000. And if I take that $3,000 and I divide that by the $12,000 that I put in it. I’m getting a 25% return on that $12,000 and plus, you know, I, I could sell that property today for, gosh, at least 30, maybe up to 50,000 more than I could have sold it for last year, right?

So I’ve added equity. I’ve in increased my cap rate, and I have to tell you, it’s easy to get excited about that because that investment has gonna have a better return. Anything I can buy on the open market today. You know, think in terms of CapEx capital expense for rent growth. Maybe it’s kitchens, maybe it’s baths, maybe it’s flooring.

Long-term value plays. This is the time to get your roofs changed out. I think I’ve done five roofs myself this year. HVAC, energy efficiency, strategic repositioning, you know, converting a two bedroom into three, cleaning up basements. You don’t even have to finish the basements. But now is a great time to get in there and, and, uh, do the, uh, the waterproofing, get a great paint job, update the lighting and so forth.

There are so many things that when I started looking, that I can do with within my own portfolio that are absolutely going to increase the rents in this market and make them more valuable down the road. I’m kind of embarrassed that I missed them, but I’m, it’s been so much fun to actually get back into that portfolio this year.

Laci LeBlanc: Yeah. I think it’s important to note that that’s not, and this is not just for. Unoccupied units necessarily. You mentioned roofs, you mentioned, you know, there’s exterior stuff that you can do to occupied units if you don’t wanna, you know, bother the tenants to do this stuff inside. But, you know, Nana has a unit that had a long-term tenant in it.

It’s actually, it’s two houses side by side, had a long-term tenant in it, lost the long-term tenant. There was so much work to be done because she hadn’t upgraded anything. She hadn’t updated anything while he was there. Uh, but then there’s a property, the property next to it, again, long-term tenants that could use work outside.

Just some cleaning up of things, but that could make it a lot easier for her to find a new tenant right next door, right. Uh, to the, to the property that she’s trying to rent. Um, because it’s been, you know, she’s spent a long time having to update it because it had been so long after he moved out. And then.

Also, you know, nextdoor could use some updates. So I just wanted to emphasize that if ev, if you’re lucky and everything is rented right, then there’s still things that you can do in this kind of section of the strategies and tactics. Uh, because, you know, making one house more desirable in the outside can help you rent the one next to next door when the time comes.

Chris McAllister: Absolutely. Absolutely. The next tactic I wanna touch on is this is the time to prune and reallocate the portfolio. So dry markets are the perfect time to take a hard look at your overall portfolio. Which properties are dragging you down, which ones generate constant mainten call maintenance calls, weak tenant demand, or underwhelming cash flow.

I have to tell you, I’ve had houses that I just could not make. Work and for whatever reason, I don’t know why, I guess it was just me because I’ve had these situations where I’ve decided to sell them and the investor that bought them after me was, was able to do incredibly well with them. But you know, sometimes you have a property, maybe you’ve got three or four properties, but one of ’em is just making you crazy.

For whatever reason. Maybe now’s the time to look at. Putting that property up for sale, you know, the best investors aren’t sentimental, right? I, I, I don’t think I’m sentimental, but I really do have an aversion to selling. ’cause I know how much, money I’m gonna make over time by taking the, the long view, the long road.

But the best investors, they, they offload underperformers and they recycle that equity into stronger opportunities. You know, whether they do 10 30, if they could do a 10 31 exchange, even that makes it even more. Attractive because you can defer taxes while you’re upgrading your portfolio. You know, a lot of times it’s as simple as, you know.

We’ve got clients who, you know, said they have four or five property portfolio. And three of those properties really could use some love and they end up selling their worst performing property or their most annoying property, and they take whatever equity they could harvest and they put that money into the other three and bring them up to the neighborhood standard.

And in turn, they’re able to raise the rents and they’re overall portfolio is that much stronger. So sometimes consolidation is the smartest. Move. You know, I other examples, you know, we’ve had people who, you know, have single family homes and they get an opportunity to buy, you know, a small apartment building or something like that.

So sometimes replacing three even good to mediocre, you know, they don’t have to be mediocre. They can be decent single family homes with a solid, uh, multi-family asset can really rejuvenate your, your portfolio and your, and your future returns. 

Laci LeBlanc: I feel like that’s good advice for the folks who are, are being very intentional about their investment portfolio.

And maybe, I mean, you know, if you’ve got two properties now, maybe you want two properties, right? Maybe you don’t want 30 properties, maybe you never wanna have a a 50 property portfolio. Right? If you wanna stay in the two to 10 range, um, and that’s where you’re, you’re comfortable, then yeah. Consolidating or reallocating, it could be a really nice, intentional strategy for you.

Um, because I think a lot of times we think about, oh, real estate investor, you’re always looking to buy, buy, buy, buy, buy and add, add, add more properties. But that’s not necessarily the case. Uh, maybe you just want a two to 20 portfolio and that’s good for you. So you just have to be very intentional about which properties are in there.

It’s not always about a add add. 

Chris McAllister: That’s exactly right. That’s exactly right. And the final tactic I want to touch on is consider a new personal resident resident residence. Sorry.

Laci LeBlanc: It’s a very different conversation. 

Chris McAllister: Yeah, yeah, yeah, yeah. So a new personal residence. Here’s a play that a lot of people overlook in a slow market moving up personally.

Can be a smart strategy, right? There’s a point where competition starts to cool, prices stabilize, and you may be able to, you know, get an offer accepted on, on your next dream home with a lot less plaque pressure. And we’re seeing that, right? We, we are far from the frenzy market that we saw coming out of COVID.

The overall housing market is more balanced than it was even a few short months ago. This only works of course, if you are in a financial position to keep the home you’re currently in as a rental property. And this works too. This is a great way to, you know, get started in the, in the residential investment businesses with the house you already own.

So if you can turn your current residence into a rental, you add another cash flowing property to perfor to your portfolio while upgrading your own, lifestyle. You can, you can lock in the long-term upside on both properties and it’s a, this is a move that benefits you personally and, uh, also improves your, your investment balance sheet at the same time.

So that’s something to consider. Can you, you do the math, talk to your lender, see if you can actually pull off what would be a great upgrade for you and your family, but keep your current residence as a rental property.

Still with me. 

Laci LeBlanc: Yeah, I just have a little background noise, so. 

Chris McAllister: Okay. All right. So those are the tactics that I wanted to discuss today. And the second idea I want to talk about is what I call the long bur. And this, this kind of goes back to the conversation we just had about upgrading properties within your current pro portfolio.

So Brr, which is B-R-R-R-R, stands for buying a distressed property. That’s the b. Rehabilitating it to increase its value. That’s the first R renting it out to tenants for income. That’s the second R. Refinancing to extract the initial capital. That’s the third R. And then repeat the process is the. Is the fourth R, right?

So that’s what the bur process is. So, you know, I think a lot of people have built their entire business around the very intentionally, around the bur method. I have to say that I, I, uh, I use the Bur method and have constantly for years and years and years, but honestly, I just heard that, that, uh. That terminology in the past two or three years.

So I guess that’s a little bit embarrassing, but I stand by the, the process. So what’s interesting for me is as I’ve gone through and started to upgrade my properties and upgraded the rents, you know, some of these properties, you know, I’ve had for 10, 15 years and, you know, I’ve got the mortgages paid down dramatically.

You know, most of ’em are. We’re 20 year loans. If I didn’t pay off any principal, I’m already 10, 15 years in, we’ve had all this appreciation during COVID, so I can actually do the right thing with these properties, increase the rent. And I can go ahead now and refinance these properties and harvest that equity and either use it to pay down other debt or to use it to upgrade other properties or set that money aside someplace safe where I’m not gonna touch it and be ready for when the, uh, the market turns.

So my twist on Burr, or what I call the long burr, is that. You repeat the bur process, but you do it later in the lifecycle of the property. So my bur becomes her, right? So it becomes hold. So it’s the H instead of the B for buy, and then it’s reinvest, it’s rent at a higher rate. It’s refinance and repeat, right?

So, you know, instead of buying and rehabilitating, it’s holding, reinvesting, I guess you could call it a rehab upgrade. Raise the rent, refinance, and repeat. So instead of buying something new, you recycle what you already own and the long burn literally. Looks like this. It’s hold, reinvest, raise, refinance, and recycle.

Does that make sense or am I just too excited about this to be clear? 

Laci LeBlanc: No, it makes perfect sense. And you know, again, we talk a lot about, we talk a lot about nana, but um, she’s had most of her properties for a really long time, and this is the exact strategy that she’s used to. Get to where she is. And so, and that goes for the rest of my family as well, because it is really a, a familial, kind of a gener, a multi-generational wealth building asset.

And so if that’s what you have in mind, if you’re building wealth. If that’s your goal, then this makes perfect sense because you’re, I don’t wanna say you’re delaying your reinvestment into these properties. If something breaks, you’re gonna fix it. You know, if you’re not gonna leave them in disrepair for the sake of her, right.

But, but by delaying it, you know, you really are. Maximizing, I think. 

Chris McAllister: But we’re not really talking about delaying maintenance. I just wanna be clear on that. Right? ’cause we’re taking care of the property. The tenants are happy they’re paying the rent, they’re paying your mortgage. But what we’re talking about is you don’t, I don’t think anybody has the opportunity to maintain their property to the neighborhood standard on a monthly basis or even an annual basis.

So this is a situation where, you know, some of these properties I’ve had for 10, 15 years, I have never. Made a conscious attempt to keep up with the neighborhood standard. Right. And in many cases, the neighborhoods have gotten better. I’m sorry to interrupt you. I a little passionate 

Laci LeBlanc: No, that makes perfect sense that that’s exactly what I was trying to say.

But also, you know, by following these kind of rules that roos follows, right? You, you set the. Rent at market rate, right? So you’re getting good rent. You’re getting the right rent. Then I think that, you know, we see this with Bruce clients with Nana’s clients by getting a fair rent and keeping the property up to the neighborhood standard.

Then you’re more likely to see these kind of long-term tenants. Yeah. So these tenants stay in the property for 10 or 15 years, then there’s no reason to go in and do a full on upgrade until that point. So I think it all, all these factors kind of fit together to put you in this. Ideal scenario, 

Chris McAllister: if you’ve been lucky enough to have a property with no drama for 10 years, well, there’s a good chance that you know you’ve got an opportunity there that you, you didn’t need to be aware of because everything was working the way it’s supposed to work.

You know, it’s textbook, it’s drama free. So anyway, to hold, you start with properties you’ve owned for, you know, maybe a decade or longer. The ones that are performed that are now just a little tired. You reinvest, you put new capital upgrades in there. Maybe it’s kitchens, baths, flooring, systems.

You upgrade the curb appeal, you know, like you said on a, on a duplex that Nan might own. You push the rents to current levels. And what I’m finding is I’m pushing the rents by 20 to a couple of cases, 40% because I just wanted to keep long-term tenants in there. Right. It makes a lot of sense as a, as an owner, you know, for a certain period of time to to, to take, you know, a discount against what’s possible.

In order to avoid having to go in and, and spend money on a rehab between tenants. So it’s not a bad thing if your rents have, maybe not kept up with what’s possible. But when the time comes to when a tenant does move out for whatever reason, it would be a sin not to take advantage of where the market is today, right?

So we hold, we reinvest, we raise and we refinance. We execute a cash out refi at a new hire. Value. And we take that cash and we do something else with it. And, you know, we’ve, we’ve talked before about our relationship with Lending One, they are a uh, a lender that only works with investors who, you know, have their properties in an LLC and they do these DSCR loans basically that value the property based on what the rent is.

And they have amazing products right now that where the interest rates are competitive, but what with what you’re gonna be able to get at a local bank. So, and they do refinances also. They also do blanket loans and so forth. So here’s another shameless plug for lending one. Maybe we can put a link to the, uh, webinar we did with them in the show notes of this episode.

Then recycle, right? The last R is recycle. Pay yourself back for the upgrades. And many times, you know, you’ve got additional money that you can put back in your, you know, pocket to, uh, or back in the bank for the next selling season. So hold, reinvest, raise, refinance, and recycle. That’s the longer for seasons.

Landlords, instead of growing by acquisition, you grow by. Reinvestment. And obviously, you know, it is perfect in seasons like this ’cause dry markets are frustrating. Acquisitions don’t pencil, but you know, sometimes these long brewer opportunities pencil out incredibly well. So you get forced depreciation without buying you, you know, you create more liquidity.

Your portfolio gets literally physically stronger and you can pocket cash for the next cycle. The congregation may be seated, Laci. 

Laci LeBlanc: No, I think that’s great and I think that, you know, the refinance point is a really good one because a lot of these strategies or tactics that we’re talking about today, you know, it, they seem to appeal to folks who have been in this a long time and have some, you know, cash or some liquidity kind of already.

Or some assets to tap into. But with the refinancing thing, and especially, you know, based on how much your rental is actually renting for, I think that really gives folks who maybe still do have a mortgage payment on these properties. They haven’t paid them down all the way. Some extra options.

Chris McAllister: Yeah. Yeah. It’s, um, you know, I, I go back and forth between, do I wanna pay all these off? Because if I paid off all the mortgages, that’s an incredible amount of money every month. Or do I want to take the approach that, the, the thing about paying everything off makes it sound like you’re gonna stop, you’re gonna retire, you’re, you’re not gonna play anymore.

And I, I can’t quite stomach that. So I do think that there’s a balance that I’m looking to strike between. Some houses that make sense to just hold and be paid off and other houses that, you know, you go back to and you tap equity every 10 or 15 years and continue to, to grow that investment business.

If not for yourself, then you know, for the kids and grandkids. But having said that, there are some risks that you have to manage. The last thing we want to do is put somebody back in a position. So many of us found ourselves in back in 2008, so don’t over-leverage. Don’t strip out all the equity just because you can.

You wanna leave yourself a cushion so that you don’t get caught if things happen to turn south, be conservative about, what you think your cap rate. Truly is, you know, appraisers lean really heavily on rent comps, so make sure your increases are realistic. The last thing you’d want to do is to try to push the rents as high as you possibly can in order to get a certain value for the property and get that, get that loan done, and find out that the tenant can’t stay because they can’t afford the rent or.

Worse yet, they can, uh, go ahead and run another house down the block for two or $300 less than what you’re able to rent for. And rate sensitivity, you know, model your refinance scenarios at different interest rates. A good upgrade can not be a good upgrade, right? If, if the, uh, if the debt terms don’t, don’t work.

So handled with discipline, I think the long word is safe. It’s highly profitable, and it’s a great way to put money to work in the slow seasons. So as we wrap up, I want to go into our third topic of the day. And you know, in the first episode we talked about different seasons, and what I did was, uh, my good friend Chad, GPT, and I went back and, uh, re researched how the Columbus market area fared in terms of seasons over the past 30 years.

So how’s that, that for excitement, Laci? 

Laci LeBlanc: Yeah, I’m excited about this one because I’m not from the area, so, well, I’ve been here where I am for 30 years and I’ve seen it firsthand. You know, I, I’m interested to see if there are any differences, you know, or if they mirror each other. As far as the history, because I live in a smaller town.

Columbus is a pretty big city. So I think there are intrinsically some differences there, but I think that, that’s the mindset I would love for people to go into this with, which is, how does this compare to, this is not a necessarily how your area has been, has been dealing with it, but how does this compare?

To my area. 

Chris McAllister: Yeah. It gives you a reference for how you might evaluate what season you’re in, in the market you’re in. And I, I, I’m not here to say this is the most exciting thing in the world, but for real estate nerds like myself, it’s kind of a cool, so we’re gonna go through it and we’ll have this in the blog post as well.

So, Columbus seasons real estate season. So in the 1990s, Columbus was characterized by slow and steady growth. Columbus in the nineties was a very different city than it was today. The population was growing, but it was very manageable. Home prices climbed slowly. There were no wild swings like you saw in the coastal markets.

You know, the mortgage rates were a little higher back then, but they were drifting downward from levels in the eighties that were just outrageous. So for investors, the nineties in Columbus was largely a neutral season. Deals could be made. But you had to really control your value creation, right? You had to, uh, buying a property at retail and waiting for appreciation wasn’t necessarily a winning strategy.

Smart operators invested in small multifamily and they focused on cash flow. The discipline built in the nineties set up Columbus investors to thrive in the decade ahead. So if somebody was really focused. On what they were doing. They had a sharp pencil, a good buy box, and they were disciplined. The houses that they purchased it held onto in the nineties are gosh worth hundreds and hundreds of thousands today.

So you move out of the nineties, which was a neutral season, and you move into the period 2000 to 2006. So this is characterized by expansion in an early sellers market, right? The early two thousands brought faster growth to Columbus. Population gains, steady job creation. There was easier financing, so things were going crazy in real estate in Columbus, but by in by 2004 through six, you know, Columbus was writing about the same wave as the rest of the country.

It was a hot time, right? Prices were climbing faster than were climbing fast, and actually that was a point where incomes stopped keeping up and lending standards back then were loosening up. And a lot of investors, myself included, I’m sorry to say, got very. Gr very aggressive, and this became a shift into a seller’s market.

Properties started to sell quickly, sometimes above asking, many investors stretched, you know, and banks stretched their underwriting. They, they were confident that based on what they’d seen the past few years, in the early two thousands, that values would only go up. You know, appreciation would bail them out of any mistake they might.

Made. Now on the other side of it, the seasoned investors, the ones that had been at it for a long time, in the early two thousands, they used this as a time to prune their portfolio. They sold their problem properties, they consolidated and they got prepared for what was coming next. So this is a great situation where what can be a seller’s market can either work for you or work against you, but.

To sum it up, 2000 2006 was characterized as a seller’s market, and then we got into the great recession in the true buying season. So this was 2008 through 2012, right? If you remember, we had a massive crash. In 2008 and oh nine. Now what was interesting is, you know, Columbus is home to the Ohio State University.

It’s the state capital, neither one of those are, are going anywhere anytime soon. So Columbus didn’t see the extreme price drops that places like Phoenix are, are Las Vegas saw. But the value still fell, supply swelled. There was a lot more houses on the market and. This is the key.

Financing got super, super tight. So between 2008 and 2012, you could buy houses in almost every part of Columbus for, for less than a cost to build them. And this was obviously the clearest buying season in the past 30 years, maybe longer. You know, investors with cash, a little bit of courage and conviction, they were scooping up properties at discounts that, looking back on, are just crazy.

Whether they got ’em at sheriff’s sale or the real estate owned properties that banks were offloading, there was just so many opportunities. If you had the cash and if you knew what, what you were doing, if you’d been patient. And you stayed liquid, right? During the early part of the two thousands, you were rewarded with the buying opportunity of a lifetime.

You know, I sold so many houses during that period to investors I work with, and fortunately I was able to buy a handful of houses during that time as well. And it was a magical time. Laci, you know, I don’t know that we’ll ever see that again, but, uh, you know, anything that comes close is, is just, I just can’t wait, quite frankly.

Laci LeBlanc: Well, part of you hopes no. And part of you hopes Yes. So 

Chris McAllister: that’s exactly right. I don’t wanna see anybody get hurt that, oh my gosh. You know. Myself, the investors we work with, the agents we work with. There was just so many opportunities and, and yes, it was a dark time. You know, it was, it was, it was dark for us, you know, personally in many respects.

But as for an investor, you know, who was prepared during that time? It was the buying opportunity of a lifetime, and then in 20,000, in 2013 through 19, right from basically coming out of the crash in 2013, all the way up until COVID long expansion and a neutral to sellers market. Right. So we went from a neutral market in the nineties, a seller’s market in the early two thousands, a true buyer season and uh, you know, post crash.

And then we came into another neutral, maybe neutral to seller season. So the recovery during that time turned into a boom. Columbus grew into one of the fastest growing metro area, is not just in the Midwest, but in the country. We had test tech jobs, we had logistics and warehousing, education, research.

Home prices climb year after year, 20 15, 20 16. Bidding war, bidding wars were common. You know, it was just clear that it was a great time to be a seller. For the, for the investors, of course, the best Buys were in the early part of the decade. By the end of the decade, the 20 teens, the only deals that made sense were value add plays, properties that you could upgrade, reposition, buy off market, et cetera.

So it was a neutral season. For disciplined buyers, and it was a seller season for everybody else. And then we got into COVID, right? And COVID was just the craziest thing in the world. And I think we’re still having a COVID hangover, to be honest with you. So just in 20 to 20, 21, there was a frenzy, cheap money.

I think people were at home, they had more time with their hands. They were looking at Zillow, they were buying houses there in California. They were buying houses in in Ohio. You know when interest rates collapsed During the pandemic, Columbus saw a frenzy, right? Inventory evaporated rates, hit new lows.

Demand spiked prices, surge double digits in a single year. It’s a classic seller’s market. Investors who chase deals in that time often find themselves overpaying and betting on appreciation that couldn’t last. And we have, sadly, you know, we have a handful of owners who did buy a lot of houses at Tope or some houses at Tope during COVID.

And, they’re not super happy with, uh, their investment today. And, you know, they’re doing the best they can to hold on because. As I always say, this too shall pass, but it was a dangerous time for investors to be buying up properties anywhere in the country, but especially in Columbus, Ohio.

You know, during COVID, the smartest players, the experienced players either sat that whole period out or they only bought when they had a true edge or a true reason. And then we get past 2021 and you hit 20 22, 20 23, and suddenly. We start to get a little hangover, right? We got a rate shock, interest rates on mortgages.

Doubled in, in less than a year, demand cooled off. But Columbus, you know, the supply TA stayed tighter. Prices started to flatten a little bit, but they certainly didn’t collapse. So, 22 to 23 was a kind of a strange neutral to, I’m gonna say, winter or fallow season. You know, those dials, those three dials weren’t lining up for acquisitions, you know, deals that might’ve looked good.

In 2021 at a 3% interest rate, suddenly didn’t pencil out at all at six, seven, you know, 8% interest rates. So again, savvy investors, you know, they shifted into reinvesting in their existing properties. They proved the weak performers and they started banking cash. And then we get to basically where we are today, call it 2024 to 2025.

And today we’re in a kind of a transition period. So right now, active listings in the Columbus metro market are definitely up compared to the depths of where we were in 2021. But the number of houses on the market, whether they be investment grade properties or, or properties people wanna live in, the number of houses for sale is still, well be below.

Historic averages. Prices are still going up a little, but you know, they’ve kind of plateaued. They’re certainly not surging. I won’t even say rates have eased up, you know, any given week they’re plus or minus a half a point. So clearly there hasn’t been enough relief in interest rates to unleash a flood of buying.

So it feels like right now, and this is kind of what brought us to this, uh, this podcast today, is we’re at a period of hibernation. And, and it’s kind of a long hibernation period. It’s not a buyer’s market yet, but the signs are starting to shift. You know, investors who are protecting their portfolios, upgrading, building liquidity and so forth, they’re doing what they need to do, and they’re the ones that are going to be poised to do really well when we come out of this hibernation season, and I truly believe.

That, this too shall pass that next, that next buying season or at least the next neutral season with opportunities for investors will come. I don’t think it’s going to be I don’t know that it’s gonna be as soon as next spring, but I would say in the next year or so we’ll start to see some, some, uh, green shoots, as they say for residential real estate investors.

Laci LeBlanc: I mean, that’s a pattern that I see in all of this is, you know, the buying seasons are really few and far between, right? When it’s truly a buying season. And if you look at things like COVID and you know, obviously the crash of 20 2008, you know, that kind of. Four year period there. Then there are also some questionable, parts of that those buying seasons that might affect potential buyers, right?

So if you lose your job or you know, if your hours get cut or if something else happens, your health that goes downhill, then that might not put you in the right place to, to be, to take advantage of the buying season, but. Um, so you really do have to be ultra prepared, and I think that preparedness portion is a huge part of it, but just acknowledging that, you know, they teach us in school to learn history so we don’t repeat it.

Mm-hmm. But in this case, in the case of real estate, right, we wanna learn history so we can repeat it so we know, so we can identify right when the time is right. So we can have our finger on that pulse and so we can then. Repeat it the right way. Right. Maybe we didn’t get to take advantage of it last time, or maybe our parents didn’t get to take advantage of it in, in my case or somebody else in my age’s case, but maybe we can take advantage of it this next time.

And if we can keep our finger on the pulse and kind of like you said, people exist. Like people who have experienced in this, experienced investors kind of know what’s coming. Uh, then you really can. Position yourself in that place to take advantage of these very rare buying seasons? 

Chris McAllister: Well, I, I’m gonna say, I’m gonna go out on a limb and say that we’re overdue for a correction and we’re overdue for a buying season.

You know, the last real buying season we had was 20,000, 2008 to 2012. God forbid it, it becomes that kind of opportunity because there was so much collateral damage, but. That was only really a four to six year period where we had a buyer season out of 30 years. So most years were neutral at best.

Had definitely some interesting, seller periods, but lot of neutral, lot of fallow periods, a lot of winter periods. And you just have to believe that, uh, you know, like I said, three times now, I think this too shall pass. And I think we will start to see some opportunities in the next. A few months, a year, year and a half for investors.

Laci LeBlanc: I just think it’s so encouraging, for the average everyday person that you know, real estate investment is generational wealth building for all of us. It is not exclusive to the moguls, to the billionaires. You know, if you are smart, if you have, you know the means enough of them, you can, you can invest, you can make these decisions, even if it’s just turning your existing house into a rental.

When you move up to your next house, you know, this is something that’s available to everybody. And that people can really take advantage of to build wealth generation to generation even without just, you know, huge amounts of assets, um, sitting around. So, I, I just think that this whole conversation should be very encouraging to investors in all of the stages, um, because it truly is, you know, real estate is truly a wealth building tool that’s accessible, you know, to, to most folks.

Chris McAllister: Yep. Absolutely. So as we wrap up, I just wanna reiterate, in every market season there is a right play. You know, the winners over the long term aren’t the ones who always buy. In fact, the real winners, you know, out of the last 30 years, maybe they had four big buying years, right? But they’re always the ones who play the right game for the season they’re in.

When deals dry up. Average investors just freeze, right? The best investors, they figure out how to shift gears. They focus on their operations, they focus on liquidity, cash on hand, relationships skills, right? Whether it’s, uh, valuation skills, acquisition skills, what have you. And they also focus on reinvestment where it makes sense and they pull that equity out and set it aside for the future.

When they can, they prune what isn’t working and they prepare for the next opportunity wave And again. The seasons will change. They always do. And the, when the next true buying season arrives, those who use this downtime wisely will be the ones that, uh, are gonna be ready to go on offense. So before we wrap up, I just wanna remind our listeners that at ROOST Real Estate Company, we’re not just property managers.

We see ourselves as true partners in asset and portfolio management. So our last shameless plug of the day, Laci, if you’re a serious investor. You know, you know, it’s not just about collecting rent checks, it’s about protecting your capital. It’s about maximizing your, uh, return on investment, and it’s about making the right moves at the right time in the cycle.

And that’s where we come in. You know, we work with investors of all sizes. We work with mom and pops, we work with accidental landlords. We work with professional investors to manage not just the day to day. Operations, but also to help with the big picture strategy. And again, that goes back to does it make sense now to prune under performers to put a few houses up for sale?

Does it make more, you know, sense to reinvest in existing assets? And we’ve got fantastic, uh, rehab and maintenance company, the ROOST rehab and maintenance company to help our owners with that. And just the whole plan for repositioning your portfolio to take advantage of the next. Buying season. So if you’re ready to work with a team that treats your properties like an asset manager would with a focus on growth, stewardship, and long-term profitability.

We hope you’ll reach out to us. Laci, I enjoyed this, but I’m a real estate nerd, so thanks for, uh, being here, listening to me ramble today. 

Laci LeBlanc: No, I think it’s great. More shameless plugs, I say, and I, we can do that because we’re focused on the relationship, right? We’re focused on, you know, building a relationship with our investor clients.

That, spans all of the seasons and, and being alongside of them for all of the seasons and, and helping them be in the right position when the next buying season comes along. So, more shameless plugs, I say. Um, not shameless at all when you’re focused on, on the relationships like we are. 

Chris McAllister: All right, fantastic.

Thanks for being here. We’ll see you later. 

Laci LeBlanc: See you next time.