85% of real estate agents don’t have administrative support, even though 80% of a real estate agent’s job is doing low-value administrative tasks. The most important aspect of moving up in this business is learning what you can and cannot afford to delegate.

As you scale, 10% of your topline GCI should go to administrative support. While it may seem like spending $20,000 of a $200,000 GCI on an administrator is a lot of money, if you think about it not in terms of years but in terms of months it becomes a quite manageable sum: for only $5,000 you can pay for 3 months of your first administrator’s salary. In doing so, by freeing up more of your time to work on what makes money, you will probably make $100,000 more in a year than you would have otherwise.

Once you make this jump, you will never go back to wearing all those hats you used to wear.

If we break down the jobs that a real estate agent performs, most make less than $25 an hour and many more make less than $50 an hour. If you are running business-related errands during the day -- inputting an MLS listing, putting a lockbox out at a property, or picking up a check -- you are performing tasks that are low in value. For someone cutting their teeth in the industry as a real estate agent, this is important and necessary work. However, these are not the kinds of things that a real estate business owner should be doing, even though the industry considers those things as core to the business.

Think about it: as a business owner, your time is incredibly valuable. You need to ensure that you are maximizing the value that you create. That can mean closing or converting high-value deals, but it can also mean streamlining your business processes such that the employees you delegate work to can get their jobs done more efficiently and without you having to continually invest your time in the minutia of the business’ day-to-day operation.

People often think of low interest rates as being a great way to save money on a home. After all, if the interest rate falls from 6% to 3%, that’s half as much interest you will be paying over the course of your loan term. However, people often forget that locking into a fixed-rate mortgage at a low rate (like right now, where rates sit around 3%), can also dramatically increase your buying power.

For example, if you had qualified for a loan amount of $350,000 at 5.5%, if that rate drops to 2.5% you now qualify for a loan of $500,000 for the same monthly mortgage cost. That can allow you to purchase a much more valuable home.

This is yet another reason why it is a great idea to speak to a loan officer at the start of your home buying journey. They can help you figure out how much you can afford to spend given the current market interest rates and other factors unique to your situation. 

For prospective borrowers who plan to put less than 20% down on their new home, such as taking an FHA loan that only requires that you put 3.5% down, you will be required to purchase what is known as ‘mortgage insurance.’ This is essentially a monthly insurance payment that protects the lender against you defaulting on the loan, and will need to be paid monthly until you have established 20% equity in the home. For borrowers choosing a long mortgage loan term, that can be a lot of payments! Think about it: if you have only put 3.5% down on the home, it will take you 5 years to reach 20% equity!

However, there are a few ways to avoid having to pay mortgage insurance. Sometimes, for borrowers with incredibly high FICO scores (think: high 700s), the lender may waive the requirement for mortgage insurance due to your high creditworthiness. You can also consider enticing lenders by offering to pay a much higher interest rate, the potential profit of which will offset the increased risk to the lender. Or, finally, you can just put 20% down up front.

Whatever you think might be best for you, be sure to talk to your loan officer as they will have advice and recommendations specific to your situation that will help you get the best deal possible.

When choosing a mortgage loan package, you always want to consider all of the loan terms offered to you. In general, they can range from 10 to 30 years, providing an array of options for borrowers no matter what their month-to-month financial situation.

While longer-term loans may seem attractive because of their low monthly mortgage payments, a shorter-term loan can actually save you money. Because you are offering to pay back the loan in a shorter amount of time, which will free that money back up sooner for the financial institution to lend to someone else, the interest rate will be lower on a shorter loan than a longer loan.

However, people often make a simple cognitive error: they think that because they have chosen to repay the loan in a shorter amount of time, they will be paying a lot more each month. However, because of the lower interest rates, the month-to-month payments are often only a hundred dollars or so more expensive. This means that you are saving a lot of money in the long run on interest -- you are paying less interest for a shorter period of time. For those who can afford the small increase, a short-term loan term is a great option.

The biggest mistakes self-storage investors tend to make involve a failure to properly evaluate the numbers that an existing property is doing. You need to ensure that there are no phantom leases or tenants who are late on rent in order to be confident that when you take possession of the property a large number of tenants won’t simply leave now that you are requiring them to pay what is owed.

Other than that, all of the traditional aspects of due diligence come into play. You need to ensure the HVACs, roofing, and drainage on these facilities are not held together with spit and glue, or you may find yourself with a large upfront investment in order to prepare them for tenancy.

Finally, be sure you know how the numbers actually work. Read the appraisal and ensure that a mentor or someone else knowledgeable can walk you through it. The most common way to get burned is simply not understanding what you are getting into.

Self-storage differs from other asset classes insofar as it is the only kind of real estate (other than parking) where your tenants failing to pay rent allows you to both lock them out of the property without an eviction notice and sell their remaining property to make good on their debts: after 6 days a storage unit can be locked, and after 90 days the property inside can be sold to recoup costs.

This unique aspect of self-storage makes it a very stable asset class, unlike habitation real estate which can be highly volatile during periods of national economic crisis when rents often go unpaid. Because of this, financial institutions love to lend for self-storage properties, as they are highly recession resistant.

In addition, turnover costs in self-storage are very low. While a turnover for a habitation real estate unit may cost up to $1300 to clean, repair, and cover lost rent, turning over a self-storage unit takes only an hour with a leaf blower or powerwasher. The simplicity of a concrete slab has its advantages!

Self-storage facilities these days are often small, mom and pop operations that have not modernized with the times. This makes value-add deals very attractive, wherein low-performing properties are bought for pennies on the dollar compared to their potential worth, and then they are spruced up to maximize rents and eventually ROI.

Sometimes, adding value is as simple as streamlining the rental process. Many facilities still employ expensive management structures, having someone on-site at all times to hand out keys and take payments. By using modern payment kiosks, this cost can be avoided entirely. Similarly, tenancy rates are often very low at these mom and pop operations due to a lack of marketing. By setting up a website and running a comprehensive marketing campaign, you can expect to raise tenancy to around 85% for a huge value-add.

Finally, value can be added by building more units. This can involve making better use of existing space on the property: lowering the amount of space used for parking or turning some common spaces into more units. However, it is also common to buy adjacent land to build totally new units on, expanding the scale of the business and dramatically increasing its value.

Finally, in areas that require high-end self-storage, the addition of climate control and other amenities can be a great way to get more money per square foot in competitive markets. 

This week I spoke with Alex Camacho about how to network like a pro in real estate for Episode #63 of The Morales Show. Camacho is easily one of the most social people I have met in this business -- he seems to know and get along with everyone -- and I thought it would be a good to talk to him about how he networks, what advantages social networking has, and how important networking can be for building your business. If you are new to real estate and wondering how to network like a pro, this episode is for you! 

Importance of Having a Mentor

Camacho is a huge fan of mentorship. When he was young, he had started a real estate business with his brother and was making 6-figures by his mid-twenties, but his inexperience led to disaster when the market crashed and wiped him out. Though he built himself back up over the ensuing years, moving into real estate investing after seeing some flippers making $100,000 on a single deal, but he knew he needed more hands on experience before he would be able to do it himself.

In 2017 Camacho went to work for a real estate investor, being hired based on his previous experience. This mentorship would prove vital, giving him the experience of flipping 20-30 properties a year and the knowledge he would need later when running his own company. Soon after he was recruited by a larger company that did 200 deals a year, giving him a deeper understanding of how real estate investment businesses operate at scale. With these core competencies established, Camacho started his own company in 2019 which has been doing huge numbers ever since, even through the pandemic. 

Should Money Play a Role in Selecting a Mentor?

While Camacho told me in no uncertain terms how much he values mentorship, he also stressed that he has always treated his on-the-job education as far more important than the salary he was collecting. The point, he said, is to learn beside a master every day until you are knowledgeable to go and do that work yourself.

Furthermore, he said that when finding a mentor it is important to understand that they are not going to simply train you out of the goodness of their heart: it is important that you bring something concrete to the table. When you start your journey to finding someone to guide you into this business, take an inventory of what skills you can offer; if you don’t have any, then you need to go get those skills first. Then, be prepared to take a reduced salary and to work constantly until your time is as valuable as your mentor’s -- because right now, it isn’t!

In fact, Camacho told me he still spends around $25,000 a year on education and 1-on-1 coaching sessions with highly successful individuals. Part of real estate investing is dedicating yourself to education and personal growth, and that means continually finding people who know things you don’t and doing whatever you can to take a few hours of their time to teach you something new.

How Important Is Social Media?

Yet Camacho’s ability to network like a pro in real estate goes beyond just mentorship. Camacho’s use of social media is something everyone in the industry should aspire to. “It’s a skill you need to develop, like anything else,” he told me.

Camacho posts regularly, day in and day out, to ensure that he is constantly in the feeds of his audience -- and he never wastes time with trivial posts, but tries to keep everything relevant to his network. In this way, he is passively developing a relationship with these connections, even if they have never spoken 1-on-1 before. He says this has led to a number of deals, as people have reached out to him with ideas and offers after something has brought his content to their mind.

Finally, Camacho made clear that he treats each platform differently. On Facebook, he likes to post more high-value content that veteran real estate agents, investors, and wholesalers will find informative or interesting. On Instagram, however, he finds that more frequent, bite-sized content does better for a younger audience who might reach out to him for help that will be mutually beneficial to the both of them. It’s all about audience!

Building Your Team

Finally, Camacho’s social skills that let him network like a pro in real estate have also proved a vital aspect of building out his team. Knowing and understanding people is vital for vetting potential hires and understanding peoples’ passion and dedication at a glance. Though this was a learning process like anything else -- Camacho’s first two hires didn’t pan out -- he did give me some advice about how to hire A-players.

First, to hire A-players you have to be an A-player. If you aren’t fully dedicated to your business, you will never attract and keep talent that is going to give it their all.

Second, you need to make sure that your team has a mutual alignment with your goals. If they aren’t getting value, why should they stay or put their all into their work?

Third, use virtual assistants where possible. They are cheaper than talent and can free up your A-team for more important work. However, do know that VAs can be management intensive and turnover can be high, so you need to create robust processes for on-boarding them. However, at as low as $3 an hour with hours and hours of time savings for you, hiring VAs is a no-brainer.

In talking to Alex Camacho, I was reminded of how deeply integrated networking is into every aspect of the real estate business, and I am definitely going to implement a few of his suggestions into my own business processes. If you want to reach out to this pro networker, you can contact alex on Instagram @alexcamachotv or email him at alex@cashofferoptions.com.

When I talk to people, young and old, looking to get into real estate investing, they often struggle to understand how they are going to turn their small amount of savings into an amount that could be truly called ‘capital.’ They have saved up 10 or 20 thousand dollars and are looking to invest, but the success stories of their mentors and gurus seem so far away. In this video I wanted to share with you all how I turned an $8,000 investment into $600,000 as one part of my journey to financial freedom -- just to illustrate how this is not only possible, but it is something that you can do if you make just a couple smart deals.

Buying My First Home

In 2009 I had just graduated from Cal State Northridge and was interested in getting into real estate investing. I thought I would need to work for two years before I qualified, but I was fortunate to discover that such requirements are waived if, as a university graduate, you get a job in the field you studied. That knowledge is why, whether you think you have the money and qualifications to start investing now or not, you should always talk to a loan officer; it is their job and passion to get people the funding they need, and they will leave no stone unturned to find a loan product that works for you. With that loan, I bought a property through the Federal Housing Administration (FHA), which provides loans for first-time home buyers who plan to live on the property and can make a 3.5% downpayment on the home.

This was in the middle of the housing crisis, and people all around me were telling me not to buy, that the market was going to continue dropping. So I made a simple calculation: at a purchase price of $250,000, with a downpayment of 3.5% or $8,000 and a monthly mortgage payment of $1,700 a month, what would happen if I ever wanted to move out of my house? Would I be stuck with a money drain, unable to accumulate enough cash for another investment? As it turned out, the local market rate for similar rentals was $1,900 -- a small profit of $200 a month. I made the purchase.

Calculating a Return on Investment

What I realized was that I wasn’t smarter than the market: I wasn’t looking for a ‘bottom’ to maximize my return. Rather, I saw an opportunity that had a positive-cashflow option, if I needed it. After a year living in the home, I moved out and began renting it for that $200 profit. It wasn’t a lot of money, but based on my investment of $8,000 it was a great return. $200 per month times 12 months is $2,400! That’s a 30% return on investment each year! I was ecstatic.

Focusing on My Return on Equity

Over the next couple of years, the housing market stabilized and the property I had purchased for $250,000 had appreciated in value to $350,000. While I was still getting that 30% ROI each year, I tried to calculate the value of this investment in a different way, what is called a “Return on Equity” metric. By dividing my net income ($2,400) by the equity I had in the home ($100,000), I calculated the return on the equity I had: 2.4%. That seemed low.

What I learned was that money has an opportunity cost -- letting it generate value in one property excludes its generation of value in another. Soon after, I came across a 4-plex for $405,000 that would generate $2,000 per month from rental incomes. Were I to move my equity to this property, I would be generating almost 24% ROE! It was then clear that for my first property, though I had a great ROI, I had a terrible ROE. I decided to sell my old property and buy this new 4-plex.

… Profit!

I have held onto that 4-plex for 6 years, which has netted me approximately $150,000 in rental income; in addition, the property’s value has appreciated from $250,000 to $700,000 for a $450,000 profit. Combined, this is means I turned that initial $8,000 investment in my starter home into $600,000.

It wasn’t difficult. I didn’t try to beat the system. I just talked to a loan officer, made a purchase that would generate positive cashflow, and then shifted my money into a higher ROE investment once I had accumulated enough equity in the property to do so. If you are getting started in real estate, this kind of simplicity is something that you need to understand. Don’t get caught up in wondering how to get from A to B, just be brave enough to good choices and you’ll find yourself there soon enough.

If you want to talk to me about getting into real estate investing, I love running numbers for people and helping them get started on their real estate investing journey. Call me at 805-228-4672 or email me at MRG@moralesgroup.com.