Going Beyond Cash Flow to Understand The Total Return of a Rental Property
In this episode, our guest Chris Willard tells us about his total returns strategy and how he uses it to fuel the rapid growth stage of his investment career. --- Transcript Michael: Hey, everybody, welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum, and I am joined today by my co host, Tom Schneider. And we have a very special guest with us, Chris Willard. And he's going to be talking to us today about total returns and using that to scale his portfolio. So I won't take up any more time. Let's jump into it. Before we get into it, we want to talk really briefly about a special offer that we have going on for the Roofstock Academy. And for those of you who might not be familiar, Roofstock Academy is your one stop shop education arm of Rootstock. It's comprised of one on one coaching, over 50 hours of on demand lectures, cashback incentives for closing on properties through Roofstock $2500 cash back to be specific, as well as private access into our online forums. So as you go to roofstockacademy.com into the checkout section, use coupon code SANTA2020 for $151 off a registration. Again, that's roofstockacademy.com. And coupon code is SANTA2020. Tom: And to make this even more of a no brainer, it is a lifetime satisfaction guarantee. Take the coaching, watch the lectures, if you're not happy, get a full refund. No expiration, you're not gonna find that anywhere else. And on the cashback aspect, if you do the math, right, the discount, taking a 151 off, that's gonna make it $1,098. And you're going to be getting $2500 in return. So you're actually making money with the program. So join risk free today. SANTA2020 Michael: Awesome. Well, Chris, welcome to the show, man. super happy to have you here. Thanks for taking the time. Chris: Thanks, guys. Always fun talking to you both right on. Michael: So maybe you could give our listeners for those who are not familiar with your background, your story, a little bit of background on yourself. And then we'll jump into this thing about total return. Chris: Yeah, so I've been in real estate for going on about 10 or 12 years, several different capacities, but more recently on the single family rental side of it with Roofstock. I currently, you know, work as the head of sourcing, oversee a lot of our larger portfolio transactions through our platform, but through my life here at Roofstock. And prior at Waypoint with Tom been able to do a lot of investing on my own, which is pretty exciting. Michael: Awesome. Awesome. And I know that you kind of invest all over the country, is that right? Chris: Yeah, I don't have any specific markets that are interesting to me, deals are interesting to me. So I'm always pretty opportunistic, and happy to go into new markets when I find the right deal. Michael: Awesome. Tom: Chris, I'm gonna interrupt a little bit. So Chris and I are in a special Roofstock Club. So our CEO at Roofstock. Gary has been on the episode a couple of times, he was formerly the CEO of one of the very first publicly traded single family routes. And both Chris and myself used to work with Gary at this company. And when Gary and Gregor and those guys came up with the idea of Roofstock as a company, we shortly thereafter joined Gary on this adventure. So Chris, why don't you just talk real quickly about all the different stuff you did at that single family read as well. I think it'll give good context experience. Chris: Yeah, so at way point, and even prior to waypoint I was underwriting hundreds of homes a day, we were buying off the courthouse steps back in, oh, nine 2010, you know, when right at the downturn of the market, when everything was when the world was falling off, I had the opportunity to join the waypoint team. And as 2011 or so down in Southern California, we started growing the region, buying hundreds of homes quickly grew that over a couple years to several 1000 homes and really manage kind of all facets of acquisitions, they're all the way through from acquisitions to lease up, we obviously manage the properties there. And then kind of towards the tail end of my tenure there really oversaw a lot of the disposition efforts, so got involved with selling homes. And you know, Tom, to kind of your point, it's really funny, because, you know, when we started selling homes at waypoint, we did it like everyone else, you know, we vacated you know, move the tenant out, put the home on the MLS, we incurred all the fix up costs, the vacancy, the leakage, you know, and then we realized that about 30% of the time, or more than that investors were buying the homes and putting tenants back into them. And so, you know, then we had the bright idea, well, why don't we just list the home with a tenant in place on the MLS? And, you know, there's just a lot of challenges that agents have to deal with in terms of, you know, not being able to show the homes, you know, the condition of the homes and obviously, there was no platform like Roofstock at that time, you know, I think is when you know, Gary Gregor and, and the others got the light bulb, and obviously, overnight, you know, rootstock was formed. So, you know, pretty exciting, you know, to come up through the industry like that and see all the different facets to where we are today. I think we were bootstrapping things pretty frequently back then. Now we leverage a lot of technology to scale up and grow our business, Tom: Both sides of the business I love that how just you know in running that route and trying to sell this realizing the inefficiencies of selling occupied. Alright, I digress. I'll let Michael go ahead and bring us back in. Michael: No, it's I mean, it's super interesting background. It's it's super cool to see and hear about it is kind of like this seemingly obvious only in hindsight of like, Well, yeah, duh, it's investments, we're buying it anyhow, why are we taking on all this extra expense and headache to move these people out to have different people just move back in. So… Tom: Totally! Leakage. That's a word we use. Michael: Got it. Tom: Preventing leakage. Michael: That's a great word. Tom: It's a great word. It’s alright. It's an okay word. Michael: Getting back on the rails here. So, Chris, I really want to chat and focus today about total return. And I think this is kind of this word, this concept that might be thrown around a lot that some people might not have a good grasp of, or a hard time defining and pinning down. So can you give us what your definition of a total return actually means? Chris: Yeah, I mean, the way I look at it, which might be a little bit different, but you know, it takes that idea of, you've got your cashflow investments, and you've got your appreciation investments, and it's a blend of both Now, now, total return doesn't necessarily mean that you're not going to have steady cash flow. And it doesn't mean that you not might not be able to catch, you know, market and an upswing and take on some appreciation. But you know, you get a little bit of both worlds there. When I try to target you know, investments, when I'm kind of putting my acquisition hat on and looking at acquiring homes, I always look at homes that have maybe have some upside on the rental side of things, maybe also have some upside in the market value of the home. So that's how I kind of look at it and categorize total return is takes a little bit from both the cash flow model as well as the appreciation model. Michael: Awesome. And do you factor when looking at acquisitions? Do you factor in like the tax benefits are the loan paid down into like, calculating a total return? Chris: My model? I don't necessarily look at the tax advantages of that too much. You know, for me, I'm really focused on what is my cash on cash return, that's where I focus a lot of my energy, I do have a great CPA, and he tells me and kind of writes the ship when, you know, may go down the wrong road from from a tax perspective. But for me, it's really looking at what is my cash flow, because that's going to be kind of my day to day, right? You know, my cash in and my cash out is going to get me from point A to point B, but then where I can capitalize on some of that upside, you know, that's really kind of the unknown, that's where the risk comes in. But that's also where the reward, you know, can be found. Michael: Absolutely. And so for those of our listeners who might not be familiar with some of the metrics we're tossing around here, can you define for people? What is cash on cash return? And what is cash flow? Chris: Yeah, so cash on cash return is really just comparing or analyzing the cash you put into the investment, whether it's, you know, your down payment, any capital expenditures, repairs, and maintenance, all cash going into the investment verse, you know, the cash that's coming out, really your profit at the end of the day from that investment, oftentimes, that does come from your monthly cash flows, the distributions you get from your your property manager, but also could be, you know, realized, as, you know, potential profit from an upswing in a market and, you know, equity and appreciation. Michael: Awesome. Yeah, I always like to make the analogy that your cash on cash return is just a measure of how hard your dollars are working for you. Chris: I like that. There you go. Michael: Dollars out over dollars in. Tom: So thinking about total return, Chris, I'd love having been in the space for you know, both professionally and personally, as your philosophy around what type of returns you're looking for changed much over time from x from beginning of time till now, and I'd love to hear about that evolution of your philosophy on that. Chris: Yeah, the short answer is yes. You know, I think when I first started getting into you know, investing, I was fairly focused on what that cap rate what that cash flow look like, made sure I had, you know, high cash flow properties. And what I realized, you know, the, the, the time that we had at Waypoint was very helpful, being able to spend private equity capital rather than my own to, to learn a lot of this and make some mistakes there. But, you know, really, what I learned is that sometimes there's some negative factors with those higher cash flow properties, they're typically going to be older investments, they typically will need you know, more work just given the age, sometimes they can be associated with a lower rent price point in a certain market, which could increase your turnover. Therefore increasing your vacancy costs, increasing your turn times and thus decreasing your cash flow. So I would say that I probably started on the side of the fence when I started personally investing as a I'm going to be a little bit more cashflow driven to now really, I take a balanced approach. And I think as you probably build your own portfolio, you start to take more of a balanced approach naturally, I do like to invest in heavy cash flow properties, but I make sure that when I do so I'm looking at the major components of that home, what is the age of the roof, the age HVAC, the the water heater, electrical, plumbing systems, those are going to be my big ticket items outside of anything cosmetic, and if I can make sure that from that perspective, the home is bulletproof than I think I've pretty safe from you know, looking and taking the risk on some of those high cash flow properties. But where I'm starting to and I look over the last, you know, five or six years in my investment strategy I start to see that, okay, the vintages of homes I'm buying today versus I was buying, you know, five, six years ago, are starting to become newer home values are also becoming more expensive. They're safer investments and, and while maybe on the surface, the cash flows or the returns are not as great as those high cash flow properties, high return properties over the long term, if you look at over the span of multiple years, and you consider all those external factors of reducing your vacancy, reducing your turn cost, as we talked about cash in cash out, you know, the more money I can keep to myself, rather than, you know, giving out then honestly, the newer, more expensive homes, the way my investment philosophy is transitioning is panning out to even higher returns. Tom: You can say something in a minute, Michael, I was just having a coaching session with a member of our sec Academy. And they were talking about having a hard time finding newer homes that cash flow well, right. Because if you're buying a house for $200,000, it's got to have a pretty reasonably high rent, if you're using debt on the property, and you're servicing that debt to still get a healthy cash flow. Two questions in this I mean, for what you're targeting right now in your portfolio? Like what, what is the relationship between the price and the rent, that you're able to find these newer homes? And if you could talk a little about markets that you're looking at? I think that would be interesting to hear. Chris: Yeah, I mean, you obviously hear the 1% rule, you know, quite a bit. And I think it's something in the back of my head I certainly look at but you know, as I've seen the transition across my philosophy of my own personal portfolio, you know, I'm starting to dip well below that, that 1%. You know, I even just recently purchased a home, you know, in South Carolina, where the cash flows weren't great. But I was stepping into quite a bit of equity upside, which was was the play, but the way I was able to mitigate and improve some of that lower cash flow or negative cash flow was I made the conscious decision of, you know, I'm going to manage this myself. So now I'm going to save 10% a month, and that's going to inject cash back into the rental. You know, I think there's other things that you can do by running maybe a competitive process around insurance rates, making sure that you are getting the most competitive rate out there. I often talk with a handful of insurance providers on every home, I purchase and make sure and this is not something I do just on the front end. But this is something I do consistently every every year, every couple years, I'll start looking at different insurance providers and see who has the best straight out there. Michael: You said something, Chris, that I just want to circle back and touch on is with the high cash flow properties. If you are in a lower rental tier, you might see the higher turnover cost, which means you have a higher vacancy, and then you might have higher repair and maintenance. So it can often be this kind of Domino ladder effect where one expense has a significant impact on all the others. And I think it's so important to highlight that for folks. I can't tell you how many turnkey provider proformas I've seen. They're like, Oh, we just rehab the property, zero maintenance and zero capex needed. And it's like, yeah, maybe for the first year. But if you're going to own this thing for 2,3,4,5,10 years, like we have to be factoring this stuff in so coming to the table with your eyes wide open, when you're buying some of those properties, I think is hyper hyper important. Chris: To that point like really is you're stepping into an investment, you need to understand how long am I expecting to hold this am I is this kind of a buy kind of set it and forget it type mentality where I'm going to have it for 15, 20 years, and it's just going to work itself out or what I've been able to do over the last couple years is I have a mentality of I'm always buying a home that I'm typically going to sell in the next one to two years. And I'm going to buy it in a market that is seeing higher appreciations. And they they have historically, that tells me that there might be a little bit of an upswing, and that way, I've been able to grow my portfolio and roll it I sell one I buy three. So one, I buy four. So one, I buy two, and then before you know it, it's a little bit of a domino effect. But kind of going back to Tom's point, you know, markets. Tom, I think you've centralized around a few markets, right. And I think you've got a few properties in Florida and a few properties in Atlanta, if I'm not mistaken. Whereas I I've got two properties in Atlanta, I've got to spread out in Florida, but I've got a property in Kansas, you know, I just sold a property in Texas. Now I've got a property in South Carolina, I've owned in California, I've owned in Arizona, I own a couple in Detroit, I'm really all over and it kind of just for me. It's you know, where's the opportunity, you know, I'm less focused on building scale within a certain market. I do like Atlanta. I do like Florida. And when I see deals, I'm always happy to jump on them. But I think there's certain opportunities in other markets as well, that for me, at least my investment philosophy is, you know, I want to be less restricted around markets. I'm happy to work with third party property managers, if and where it makes sense. And most of my properties are, are being managed by a third party property manager, but it really just comes down to the opportunity and your investment style. Tom: I'm interested in how is the self management process going are you pretty far into that? Chris: So truth be told, see, it was about four years ago when I owned my first home. I was self managing it. And you know, for the first six months or so, or maybe as a couple years, it was fine, you know, the tenant was clean, rarely got a phone call from them. Then I joined Roofstock. And six months later, I bought my second property. And similar philosophy, I bought it as a new home, I think it was only two or three years old. And it had a tenant that was two months into a 36 month lease. And I said, Great, well, I'm pretty bulletproof on having to release this home, and there's not going to be a whole lot of repairs and maintenance are going to be needed. The home was just built. And I remember being at work. And I received two phone calls within 30 minutes of each other couldn't answer both because I was working and the HVAC went out on one home and the water heater went out on the was leaking on the other. And I made the decision right then and there that I am no longer self managing multiple properties. And, you know, now fast forward five years, I'm breaking that rule. But again, like I'm breaking the rule, because, you know, with this property, the tenant has been in the home since 2015. It's 2020, they've got a strong track record, they always pay their rent on time, the home was built in 2007. So as I speak to those major components of the of the property, everything is still relatively new. And you know, the age of its useful life, there's still a lot of a lot of runway left. And so so far, I mean, it's been a month into a month and a half into it, it's going well, the tenant was very flexible. Michael: That's awesome. What are you doing all the leasing? I guess you didn't tend to do the lease up on that property. Chris: Yeah, what I liked about this lease is that it just automatically rolls to month a month. And so you know, my strategy with this home, which is why I was okay with it is she has a lease through February of 2022. And this was one of those homes that I was planning on selling at the end of that lease and holding for less than 24 months, Columbia, South Carolina has seen I think about five or 6% appreciation compared to the 2% historical average, you know, over the last 20 years. And so there's a bit of an upswing in the market, there's a lot of institutional demand for that area. Right now, I did speak with other realtors and property managers going, you know, when I was doing my own diligence, and they're seeing a lot of my folks moving into the market from out of state. So there's a lot of positive drivers in the market right now that are pointing to that appreciation. So but when you think about you know, releasing the home, that's not something that I plan on doing. Now, I plan on selling it. I also didn't plan on releasing the home in Jacksonville, I bought four years ago, with a tenant that had a 36 month lease in it, the tenant ended up moving out my goal there was to try and sell it to the tenant, they had just got, you know, engaged or married. And I figured, well, you know, who not better to be a buyer than your tenant, but they ended up moving out. And that's when I did engage with the local property manager to do the turn and, and the releasing efforts. Unfortunately, I don't have time, you know, for that or want to do that from you know, 3000 miles away. Michael: Right. Right. Chris, I'm curious to get your thoughts on home warranties. Chris: Yes. So I actually had a conversation with an investor, you know, last year around this, who does home warranties on every single one of their investment properties that they own. Up until recently, it was not a strategy that I utilized, you know, but, you know, obviously, when I bought my primary residence in the bay, I did get a home warranty. And within the first, you know, six months, I did have, you know, some work that needed to be done on a couple of the major appliances. And that was a very, extremely easy process. And so, with these last two homes, you know, I did ask for home warranties, and it's something that I'm going to, you know, incorporate into my offers going forward. You know, the way I look at it is if an owner is selling to another owner occupant, it's pretty standard to have a home warranty into that contract. So we're it's not like we're asking for something that is out of the ordinary or is not standard in these agreements. So again, it doesn't hurt to ask and it that extra layer of protection with it can also keep down you know, as we talked about cash in and cash out, and also keep cash in your pocket. Michael: Totally my very first property that I ever purchased. I did the exact same thing as for a home warranty provided by the seller, they agreed to it. So the year comes up on my home warranty and my manager called me she says hey, do you want to renew it? I said How much is it? She's like 500 bucks. I'm like, ah, we've never used it. I don't know Like, I don't know, and she goes, it's up to you. And I said, You know what, screw it. Let's just do it. Let's spend the 500 to bite the bullet. The next day, the AC went out and I got a brand new AC and I was like, oh, such a good call. You know! Chris: I the exact same thing happened with my primary, which I forgot about until now that I it wasn't even the home warranty. I had a mailer come through the mail from the water company, saying Do you want extra insurance on your external water pipe? You know, the pipe going from the the main line from the house to the sewer? I was like, Okay, well, you know, this is what 100 bucks for the year, I own a 70 year old house, I don't think it's ever been replaced. You know, why not? Let's do it. And six months, you know, a year ago by I think it was about eight months, nine months go by and I completely forgot, I didn't even realize I did it. And then all of a sudden, our pipes start backing up, and we have a company come out and end up you know, having to spend $12,000 to replace that pipe. Well, three months later, and I got the renewal for this insurance that I paid for. And lo and behold, they accepted my reimbursement. So I got all of that covered through paying this, you know, extra $100 a month for $100 a year for insurance, something that you expect never to use, but if you have it… Michael: Use it! Chris: Exactly. Michael: I've never heard of that sewer lateral insurance. Tom: Yeah, that's incredible. I mean, one thing that concerns me and hopefully other investors with these warranties, and you know, more obscure insurances that when it comes time to collect, you know, okay, it's a battle like the the mattresses of being able to collect on that and, and hearing these winning, you know, stories from both you guys. I've never been a big Home Warranty guy, but I guess they're inspiring me. Michael: The devils in the details, man, like big company has to be reputable, because I've had horrible experiences with other home warranty companies where it's fight tooth and nail to get everything covered, when it's clear as day that it is covered. So do your research on the issuer in the company. But it's funny to talk because you know a little bit about my due fires. It's not it doesn't even have to be obscure, obscure, and obscure insurance have to fight tooth and nail to get it handled. Tom: So Chris, yeah, I love talking about your strategy is kind of a short term rental planning to hold it for the one to two year really kind of maximizing the return you can get on that immediate appreciation as well as the cash flow. I mean, did you always land on this kind of shorter term? And as you're doing this diaspora of converting one house into three, those three into another three? Are you concerned about the amount of overhead that it's going to take? And do you have like, Okay, this is what done looks like and getting to a certain number, just because I would imagine a point he gets untenable as you're multiplying this, this portfolio? Chris: Yeah, no, it's something we have been thinking about. And, you know, I've been leveraging the the 1031 exchange, you know, pretty well, you know, really, in the last four years, since joining Roofstock, I've gone from one home now to 10 homes, all through, you know, three different 1031 exchanges. Now, the challenges with that, you know, I've been able to really exhaust the conventional, you know, financing, you know, through an individual have 10 loans in my name, what I do need to do pretty quickly here is start having my wife make her first investment, and then doing the same thing, but to your question. And to the point is, the strategy for me was to grow my portfolio, while leveraging the least amount of capital from the onset. I made the investment into my very first home, and then I took that home sold, took the proceeds from that sale, bought four, and then one of those homes that I bought from that for I sold 18 months later. And so whenever I'm doing this 1031 exchange, I'm always looking, okay, where's the next sale, and then which is the next property, I can just put into the portfolio and kind of forget about it. Now, those other properties that stay in your portfolio that you're not selling every couple years and maximizing the return there, you know, those are also good candidates, depending on where you are in a market cycle to potentially pull out some of that equity, do a refinance, and then use that capital to reinvest in and purchase other homes. So I think that the next strategy here is probably for one of two things to happen. And, you know, I've got some homes that have quite a bit of equity in them and could certainly look at refinancing those interest rates are extremely low right now. Pull out that capital, put it off to the side for a period of three to six months, and then allow my wife to start investing using that capital, and then she can start doing the same strategy, you know, where we start, you continue to roll these homes, where I'd like to get, you know, is that each of us have, you know, 10 in in our names 20 amongst the two of us to really maximize that that conventional loan, you know, 10 or 20 to a husband and wife requirement, but, you know, yeah, I mean, we've got a long term goal. You know, ultimately we want to be able to retire and have a nest egg that we can pass on, you know, to our children and you know, College is a lot more expensive today then it was when we all went through it, and but we've got a goal of, you know, 50, 60, 70, 100 homes that we want to get to. And, you know, this is, you know, at least in the short term, this was a way that I identified that I could kickstart that and do it pretty rapidly without investing a ton of outside personal capital. You know, today, I've really only invested about $100,000 in been able to grow the portfolio from strictly cash flow, and proceeds from sales. So being able to take a small pool of capital like that, and just continue to let it roll. For me, that's been pretty neat to do. Michael: Good for you man, that's awesome for your properties that have a lot of equity. And, Chris, that you're talking about taking some cash out. Are you okay, if a property goes negative cash flow? Chris: Rnder the right circumstance? Yes. For instance, this one in South Carolina, I think right now it's modeled and if it performs perfectly, it's modeled out to have, you know, maybe a $200 return on the entire year. So it's very likely that that will be a negative cash flow property, because it's real estate and nothing goes away it's planned to. Michael: You mean the models aren't perfect? Chris: They call them proforma for a reason, right? Michael: Yeah. Chris: So yeah, I mean, under the right circumstance, yes. I'm okay with taking a negative cash flow on a property if I know that there's other drivers such as I'm stepping into $40,000 in equity day one. Yeah, sure. I'll take a slight loss on the first year in those situations, I'm fine with it. Michael: Sure. And then what about tapping into equity that's in a property, cashflow, positive, saddling that property with debt so that you're by design, making it cash flow negative to that and go do something with that cash? Is that something you'd be open to? Or a strategy believe in? Michael: Yeah, and that's where I think you've got to be able to forecast or have insights into what is the future look like with that? You know, with that market? What is the future look like with that property? Is that a property that I'm expecting to hold for 20, 30, 40, 50 years, then? Yeah, I mean, negative cash flow really doesn't mean a whole lot to me then right? You know, because that's a long term investment, not a short term play. So each investment is its own use case. But again, I'm opportunistic. So if I can pull equity out and use that to invest in other properties, and, you know, while this property may be negative cash flow, in aggregate with the property that I'm going to acquire, now, I'm in a positive situation. And now I've got two properties that are now growing equally on the equity side as well. Tom: Portfolio total return! Chris: Yeah. Tom: So I know, we love debt, debt is great. But I think it's kind of like the ocean and that you need to respect it. And at there is some point, you know, some kind of downturn, making sure you're not over your tips. Do you think about what the loan to value is of your portfolio? And just to redefine that real quick? That's the amount of total debt you have, of all your mortgages divided by the total value of all the homes together? Do you think about your portfolio LTV or loan to value? And is there any rules you have in keeping above a certain level? Chris: The way I think about it, Tom, it's Yes, I mean, in the back of my mind, I'm always thinking about my LTV. I'm always calculating, you know, what is my loan balance? What is today's BPO? And how much equity Do I have there? But the way that I look at and right, wrong or indifferent, you know, hedging against, you know, a potential, you know, recession is really understanding, okay, where is my rent today? First, where is my mortgage payment? You know, for me, if you look at the history of, you know, the single family rental, you know, industry, and if you look at rents, even going back through the last couple recessions, rents have never really dipped terribly low, rents have stayed pretty flat and consistent. And then as we come out of the recession, they continue to rise. So what I really plan for is that if I'm in a situation where I can drop my rent 20% and still be in a breakeven situation, to me, that's a very positive investment, you know, thinking about the worst case possible scenario from cash flows, and I just don't see a scenario looking at the historical data where, you know, we'll likely have to drop 20%. You get through the holidays, and sure, you might have to cut rents five or 10%, just because it's a slow time of the season, but you come out of that strong and rents are continuing to grow. Some markets right now are seeing 15% rent growth, whereas other markets are continuing to see kind of single digit, you know, rent growth, what I've been able to do on my homes on renewals is what I look at is what is the market rent today for that home? What is the alternative for that tenant to move out of that home? What are their other options, and then let's factor in moving costs. And so maybe if the market rent on another home is going to be $1400, it's not advantageous for me to mark my home all the way up to $1400. Maybe I give the 10 a little bit of a discount, but I price it in an aggressive way that I factor in, what are their moving expenses, and then factor in what are their moving expenses plus their security deposit plus first month's rent and that's the amount of money that they're going to have to come out of pocket. So I take a very calculated approach there. But with that approach, I've been able to achieve six to 7% across the portfolio pretty consistently, while keeping tenants in place for three, four, or five plus years. Michael: That's awesome. That's so good to think about to like, and make it so blatantly obvious for the tenant. Because I think when tenants get that renewal of like, oh, the rents increased, their first thought is like, Oh, well screw the landlord, like I'm moving. And then they go look around, it's like, I can't really go anywhere, for anything better. So why bother? It makes a lot of sense. Chris: And if you think about it. And unless you have a huge family, or some great friends, they'll help you move, every time you do, you're likely spending upwards of $1,000. If you don't have a vehicle, and you're trying to do it yourself, you got to go rent the vehicle. If you're trying to hire a moving company, it even gets more expensive. So oftentimes, you know, investors may not be as clear to an investor that those are considerations and factors that should go into the equation. And that's just how I look at it. Michael: Yeah, makes sense. So Chris, it's funny, I had a pretty similar approach being opportunistic as far as markets are concerned, in my past life, I was working all over the country as a fire protection engineer was constantly looking at the different markets wherever I found myself for work. And it just got to a point for me where it's too overwhelming mentally and physically trying to keep track of this property manager managing this project. And this business filing due in this state, I utilize LLCs, for a lot of stuff, do you envision getting to a point at which the market just you're too spread too thin? And you're gonna look to consolidate or focus on a couple different markets? Or do you see this growth country wide? Kind of continuing for yourself? Chris: Yeah, it's a great question. I don't think I have a definitive answer yet. Yes, I think… Michael: You'll know, you'll get there. Chris: Exactly. It'll get to a point, you know, someday in the future, that, you know, I'll probably start to consolidate and it'll make more sense. My wife, and I always talk about, you know, her, you know, eventually managing all the properties when we're done having kids and she's done working. And, you know, that's what she does to kind of help support the family. But that's also when we have you know, 50 6070, potentially 100 properties. And you know, if even for her to do something like that, obviously becomes very taxing to have them all over the US, right. And so there will be a consolidation at one point in the future. But you know, where I am in my investment cycle, now, I'm in a growth mode, and I'm in a rapid growth mode and software, I can take advantage of growing my portfolio, increasing my equity that's ultimately going to get me closer to my long term goal. Michael: That's why I love real estate. I mean, you, myself and Tom all have vastly different strategies. And it's all right for all of us. Right? There's no right or wrong. There's no right or wrong for the individual. So this is killer man to wrap things up, gents. Tom: Yeah. This is great, Chris. Yeah, thank you so much for coming on. I think the first is gonna be a regular segment checking on especially because you, you always have so many irons in the fire. It's awesome to hear it, man. Chris: I told myself last year that I wasn't gonna make any moves this year. And then I did. Part of that was due to COVID. Now, I've told myself already, I'm not going to make any moves next year, but we'll see what 2021 has in store. Tom: Financing rates are just too great. You gotta you got to take advantage of it. Chris: I was just told the other day from a neighbor that he reified. He's got some investment properties here in the Bay Area, but he refinanced all of his investments up here at less than 2% on on a 30 year fix. So now it now it's now it's got me thinking, Michael: Who's his lender? Chris: It's actually a group that you showed sent to me a while back, I think Loan Depot. Tom: Yeah. Chris: Is who he's been working through. But yeah, he was quoted, or he's got these locked in at 1.99. Now, I don't know how many points he's paying. I'm sure he's paying a few points there. But he's thinking of it long term. So if I got to pay a couple $1,000 in points now, to lock these in for the next 30 years, then you know that that's something that works for him. Tom: The Loan Depot came up in we talked about Roofstock Academy a couple of times proud sponsor of the podcast. within it, we have a Slack channel, which is like a forum and there's this one called vendors or I think it might be lending. And somebody talked about, Hey, have you guys ever looked at loan depot? And I think like five members of all like refinance, but loan depot loans Michael: Yeah. Them and Network Capital, A bunch of them utilized them to. Tom: Amazing Chris: Yeah, we got to get him on here to be a sponsor. Tom: Right. Michael: That's a great idea, we send them so much business. We should be getting commissions or something. Tom: Yeah, wet the beak a little. Michael: Awesome. Well, Chris, thank you so much for hanging out with us. Really appreciate it, man. And we will definitely have to do this again soon. Chris: Thanks, guys. We'll catch you next time. Tom: Thanks, Chris. Michael: Alrighty, everybody, that was our episode a big big, big thank you to Chris. Thanks again for coming on the show, man. A lot. A lot of fun. We'll definitely have to have you back on again soon. If you liked this episode, feel free to leave us a rating or review wherever you listen, your podcast that was really helped us out. And as always, if there's anything in particular that you want to hear an episode about, leave us a note in the comment section. Thanks so much for listening. We look forward to see you on the next one. And happy investing. Tom: Happy investing.