Michael Zuber on When to Buy Turnkey vs When to Use The BRRRR Strategy
In this week's nugget of weekend wisdom, Michael Zuber weighs in on when to employ different acquisition strategies. --- Transcript Emil: Hey everyone welcome back for another episode of The Remote Real Estate Investor. This is one of our weekend wisdom episode. So hope this catches you on an amazing weekend. So in this week's episode is somebody you guys are probably familiar with. If you've been following the show for a while, we have Michael Zuber back on who is the author of one of my favorite real estate investing books called one rental at a time, he also has a YouTube channel by the same name, definitely recommend checking out both of those. If you want to check out if you missed Michael's previous episodes, he was on episode 11 and 37. So go check those out. He's a regular on the show, and we wanted to bring him on for a quick weekend wisdom. So hope you guys enjoy this one. Theme song: Emil: You mentioned doing BRRRR during 2010. Really before it was even BRRRR. I know you've also mentioned you know, if you're a busy professional, like you don't want to tie up a bunch of capital like buying a turnkey can be smarter because you're not having to keep putting a ton of money in. I'm curious if you have, Are there times in the market cycle that you prefer one or the other? Or how do you decide right now I'm going to be I'm going to follow the birth strategy versus right now I think I'm just going to use less capital go turnkey. Michael Zuber: So for me personally, or are we talking about your audience? Because we're really different people, right? Your audience is busy professionals. That's probably what you're asking about. Emil: Yeah, but I'm curious. Just even from your story, right, you were a busy professional. And at some point, you kind of made the transition. So maybe it was just being comfortable… Michael Zuber: When you think about, so buy and hold rental properties is one rental at a time, right, you can get at one rental at a time, basically two different ways. One way is you can buy turnkey properties, which I consider clean, zero make ready, right? Means you buy it, you either have a tenant or you you stick a tenant in no additional dollars out of pocket, just so we can clean up the understanding. I believe in the beginning, when you have yet to build a team when you have yet to really understand the network and all the nuances in any market the right thing to do the least risky thing to do, the fastest thing to do is to do what today is called a turnkey property. That said, as you gain experience, as you gain units, you as an more experienced investor will have the option to make choices, there will be market cycles, I've been doing this 20 years, and there's been two or three portions of this cycle where bur is just more profitable. The best example was 2010 to 2014 in that market, because it was generally bouncing off the bottom, you still could get yesterday's prices and tomorrow's values. So if you bought a dump, you got yesterday's prices, but once you polish it up, you can get tomorrow's value because there wasn't a great supply of them. That was such a special time. BRRRR was a huge benefit for me because I recycled 95% of my capital or more every time so I could just keep on buying as fast as I found deals in my pile of money never left and it never had to grow. So that was a pretty special time. Lots of people, Brandon Turner included were very successful in that time. And he's built a great career off of it David green as well I believe but most markets are not 2010 to 2014 where you really couldn't do anything wrong. Right? In between 2010 and 2014. If your project was too much longer than it should have been you won if your project cost you an extra 10 grand you won I mean it was it was a special time and for people to not nuance The difference is just not fair. That was so special. It may never be that easy. Again, that said you can always find what I now call slumlord properties today you have to find really slumlord properties but they're out there right? These are ones that can't be financed, no bank would loan on them you have to pay cash very few buyers have appetites for properties that smell and have bugs and just are disgusting but if you can negotiate a fair price you can go in get it because it doesn't really cost that much more to fix a disgusting versus a semi disgusting because it's still paint still new floor still new kitchen still new bath, still some floor it's all the same stuff. So you can still go in you just got to buy them right I would tell you in a market that is so hot for owner occupant that doing bird today is a lot harder than 2010 to 14. Not impossible. I'm going to suspect the market will get better for Burr in the future when it's more even keeled today, at least in the markets. I'm in owners are dominated the market 90% of the offers are coming from owners only 10% from investors. I have never seen it that way. It is so hard to be an investor today because there's no inventory and everything that clean is getting bid up by FHA buyers, which put less down and have lower interest rates. So I can't compete. I put in 100 offers or so this year and haven't gotten any of them. Emil: Yeah, that's kind of what I was getting to that answers it perfectly. It's it's kind of like a blend of experience having the right team knowing how much all those things are actually going to cost you which only comes with experience and then partly timing. Michael Zuber: Yeah, the one thing I would really close with is I would never tell someone to make BRRRR their first investment Too risky, too many ups and downs. It's just too hard. You don't even know if you want to be a landlord yet. And now you're going to take on working with general contractors without knowing the team, the risk profile of your first rental property being a BRRRR project. Not great. Emil: Yep. Michael Zuber: Your chances of success are not great, Emil: Especially as a remote investor, which is our audience. Michael: Yeah, not great. Time man, time. The thing that people don't realize is a busy tech professional. It's usually not money. That's our constraint. It's time, time, right? We time use it more efficiently. I tell people you can learn your market 20 minutes a day, people fight me on now like frickin ages. Do it stop going 1000 directions in 1000 different things. Just focus, tighten up your focus. Look at it 20 minutes a day and move on. Right? You've got life you got to raise a family. You got all this 60, now you're working at home you're working 24 seven. And you know, use Roofstock Learn to market pick, look, get after it and just move on. Emil: Love it. Awesome. Hope you guys enjoyed that episode. And thanks again to Michael Zuber for coming on. We'll have him on on a future episode as well. Alright guys, enjoy your weekend. Happy investing.