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As you may have noticed, the market is crazy right now, and knowing what to do can be a challenge.  Today we give a couple of quick tips on how you can make the most out of the current state of the real estate environment.  --- Transcription Michael: Hey everybody, welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum and today I'm joined by my co hosts,   Tom: Tom Schneider,   Emil: And Emil Shour   Michael: And today we're gonna be tackling what should you be doing right now given the current state of the market with interest rates, where they are and values doing what they're doing.   Alright guys, before we get into it, I just want to give a call out to all of our listeners, all of our watchers, we just launched our YouTube channel, we would love, love, love. If you came over and liked and subscribed to the channel, we've got tons of new content coming out regularly, I want to make sure everyone stays up to date. So that's a big help for us.   And as always, if there are content ideas that you want to hear an episode about, let us know drop us a line in the comment section. Wherever it is listen to your podcast. Alright guys, before we jump in today's episode, where are we at? How are things coming? Tom, you got your insurance all squared away, right?   Tom: Yes, yeah. So what I did recently was a long story short, I guess short story long. My insurance is a bit of a mess on my rental properties. I was using this third party company and they kind of dropped the ball where I paid to renew but they like sent me a refund. I mean, this I'm probably it's probably my fault. But anyways, short story long, I ended up getting lender placed insurance for like a few months. And wouldn't lender place insurance. It's not necessarily what you want, you're maybe not getting the coverage you want, you're probably paying way more than you should. So what I did through the the prodding and poking of a meal and Michael to keep me going is I did some bundling, I went to my home insurance, the company that does my house and my cars. And I added my rental properties all on on one gigantic policy, I would say you know, when it's all said and done, my costs on my insurance are probably pretty comparable to what they were but the coverages was way more expansive, with a little bit lower deductibles and just a little more, those blankets at night are a little bit warmer, the pillows a little bit softer of comfortable.   So did that finishing up refining, seeing a couple of rentals, getting them all refinance, actually under the same lender that ended up buying a bunch of my other loans. So it's there's some convenience there of having it all through the same lender first a bunch of the rentals that I have. So that's my…   Michael: Nice, Emil, what's good in your world? Emil: Tom, I just want to first say how proud I am of you that you did it, man. like six months, but you did it to there.   Tom: Yeah. There are things in this world that you know, like wouldn't take a lot of effort. But for whatever reason, it was in this like rebellious little part of you, like just doesn't want to do it. And like the moment you do it, it's like, gosh, why did I do that like a long time ago. And that kind of stuff like pops up all over the place? You just need to get through the fog and just, you know, just do I don't know. But thank you. No, thank you that positive reinforcement has me geared up to continue to do things that I for whatever reason, like the rebelliously like have a hard time finishing through on so thanks, man.   Michael: Yeah, Tom. I'm also proud of you. Nice work, man.   Tom: Michael, that sounds fake. Thanks, Emil.   Michael: Just kidding.   Emil: I'm actually proud of you. Michael is patronizing you.   Michael: I'm just frustrated how long it took. But I'm one of those people, you know, you can only take the horse to water not calling you a horse by any means.   Tom: It's about the journey, Michael. It's not about the station. Enjoy. That's true. It's very true. Yeah, that's true. Alright, Emil, what's what's going on with you?   Emil: For me? I told Mike about this earlier. So I bought a triplex last November. And when I got all the seller documents when we're doing due diligence, I noticed that the property tax was super low on the property. And I actually knew the seller of the property. And I contacted and I was like, hey, how come your tax property taxes were so low on this property? He said he had no idea why but obviously he wasn't going to complain or anything. And I figured, okay, property is going to be sold, changing hands, the city is going to reassess and it's going to bring my my property tax level much higher.   So when I when I underwrote the property did all the performance stuff. I wrote it at a much higher tax level. And so about a month ago, I got this statement from the city of St. Louis, saying, hey, it's a reassessment year, I think St. Louis reassessed his property values every other year and changes property tax accordingly. He said, it's a reassessment year, we're reassessing your property and we'll let you know of any property tax changes soon. And so I'm like, okay, here it comes. And I get I get the reassessment letter about a week ago expecting the bill to come in higher, it ended up going Up by $10. And I had underwrote it for it going up like price. 16 1700 bucks. So that was a huge win. And I'm so stoked. And I don't know why they're doing this, but I'm obviously not gonna complain. And thank you city of St. Louis. I hope you're not listening and know my property address. But thank you.   Michael: Massive win.   Emil: Yeah, yeah, I'll take it. I'll take anyone I can get right now.   Michael: Yeah, it's it's you being lucky. But also, like, the cool thing is that you underwrote and assume that it was gonna be worse, and the property still worked. So now the fact that you got this is just a total cherry on top. And granted, it's a pretty massive cherry. But it's, it's something extra, it's I mean, you weren't expecting. And so you know, good for you, man. That's awesome.   Emil: Here's the other thing, though, I find it's rebalancing everything else because I have properties and in other places where they also reassess, and they're doing it correctly. So my property tax bill has been missing all year. So I needed a break elsewhere. So happy about that.   Michael: Good. That the universe giveth and the universe taketh.   Emil: Michael, what's, what's going on? I'm sure nothing for you.   Michael: My backgrounds a little bit different today, I'm actually in my van that we had converted. So it's my wife, my dog, and I. So we're up in Lassen National Forest for a couple days hanging out up here and driving around, we're going up to Idaho, Montana, Wyoming. So doing the whole remote real estate investing from from a van is is interesting, for sure. So I've got 16 under contract to sell, which is exciting. It's getting inspected today. So I'll be curious to see what the buyer has, in terms of feedback. I have the the IRA flip is currently underway, which is exciting.   So construction started last week, hopefully three to four week time for construction, and then getting at least up and then sold as an investment property. And then looking to get a another flip as well under contract out in the Midwest, but just on the personal side of things, my wife and I want to kind of team up and do something there. So that'll be kind of an experiment for us to see what that process looks like and how, how well she can, she can tackle that. So we're really excited.     Tom: Have you guys done deals together before or you know, it, or she kind of over into the space or   Michael: She's newer into the space. But she's been involved from, from pretty early on since we started dating. And I told her kind of what my portfolio look like as we're getting closer to marriage. And I was a little ambivalent on how I wanted to have that conversation and broach the subject. So for anybody listening out there that's in a similar situation, you know, take my advice, or don't I think, you know, I easier into it and explain kind of what my situation look like. And she was very excited about that. And has always been a big proponent, and a great ideas person throughout the whole process.   Because for me, I get so in my head and I get so tunnel visioned, especially with regard to problems. And so I remember she asked me one time like, Oh, well, I was in a money crunch. I'm like, I don't know, where I'm gonna find the funds to do this. She's like, what about the HELOC you have over here, I was like, holy crap, you're a genius. So when you give people the full picture, they can better they can better assist. So it's been really great. But so this will be kind of her first deal that she's going to be partnering on and really looking to drive the ship, so to speak, because she's talking about leaving her job to do this full time. So we're gonna make sure get a proof of concept going and then see if we can make that happen.   Tom: That's awesome. I think in a future episode, that's it, I think it'd be a good thing to kind of drill in because with a lot of people in doing this type of investment, like it's, you know, you have a you have a life partner you have, you know, whatever, a wife, girlfriend, husband, you know, boyfriend, whatever, who, you know, those kind of you need to get a little bit of mindshare before moving forward. And it'd be interesting to talk to you guys about your experiences with that and Michael, you're you've fully crossed the cause the chasm and in bringing her in, you know, full, full hug. That's, that's very cool.   Michael: So we're excited to start that and see what that looks like. But we didn't come here to talk about ourselves. We came here to talk about what people should be doing right now given the market conditions with values and interest rates. And Tom you kind of touched on it nicely, I think ever so innocently in that you are finishing up your refinances. So talk to us about why you're doing that right now.   Tom: Yeah. So for you know, fortunate enough to have properties in areas that is appreciated quite a bit. And right now the rent is appreciated along with the value so what I'm doing right now with three different properties is doing a cash out refi they've you know, from the time that I bought them to where they're at now it's they're up roughly, probably close to 50% five zero.   So you know, getting my original downpayment back into my pocket to redeploy how however I see fit, and right now working on the side with Michael On on talking about, you know, the right ways to think about that either continuing to build into SF SFR, or possibly some multifamily.   So yeah, really excited about that hopefully I can close within this month and have the funds there. And man with just interest rates where they're at, it's, you know, if you have the built in equity, there's there is not a reason not to take advantage of it, it's probably cumulatively maybe five to 10 hours worth of time of getting your documents sending them over, if you don't have a lender vetting the different lenders. But I think of it this way, either the rates are either going to go up, or they're going to go down and by refinancing. Now, if they go down, I could always just refinance later, but by refinancing now, if they go up, great, I've taken advantage of that, you know, where I see right now, the bottom of the trough of where interest rates are at so highly recommended, you know, you have that the ability to do that, to take advantage of that for the refinance. So that's what I'm doing right now.   Michael: Love it. Love it. You said something that I want to dig a little bit deeper on, you said that both the actually said a couple things I want to dig deeper on. But first, you said that the properties have appreciated, and that also that the rent has gone up over time. But throughout that whole conversation, you didn't say anything about the rent. So why is that important to you?   Tom: That's important for me, because, you know, another another way to say like, I want to dig deeper that I don't know, I just thought of it. Let's double click on that. Okay, so   Michael:  I like that a lot.   Tom: What's it like office speak? You know, like synergy? Yes.   Michael: Tech tech office speak. That's good, man. Yeah, let's, let's double click on this. Let's expand the window.   Tom: Let's expand the window. Yeah. So with rent increasing, so this is important. So within a rental property, when you refinance, you're getting a bigger loan, so you're having bigger monthly debt obligation to pay that loan. So what you could do, and this is something our friend Michael Zuber would would highly advise against, you could create an alligator, an alligator is when the rent, the value of the rent that you're collecting is less than your monthly costs. So it's cash flowing negative. And alligator is just a term that Michael Zuber came up with, like it's it's eating up cash flow, the importance of the rent staying up is if I go and refinance this property, I want to make sure that it's cash flowing, that it's not like going negative.   Michael Zuber admitted, you know, early in his career, he created a couple of alligators, just to get the capital to move faster. And that's something that I think you just need to be really cautious about. But my point is that Michael double clicked on is, since the rent was able to kind of pace up a little bit, I could comfortably refinance a larger loan, take that cash out, and still with the rent that's coming in, be able to pay off that larger loan.   Michael: Awesome. Awesome. And so did you take a hit in terms of your cash flow on that property, barring the cash on cash return metric, but let's say you were bringing home 200 bucks a month, or whatever the number was, are you did you take a hit there?   Tom: Yeah, I expect to take home, you know, pro forma. And it should be pretty accurate. Just because it's been operating for a while, is my monthly cash flow is going to go from roughly 300 bucks down to 200 bucks. But I'm, I'm okay, I'm okay with that drop, just with the capital that I'm taking off. Now, I think the right way to think about this, Michael is, you know, think about it cumulatively as a portfolio. So, you know, with this capital that I'm taking out, it's going to create new cash flows, it will probably also create new new debt, because I'll get a loan with this new property, but the net cumulative cash flow, should I expect it to be a little bit higher, if not equal? more cash flow?   Michael: So would you then disagree with Michael's Zuber’s alligator warning?   Tom: If we were in like a like a coaching session right now with rich Academy, I would say it's pretty dependent on where you are, and when you're trying to like access those funds. So a common investing philosophy is the later the closer you are to retirement, the more conservative you should be with those returns.   So I plan to work for a while I enjoy working, you know, so I'll have you know, cash flow coming in from, you know, a day to day job, so I'm okay being a little bit riskier, on leverage, you know, I still want to be really cognizant that I can cover my bills for whatever. But if you are in a position where you were looking to retire really soon, I would say you know, that alligator is pretty is risky. Just because over time, sure, there's, there's there there might be ups and downs with the economy but generally speaking, it's it tends to go up into the right, Especially over longer periods of time. So with that said, creating a property that is looking a little bit alligator ish, maybe like a capybara or like a crocodile. Cadbury's like a big guinea pig.   Michael: I think it's like a big guinea pig.   Tom: If we're younger, you should be okay taking a little bit more risk. But that doesn't mean like go nuts. You should still be really intentional about your about the risk profile and your ability to manage it. But we can work closer to crocodile. Well, I really just expanded that longer than it needs to be my today's   Michael: You double click the crap out of that.   Yom: I right clicked, clicked on Get Info. And then I like looked at how many bits it was so. Yeah.   Michael: That's great. All right. That's awesome. Tom, thanks. Thanks for sharing that man. A meal. Anything to add on to what Tom said in terms of what people should be doing right now. I know you just went through a cash out refi as well. Can you talk to us about why that made sense for you. Given the current conditions.   Emil: I am trying to save up a little bit more money right now I'm I'm in cash conservation mode to God and buy something a little bit bigger. But I don't want to hold all my activity, right, right now, some awesome things are happening. If you own real estate, right? It sucks. If you don't, because prices are going up. It's a very competitive market. But if you own real estate, it's awesome. Right now, values are going up rates are super low.   And so I think we did it on a past episode. But I'll go through the numbers, I have a situation very similar to Tom. So I bought a single family home back in 2017. The purchase price is 115k. My down payment and closing costs were just shy of 25k. And the rate back then was 4.625. And so I noticed that, you know, like everywhere in the country prices were going up homes in the area, were selling for about 140 to 160k. So I did the math, and I reached out to a lender and rates were 3.125. So drop a point and a half.   So I had two options. I was like okay, I can just refi and lower my monthly payment. Or I can do a cash out refi pull out all my equity. And because the rate is dropping by a point and a half, my monthly cash flow shouldn't be affected too bad. And so all said and done went through the process. We refied out that 3.125%, the home appraised at 157. So 40k more than we bought it. So I was able to pull out 26k, which is actually 1000 bucks more than what we put into it. So pull all the cash out a little bit on top as well. And my monthly payment only went up $29 a month. And this property cash flows decently. So I knew that $29 wasn't going to affect it wasn't going to turn into an alligator.   I am on the Michael Zuber side of that one I will I rather be more conservative, even if you say oh, I can go negative on this one house by $100. But I can increase my cash flow $200 by buying another property. I am very reluctant to to have a property where I'm just shelling out money every month that just pains me and I I'd rather not have that. I'm a little more conservative on that end.   But yeah, this one was like a no brainer. It's like okay, I'm still gonna be cashflow positive. rents have been going up in that area. Why not pull all the cash out and refight a low rate. So yeah, pretty awesome environment. If you own property, like Don't, don't let this amazing time, go to waste, go refi some properties, if even if you're buying, whether you're not buying whatever, just like it's such an amazing time to go make some moves right now on your existing portfolio.   Tom: We'll also add in it's like it's it's not impossible to buy right now. Like, you know, we had this in another episode, I think it might take a little bit more offers and a little bit more time and a little more diligence, but it's not impossible to buy right now. Just   Emil: Yeah, I hope I wasn't making it sound like impossible. I just mean, you know, it's it's a tougher environment, you could be a little frustrated. But for me personally, I'm just trying to save up some money to go. If I had the cash that I need to go buy something I'd be going out and making offers right now I'm just trying to save up a little more. Just saying you know, there's there's other things you can be doing, even if you're not buying right now, like you talked about, like with your insurance and your refiling properties pulling cash out. So just keep it moving, you know,   Tom: Awesome Emil. Great, great points. And man, what a good run of luck with your property taxes and for rates doing that refi and only just having that marginal increase. Awesome.   Alright, this is a good spot to end it. Thank you guys for listening. We encourage you again to check out our YouTube channel. Lots of good stuff going in there. encourage you to check out, subscribe to the podcast, give us a rating wherever you listen to podcast and also check out RoofstockAcademy.com that's where you can sync with us talk about your profile or show me your strategy, all that good stuff. So, as always happy investing.   Emil: Happy investing.