Unlocking Financial Independence: Innovative Real Estate Strategies with Larry Steinhaus

Unlock the secrets to financial independence with Larry Steinhouse, the mastermind behind Investorschooling.com. With over four decades of experience, Larry joins me, Maria Quattrone, to expose outdated money management myths and share his innovative real estate investing strategies. From leveraging private lenders to utilizing self-directed IRAs for tax-advantaged growth, we dissect unconventional methods that can transform your financial landscape. Larry's journey from casual advisor to CEO offers an inspiring blueprint for those ready to challenge the status quo and achieve lasting prosperity.

We also venture into the realm of diverse investments, where Larry's insights on cash flow over cash itself could reshape your approach to wealth-building. Discover how creating consistent income through real estate, stocks, and covered calls with companies like Ford and AT&T can power your retirement dreams. This episode isn't just about acquiring assets—it's about mastering financial literacy. We discuss essential tools from budgeting to estate planning, as highlighted in my book "Money Hacks" and the Financial IQ program. These resources aim to equip you with the skills to avoid common pitfalls and ensure ongoing success.

Tenant management and property ownership transfer come with their own set of challenges, which we tackle head-on. Learn from real-life scenarios and expert advice on avoiding mistakes like overpaying for properties and mishandling tenant relationships. Whether you're navigating Philadelphia's complex legal landscape or contemplating the tax implications of property transfers, our conversation provides invaluable guidance. Larry and I emphasize continuous learning and self-improvement as the cornerstones of impactful real estate investing, ensuring that you leave this episode armed with actionable insights and a fresh perspective on financial growth.

Connect with Maria Quattrone:
Facebook: Maria Quattrone
LinkedIn: Maria Quattrone
YouTube: Maria Quattrone
Instagram: @maria_quattrone
TikTok: mariaquattronerealestate
Website: MQrealesate.com
Office number: 215- 607-3535

Transcript

Real Estate Investing Strategies and Tips

Speaker 1 0:00

This is the Be the Solution podcast, and I am your host, Maria Quattrone, and today I have with me Larry Steinhaus, CEO of Investorschoolingcom. Welcome, Larry.

Speaker 2 0:14

What's happening? Maria, I'm so excited to be on your podcast. I keep seeing it go by my Facebook feed and I'm like what the heck? When are you going to ask me?

Speaker 1 0:22

Well, here we are. Better late than never.

Speaker 2 0:26

Love it.

Speaker 1 0:26

That's what they say Better late than never. Where there's a will, there is a way I love that saying when there is a will. There is a way People talk all the time about why they can't do something instead of about how they can do something. I think, that's a great segue for what you do teaching people how to invest in real estate, how to find the money and so, larry, let me ask you a few questions about how you do that. How long have you been teaching others about this?

Speaker 2 1:01

So I actually just to give you a brief background before that I actually have been investing in you a brief background before that I actually have been investing in real estate for 43 years. Most of the people I teach haven't even been on the planet for 40 years, which is kind of interesting, right.

Speaker 1 1:13

Absolutely.

Speaker 2 1:15

So I've been investing in real estate for about 43 years. I mean, I used to kind of like guide people for I don't know, probably for the last 30 years, guiding people to say, hey, you should buy real estate, this is how you should buy it. Became a real estate agent just for the fun of it, just so I could maybe get some more deals or maybe at least get commissioned. It turned out to be I was the top real estate agent in my office. Accidentally, I don't really do real estate sales anymore. I do a couple of my own deals. If I have my own deal I might put it up. It's funny I actually hire real estate agents to work for me because I mean, like you know, like I'll go out. For example, if I had a house that fit your criteria, because you do a lot of stuff in Philly, I'd probably have listed with you, only because I don't want to list it myself, that kind of thing. But if it was an investment property then I would so anyway. So probably I came out with a course, probably about I don't know, 20 years ago at this point. That was called Real Estate Investing 101. That was probably the first time I actually started teaching people all together, getting a group together, and started teaching them. Then, a few years ago, we started investor schooling and investor schooling.

Speaker 2 2:21

This launch is huge. It's nationwide. We're probably the largest financial education center in the East Coast. We not only teach real estate, we teach stocks, we teach stock options, we teach money. A lot of people have no idea, no idea at all, about money. We actually started a new program it's called Financial IQ and we teach people how to actually use their money properly. Most people have no idea how to use their money properly. I mean, the funny thing is they put their money in a bank at 1% interest and that makes absolutely no sense. But now I also teach people a lot of times. I teach people how to invest in real estate with absolutely no money. So, maria, I love it because you're a real estate agent, but you're probably brighter than most real estate agents because I make fun of real estate agents all the time. I don't know if you know that the first question I have is if I was going to buy an investment property, how much money do I have to put down out of my pocket?

Speaker 1 3:12

Well, you're going to tell people nothing.

Speaker 2 3:15

Good, at least you're open to the answer, because most people will say 20%, 30%. They're like oh well, I'm not going to buy an investment property. If it's 500,000, where am I going to come up with the money? And they're like and it's funny because I actually go to closing now and when I go to closing I get money back. I'm closing a house in Florida right next next week or the week after. Actually, I'm closing a house in Florida and it's $225,000 investment property. That's what I'm paying for. I should say it's worth about $280,000. And at closing I'll be getting back $10,000. And I'll make about $200 a month on that property. How many of those do you want to do?

Speaker 1 3:51

100.

Speaker 2 3:52

Yeah, exactly, you want to do as many as you can right, absolutely. So let's give our listeners some advice of how they could do it in this short podcast.

Speaker 1 4:07

Go to InvestorsCleancom. That's the advice. Well, we got to give them something for free.

Speaker 2 4:09

I know I'm just teasing you. So the first thing I do is I use private investors. So private investors, when I say private investors, I'm not talking about hard money loans, I'm talking about private lenders, people who you know, like Maria you're a rich real estate agent, right Sure. Who you know, like Maria, you're a rich real estate agent, right Sure. So here's a question for you. So here's a question for you If you had $250,000 and a real estate investor came up to you and said, hey, lend me $250,000, would you do it? Well, I think you'd be honest to answer, which is hell no.

Speaker 1 4:39

I'm not going to just give somebody $250,000. Well, to invest in real estate. Why not? Well one? I want to know what they know.

Speaker 2 4:49

Good, that's a good thing. So what if I told you it was an amateur? An amateur real estate investor. Never did it before.

Speaker 1 4:54

No.

Speaker 2 4:55

What if I told you the property was worth $350,000?

Speaker 1 4:58

How much am I getting?

Speaker 2 4:58

$250,000. I don't know 8%.

Speaker 1 5:03

Well then, why wouldn't I buy it?

Speaker 2 5:05

Well, you can't buy it because the real estate investor has it under contract. He's coming to you for money, right?

Speaker 1 5:11

He's coming to me for money. I'm going to give him a quarter of a million dollars $250,000,.

Speaker 2 5:16

right, what's your biggest concern?

Speaker 1 5:18

Getting my money back.

Speaker 2 5:19

Exactly right. Getting your money back, that's your biggest concern, right, and that's what most people think like no way. But then I said something. I don't know if you caught it, but I said the property's worth $350,000.

Speaker 1 5:31

I caught it.

Speaker 2 5:32

Right, I know, but I wanted to bring it back up. So now, if you have a loan out for $250,000 to an investor and they have a mortgage, you have the mortgage right, you're holding the mortgage and they default. Are you ahead or behind?

Speaker 1 5:50

I'm ahead because I have my property's now worth $350,000.

Speaker 2 5:54

Correct, so you can foreclose on that property? Yes, hopefully, a deed in lieu? Well, hold on. That's one way I got a better way.

Speaker 1 6:03

Okay, I'm one way, I got a better way. Okay, me too.

Speaker 2 6:06

It's not about, so I'm glad you're knowledgeable about this. So what you're talking about is a deed in lieu where you're actually holding the deed that's already been signed. If they don't pay, you just go and you change your name, which is fine. Some investors might not be comfortable with that because they want to hold the deed right, and that's okay. That's one way Now, and I don't like to take a step back because the listeners that maybe listen to the show may not understand fully what we're talking about. So, dean and Lou, like I said, she holds a deed already.

Speaker 2 6:35

However, let's talk about this. And, by the way, if you have the deed in lieu and you haven't recorded it anywhere, I could go to a title company, sell the property without you knowing, or even get another loan on the property without you knowing, because you don't know. There's no record of that deed in lieu. The only record is that there's a deed. I say well, I lost my deed. They look it up, they make another one. So your deed in lieu is okay. It's just not the greatest thing. So let's talk about foreclosure for a minute. What's the average time it takes to foreclose on a property?

Speaker 1 7:07

Just a guess, because it doesn't really matter Philadelphia County, I'm going to guess two years.

Speaker 2 7:12

It could be two years. Right Now, remember, if you've never foreclosed on a property, you think it's going to take longer than two years or less.

Investing With Self-Directed IRAs

Speaker 2 7:21

It's probably going to take longer because I don't know what I'm doing Exactly Most people.

Speaker 2 7:23

So if you were lending the money and even though the property was worth $350,000, and you only lent $250,000, well, now you've got to go through this process, you've got to hire an attorney, you've got to do all of the things that will make it a mess. So instead of that, what we do is we actually have paperwork at Investor Schooling, we have paperwork that has a confessional confession of judgment built in. So basically what it says is hey, you lend me $250,000 on this $350,000 property and if I miss three payments, you automatically get the property, I should say. In fact, it also says that if I fight you for any reason, I have to pay my lawyer's fees, your lawyer's fees and all court costs, even if I lose, I mean, even if I win. Now I'm not going to win, because it says that right in there that if I miss those three payments, then clearly I have to give you the property. So that makes it really easy. So now your major fear of what? Of not getting your money back, has been alleviated.

Speaker 1 8:17

Right.

Speaker 2 8:18

So if you're borrowing money from a private investor and you explain this to them and they understand it, they're like, okay, great, now you got a lot of people after with IRAs, they got 401ks, they've got all kinds of money put aside maybe money in a savings account, a bank, stock market and the question I ask them is like, how much money are you actually making on your money? And it's funny because people will say my broker says I'm making 15%. And I say, okay, let's take a look at your statement from January 31st 2023. And let's take a look at your statement January, I'm sorry, december 31st 2023. And let's take a look at your statement December 31st 2024, and see how much money you actually made, what your actual return was.

Speaker 2 9:00

And the broker says they made 15%. Well, sometimes I've noticed they've made two or 3%. And then a broker also took one and a half to two percent of their entire portfolio as a fee to make them no money. So when I actually show them how much they're actually making and I say, listen, I'll give you eight percent guaranteed, backed by real estate, and you, it never goes down, the amount never goes down, they very quickly agree to lending me money. Matter of fact, I have about $2 million worth of lenders right now that want to lend me money. All I have to do is find a real estate $2 million.

Speaker 1 9:34

So the investor's job is to get out there on the street and find the deals.

Speaker 2 9:39

Yeah, exactly so. I find deals. I only buy good deals, of course. Real estate investor I'm experienced, so I'm not trying as hard as I used to to find good deals. But there's good deals out there all the time. If you have a good deal, it's very easy to find the money for a good deal. The money actually will find you.

Speaker 1 9:56

A hundred percent. If you can find a good deal, there's always somebody ready to invest.

Speaker 2 10:02

Right Either partner with you or lend you the money. I like lending me the money because I don't really want to partner with somebody just because they have money. The biggest mistake you can make is if I say, hey, I have a $300,000 property and you have $300,000, and you say, okay, I'll be your partner because I bring the money. That's a problem, because if they bring the money and they do nothing else but bring the money and then when I sell the property I get to give them half the returns, why would I want to do that when I could have just borrowed the money from them?

Speaker 1 10:31

Right, it's a better option for the investor.

Speaker 2 10:35

Well, the person who's lending me the money, or if he's investing with me, if he wants to be a partner, then he has to be a partner. He has to help me rent it. He has to take the hit. When you know when, uh, you know, when there's a repair one half, one half of that too. That's what it does.

Speaker 1 10:49

And that sounds like a headache.

Speaker 2 10:51

Well, that's right, but what a lender does is lend me the money and I just send him checks every month.

Speaker 1 10:55

That's a beautiful thing, Larry.

Speaker 2 10:57

Absolutely. I send a lot of checks out to a lot of people and you know, but people don't realize that they can actually invest in their IRA without breaking their IRA. They could take an IRA that, let's say it has $200,000 in it. They can move it to a self-directed IRA. I use a company called CamoPlan.

Speaker 1 11:13

Yeah, CamoPlan is great.

Speaker 2 11:15

Yeah, exactly Right. So I have the money to CamoPlan. Camoplan actually has the docs and they lend me the money and it stays inside the IRA. And they lend me the money and it stays inside the IRA, so it gets all the full treatment of an IRA no taxes or tax deferral If it's a Roth IRA no taxes ever. And this is how we keep it going, and it's funny how many people like to do this because they get so much more money. You know what the required minimum distribution situation is when you turn 73?

Speaker 1 11:43

I do not.

Building Wealth Through Diverse Investments

Speaker 2 11:44

You're way too young. See, you know you got to talk to people about retirement funds. You're way too young to talk about retirement funds. When you're 73 years old and you have an IRA, the government says, okay, you have to start taking money out because we want our tax money. So they have something called a required minimum distribution. It's based on your age and it's based on how much money you have. The greatest way to get your RMD and to keep your money growing is to lend it to a real estate investor, because if I have $200,000, I lend it to a real estate investor and that person is now paying me. I don't know. I think it's $1,100, $1,200 a month, right, the $1,200 goes into the IRA, back into the IRA, and then you pull the $1,200 out a month and that covers your RMD and it also gives you a nice income, retirement income.

Speaker 1 12:31

Yeah, that's fabulous.

Speaker 2 12:34

You've heard the expression cash is king, right.

Speaker 1 12:37

I have heard that expression.

Speaker 2 12:39

It's a terrible expression because it's not real. You know what's king? Cash flow, cash flow, cash flow. Cash was king.

Speaker 1 12:49

Mailbox money.

Speaker 2 12:50

Well, mailbox money is what it used to be called, but you're right. But money coming in regularly is all I care about, right? All I care about is properties. So I care about the rents coming in my lenders. All they care about is my payments to them.

Speaker 1 13:02

You got the payment, you got the money, you got cash flow.

Speaker 2 13:06

Exactly, actually, exactly, actually. I'm running an experiment right now. It's interesting, it's kind of off the topic of real estate, but I'm running an experiment with the covered calls. Now you may know what covered calls are, but in because I also teach a stock market and I actually have an experiment where I put $50,000 into an account and every month I sell the calls. And again, you may or may not know what that means, but I basically rent my stock out as kind of way to describe it, or like kind of a great analogy.

Speaker 2 13:36

So the first month that I did this, I withdrew $4,675 out of the account and I still had $50,000. This month I'm withdrawing a little bit less $3,690, I think it was and still have $50,000 in the account, all because I'm doing this. It's actually a really cool experiment. I wanted to see how long it goes and how long I could keep the $50,000 in that account by withdrawing this much money, by selling the covered calls every week, I'm sorry, every month. I basically put it this way I spend five minutes a week, I'm sorry, five minutes a month. I spend five minutes a month and I'm five grand on $50,000.

Speaker 1 14:13

Wow, that's pretty interesting.

Speaker 2 14:15

Why'd you decide to do that?

Speaker 1 14:17

experiment.

Speaker 2 14:18

Because whenever I teach anything, whenever I teach anything, I believe I must experience it first. So I crossed this concept, I thought it out, I thought let me see if I can make this work, and I said this is what I think is going to happen. Let me prove it. So I've been proving it.

Speaker 1 14:34

So what are you investing in right now?

Speaker 2 14:38

So it's just three stocks it's actually Ford, rivian and AT&T and then I sell the calls every month on the first Monday of the month and I wait for them to expire on the last Friday of the month, and then I take that money out.

Speaker 1 14:54

That sounds like a very good return, Larry. It's an incredible return, isn't? It, it's an incredible return. Yeah, I want to do that, I want to do that. Yeah, I like that idea Exactly. I mean, I keep thinking yeah, that sounds.

Speaker 2 15:06

I like that idea Exactly. I mean I keep thinking, well, wow, I wish I would have put in $500,000. We'll have $46,000 the first month. That would have been bad.

Speaker 1 15:14

Nope, not a. That's a good idea.

Speaker 2 15:17

Yeah, I'm going to a little bit long. I'm going to go. Six months is the test. See how much money I have at the end of six months, Because it is possible that the 50,000 can go down. Sure, it can't go down much, but it could go down. But I'm curious to see how far it will go down in six months and how much money I will pull out. So far, my prediction of how it's working is dead on.

Speaker 1 15:35

I love it. Super interesting, All because of ways to make money right.

Speaker 2 15:39

That's exactly right, and a lot of people get stuck on one or two. I make money a lot of different ways. I have several businesses. I even have an ice cream store. That's a complete failure.

Speaker 1 15:49

Nobody said scooping ice cream was going to be easy.

Speaker 2 15:52

Well, I don't scoop the ice cream. I have people scoop the ice cream, but it just doesn't happen.

Speaker 1 15:56

No, I know, but every business has its own, even scooping ice cream.

Speaker 2 16:02

Yep.

Speaker 1 16:03

So that's interesting. I like how you create the test market. I do that. I create little tests of things and see if they work.

Speaker 2 16:15

Absolutely. In fact, I have a book out it's called Money Hacks and this book if you buy it, it's actually the subtitle is actually Money Hacks and the subtitle is because everything you think you know about money is wrong. I talk about a lot of these topics inside the book and the book's a whole 20 bucks on amazon and you know I make a whole four bucks if you buy it.

Speaker 1 16:36

So please buy a whole lot of them money hacks money hacks by larry steinhardt's right exactly nobody, you know you nobody really teaches about when you're a young person, about money.

Speaker 2 16:51

That's right.

Speaker 1 16:51

There's no school for that. Growing up and going to school that should be something as part of the curriculum.

Speaker 2 16:59

That's exactly right. I agree with you 100%. As a matter of fact, that's funny because I've talked about it before. We have this new program called Financial IQ and we talk about money and how money actually works. We talk about building budgets, we talk about how IRAs work. We talk about how to actually create a will, because I have no idea how to create a will. It's funny. I just want to leave everything to my spouse. Well, that's great, but there's so many little pieces that you're missing by doing that. Also, I'm going to tell you something interesting. I don't own anything. So I have dozens and I control dozens and dozens and dozens and dozens of properties, but any of them.

Speaker 1 17:31

Do you keep them in LLCs or?

Speaker 2 17:34

a trust. Yes, every single property is in an individual trust.

Speaker 1 17:39

Is that a irrevocable trust?

Speaker 2 17:41

No, it has to be revocable.

Speaker 1 17:43

It's revocable.

Speaker 2 17:44

Right, because I wouldn't be able to sell the properties.

Speaker 1 17:48

Got it. So why do you think that's a better option than the LLC?

Speaker 2 17:54

Well, there's a couple of reasons. One is what most people do when they make this mistake they have an LLC and they put all their properties in the LLC. That's a major mistake. If you have 123 Main Street, 456 Main Street and 789 Main Street and somebody falls at 789 Main Street and let's say, for example, you forgot to renew your insurance, right, well, now those people can sue the LLC for all three properties. I have a trust. Each property is an individual trust. They can only sue the trust. They can only get that one property. So I'm protecting the property that way. The other thing is an LLC. You could go on to public records and you could actually find who the owner is of the LLC or the members of the LLC by going to, you know, doing a Google search. Very simple With a trust.

Speaker 2 18:38

A trust is a private document between me and anyone I want to share it with. In fact, it's funny. I often tell my students that if you have your property in a trust, make sure somebody you trust has a copy of that trust, because if anything happens to you, no one knows you actually have control or own that property. So that's another reason. So I want it all to be individual. So now they can't, they can't. The other thing, too, is anonymity. You do a search on my name on like the MLS system. You won't find anything. You won't find that. You'll see that I own no properties. I'm not even even the house I'm sitting in right now that I live in. I don't own that property either. That's in a trust too.

Speaker 1 19:13

Even your primary home.

Speaker 2 19:15

My primary home. Yeah, In fact I qualify for Medicaid.

Speaker 1 19:18

Because you don't own any of these properties.

Speaker 2 19:21

I don't own anything and you know if I wanted to, if you know, if I go into a nursing home and I don't want to pay for it, you know, maybe I do, maybe I want to pay for it, maybe I don't want to pay for it. But if I don't want to pay for it, I can have the government pay for my nursing home and I will actually qualify for Medicaid.

Speaker 1 19:36

Right, because you don't physically own any properties that trust them.

Speaker 2 19:41

Correct.

Speaker 1 19:43

What do you think about this new thing they're trying to do They've halted it multiple times now with registering all the businesses and any LLCs with the people's names that own them.

Speaker 2 20:00

I think it's unconstitutional and I think it's ridiculous and I don't know Whatever. It's silly yeah.

Speaker 1 20:10

I was following it and that's the whole point of the LLC is the anonymity.

Speaker 2 20:20

Well, no, there's no anonymity in an LLC. There isn't a trust.

Speaker 1 20:24

There isn't a trust. But that was the whole point. Why were the LLC? You can find people, but you have to do some digging. Now it's just going to be registered.

Speaker 2 20:33

It's not hard to find who owns an LLC. It's very easy. So I don't really care. I think it's unnecessary.

Speaker 1 20:40

I was curious what your thoughts were. I didn't do it. I think it's unnecessary.

Speaker 2 20:46

I think it's unnecessary, I think it's unconstitutional, but I don't really care, it's no big deal. I mean, like I said, all my properties are owned in trust, so it doesn't make much of a difference.

Speaker 1 20:53

So what if you own them in an LLC? Can you move them over to a trust?

Speaker 2 20:57

Yes, so this is interesting. So if you have a property in an LLC, now you got to be really careful how you do this because you got to do it right. So if you own a property in an LLC and you move it to a trust so in other words, let's say you had a property in an LLC and I bought it in my trust I would have to pay transfer tax, right, right. But if it's your own LLC and you are the sole member single member LLC you're moving it to a trust and you are the sole beneficiary of that trust. You do not have to pay transfer tax.

Speaker 1 21:27

Right. What if you have two people in the LLC?

Speaker 2 21:31

Well then, they have to both be the beneficial interest on the trust as well.

Speaker 1 21:36

Okay, so you can do it as long as it's beneficiary, it's the same.

Speaker 2 21:40

And this is something actually that I argued and an attorney came up to me and said no, this is correct and the property has to be seasoned. So it can't be done. It can't be like just uh, you can't do it two weeks later, it has to be seasoned. So I guess a year, maybe two years, would be enough seasoning. But it was interesting because I didn't think that made any sense. I'm going to tell you what's going to happen when you do it. You're immediately going to get a letter from from wherever, whatever, whatever county, and they're going to say you have to pay transfer tax and you're going to have to argue it because they don't know it.

Speaker 1 22:09

You're not right, Always something.

Speaker 2 22:13

And it's also your own property. If you want a property like the house you're in right now, you probably have it in your name, right? If you want to move it to a trust, as long as this person whose name is on the deed becomes the beneficial interest of the trust, you don't have to pay transfer tax.

Speaker 1 22:29

Well, and that's a big number here in Philadelphia.

Speaker 2 22:33

Yeah, exactly.

Speaker 1 22:34

Yeah, they get a lot of income from that transfer tax.

Speaker 2 22:38

Yeah, of course, so they could waste it on government waste, you're not going to.

Speaker 1 22:43

Let me go there. Huh, that's another. We could go down a whole big hole, Absolutely. We could go down a whole big hole, absolutely. We can go down a whole big rabbit hole on that one. What do you see, people? The mistakes that people make. They come to you and they're like, oh, I was investing and this is what happened. What's some of the common things you see.

Speaker 2 23:03

The biggest thing is they pay too much for a property because they don't know how to evaluate a property. Because they don't know how to evaluate a property, right, I don't care what the property is selling for, I don't care what the neighborhood is going to do and what the property is. Hey, if I buy this property right now for $200,000, in five years it's going to be worth $300,000. How do you know? How do you know? Well, I'm really really smart. My real estate agent told me. So I'm like okay, that's a really bad way to evaluate a property.

Speaker 2 23:26

The best way to evaluate a property is if the property is 200, 000, assume it never goes up. And if you do that and the numbers work today like your rent is enough to cover it and it never goes up and the rent never goes up, you you crushed it because you know what's going to happen. Right, the property value is going to go up and the rent is going to go up. But if in the first year you can't make your numbers, you're not going to be able to hold that property long enough to ever get those gains.

Speaker 1 23:52

I see 100%. I would never tell somebody the property is going to go up.

Speaker 2 23:58

I don't know, I don't have a crystal ball.

Speaker 1 24:01

Well, stupid people do this crap all the time. They tell people stupid. I don't have a crystal ball and I couldn't predict COVID and I can't predict real estate values. I can look at real estate over time and see over time, over 10 years, 15 years, 20 years, real estate has went up, no kidding.

Speaker 2 24:26

It doubles the average every 10 years.

Speaker 1 24:29

I'm not going to tell people that.

Speaker 2 24:32

Exactly. And here's a quick way to figure it out. If you're buying a property, there's something called the 1% rule, and if you're buying a property and let's say it's $200,000 for the property, if it doesn't rent for at least $2,000 a month, you're probably not going to cash flow. So I'm looking for properties that meet the 1% rule, or better, 1% rule is a guide, right? It's a quick rule of thumb. Sometimes it doesn't work out if there's really high taxes or really high HOAs. That's possible, especially with HOAs, because you've got to add the HOA fee in. So, for example, if I have a $500 a month HOA fee and the property is $200,000, the 1% rule says what it says $2,000, but I have to add the HOA fee. So now it's like buying the property for $250,000. So my new 1% rule on that one would have to be $2,500 before I consider it.

Speaker 1 25:27

Yeah, of course I see a mistake a lot of people make. They have a primary home they're going to. They bought another house, that primary home. They can't sell it for whatever reason, like the price is too high, mainly they want this number and then they decide to rent that property out and then the property doesn't cash flow.

Speaker 1 25:54

They're paying the person basically to live in the house because, they're getting rent but not enough to cover the nut of the mortgage taxes, insurance, upkeep and they're upside down on that. And they still do it, even though it's like just rip off the bandaid, take a haircut on the property and move on. That's just what they hear of guysaid. Take a haircut on the property and move on Yep.

Speaker 2 26:18

But I see here, guys like me making a whole lot of money investing in real estate and, instead of finding out how it actually works or how to actually do it correctly, they go. Well, I'm smart, I could do it myself, and they make that mistake a lot. People come to my classes and they come the first time and they tell me about these properties they have. And they tell me about these properties they have and they tell me about two things. One, they're losing money because they didn't do the math right and two, my tenant hasn't paid me in three months. And that's another thing that people don't understand. When you have tenants, you need to understand how to handle tenants. Here's the first rule. When I interview a tenant, I say let me rent still on the first. On the second it's late. On the fifth it's $150 late fee and on the 15th I'm filing for eviction.

Speaker 2 27:00

By the way, something happens you get into a car accident, your grandmother dies, I don't care, whatever. You're in the hospital because you got the flu. Give me a call, I'm going to send you flowers, but I'm still filing. On the 15th Do we understand each other? And it's a great line to use because you're going to get the response. You get to that line, we'll tell you everything right. First of all, you're going to get people. It can interrupt you. I'll never be late. That's my favorite one I'll never be late, I'll never be late. And I give them the keys and they say I'll never be late. Then you get people. I had the funniest response I ever got. The funniest response I ever got was my last landlord didn't file for three months and I said I'm sorry you're not renting from me. It was a funny response. It was like really You're that dumb.

Speaker 1 27:43

That dumb.

Speaker 2 27:44

Right. So they obviously didn't get the place. And then the other thing too that people do is they don't know how to call the prior landlord. So when I call the prior landlord, I have a very specific question that I ask. So it's like this hey, listen, john was renting from you. He told me there were problems. How bad were they? Now John has said nothing to me. John has given me nothing but your name and your phone number, and that's how I lead. He told me there were problems. How bad were they?

Speaker 2 28:16

And it's funny because you get all kinds of weird reactions to this. I mean, so many reactions were. I'm surprised he told you Some of them were, some of them were he's never been late. What are you talking about? He's a great tenant. And then I questioned him again. I'm like are you sure? He told me there were some problems, like some rent, late payments or something.

Speaker 2 28:31

And it was funny because I actually had a recording of this and it's a great recording because I play it for my students and I badgered the guy so badly like I kept saying he goes, the guy was never late. He was never late. He was never late. I'm like, come on he. I said you know, weren't there late payments? Because now how I answered the question right and he obviously goes oh yeah, there was one time the guy was in France, he sent the payment and it came back and I asked him to send it again. I didn't even charge him late fee. Do I want that tenant? Hell, yeah, right, because that guy, I mean clearly this guy is like you know, this guy had never been late. I mean a weird circumstance one time. But that guy I know that landlord is telling the truth and sure enough, the guy was never late. He always paid on time. He actually often paid early.

Speaker 1 29:17

Excellent, that's good, that is good advice.

Speaker 2 29:20

Been doing this. I'm for you.

Speaker 1 29:22

That's really good advice. It is not. You really need to know what you're doing when you're investing and you really need to be careful because people can hijack your house. Absolutely they won't pay, tear the place up. It's crazy, really crazy. What people do? I deal with it all the time because I have so many people call me the tenant won't leave, the tenant won't leave.

Speaker 2 29:46

Maria, I got a deal for you. Since they call you, I want you to immediately give them my phone number, because I'm buying that property.

Speaker 1 29:52

Okay, I have a couple people.

Speaker 2 29:55

I'm buying those properties. Those are my favorite. I have a couple people. I'm buying those properties. Those are my favorite. I'm going to teach you something and it's interesting. Everyone in the audience listening to this is going to disagree with me. Until they learn better, there is no such thing as a bad tenant. There's only bad landlords.

Speaker 1 30:11

Well, I've been duped myself, so I guess I stink.

Speaker 2 30:15

All right, you ready? I'm going to give me one example. What happened? Yeah, the tenant. Okay, wait, wait, wait, let's talk about it. Okay, what was the name of the tenant? Give me one example, be specific, because I'm going to show you how you were a bad landlord and they weren't a bad tenant.

Speaker 1 30:30

Oh, I'm sure it's all my fault. Okay because I didn't call the other landlord.

Speaker 2 30:36

Come on, let's go past that. They come into your house. How much security did they give you?

Speaker 1 30:41

First, last.

Speaker 2 30:43

And one was security. Yes, all right, great. And they moved in, right. And let me guess what happened. They paid their first rent on time, right? Yes, and then the next time it was about three days late, right?

Speaker 1 30:56

No, they paid for a while every month, Always on time.

Speaker 2 31:00

So, what happened that they? How long was it before they stopped paying?

Speaker 1 31:04

A year.

Speaker 2 31:06

So one month you found out that the roof sun was late right. So on the first, they didn't pay. On the second, they didn't pay. Third, they didn't pay. And then do you have a late fee built into your lease? We do how the second, they didn't pay. Third, they didn't pay. Fourth, they didn't. Do you have a late fee built into your lease? We do how much.

Speaker 1 31:18

I think it's $100.

Speaker 2 31:20

Okay, great. So on the fifth, did you contact the tenant and say, hey, your renter's late. You need to pay the rent and the late fee.

Speaker 1 31:27

Yep.

Speaker 2 31:28

All right, and what did they say?

Speaker 1 31:30

Oh, okay, well, I'm going to the bank.

Speaker 2 31:33

Great. And the next day, what happened? You didn't get it, of course, nope, okay, and then did you contact them again?

Speaker 1 31:40

Yep.

Speaker 2 31:41

Okay, then did you say somewhere in between, there I will be filing for eviction on the 15th? No, I did not, I know. And you didn't file for eviction on the 15th, did you?

Speaker 1 31:52

No.

Speaker 2 31:53

Right. How many months did you go before you actually filed?

Speaker 1 31:57

A while.

Speaker 2 31:58

No such thing as bad tenants, just bad landlords.

Speaker 1 32:01

I know I know, we all make mistakes.

Speaker 2 32:06

So here's the thing If you file on the 15th, your court hearing is usually the first week of the next month, right?

Speaker 1 32:12

Well, in Philadelphia you need another six weeks or something. Well, whatever, okay, so you file six weeks or something.

Speaker 2 32:16

Well, whatever. Okay, so the middle of the month, whatever. Because Philadelphia is the worst. By the way, there's two places to invest in the world. One is Philadelphia and one's everywhere else. I choose everywhere else Because Philadelphia is like, oh, you know these poor tenants, let them take advantage of the landlords.

Speaker 2 32:34

Landlords are so rich, they're so rich, they're so rich, the landlords are rich, they don't worry about paying their bills. I had one of my partners. It was hysterical. He actually goes to court and the judge says something about give them more time. And I swear he looks at the judge and goes you're taking fat out of my children's mouth. I couldn't believe. He said that it was great, it's true. Yeah, I couldn't believe he said that it was great, it's true.

Speaker 2 32:59

But anyway, the point is you've got to file the 15th. You're going to file as soon as possible. So right now you have first month. They already used that. You have last month and you have woman security. So now you're in the middle of the next month and they only owe you one and a half months by then. You go to court. The judge says probably going to be a paid stay. If they pay, they can stay. If not, 10 days later. You have you. You have the right to evict them. Yeah, so now, if they leave, if they don't pay 10 days later after that they're gone and guess what? You're pretty much broke, even because you had the last month and you had security, and that's the two months that they were out. You're done. Move on, get rid of them, run it to somebody else.

Speaker 1 33:35

Yep Got to do that Most people don't know.

Speaker 2 33:39

You got to go, you got to go, you got to put it to go.

Speaker 1 33:41

Yeah 100%.

Speaker 2 33:44

I actually text my tenants filing on the 15th and I actually continue to say I really hate filing, so please pay your rent before the 15th.

Speaker 1 33:55

You got to follow the. You got to follow, got to follow the plane.

Speaker 2 33:59

Marie, you have kids.

Speaker 1 34:00

No.

Speaker 2 34:01

Okay, so are you with kids?

Speaker 2 34:03

I do Right. And they say to their kid be home by right. And the kid comes home at 7.15. And what do the parents do, whatever? Next day the kid comes home at 8 o'clock Eh, whatever. Next day, the kid comes home at 9 o'clock Eh, whatever. And then, all of a sudden, three months later, the parents are going. I thought you were supposed to be home by 7 o'clock. Well, you never disciplined me, you never told me to be home, you never yelled at me. Now, all of a sudden, there's a big chaos in the house because the kid's mad, because he thought his new cur clock, because it was unwritten and nobody followed up on it.

Speaker 1 34:43

So you have to treat tenants like children, right? You tell them something, you follow through, 100%, 100%. Otherwise you're the problem and not the solution.

Speaker 2 34:49

There you go, very well done, very well done how about that. Very well done, Larry.

Speaker 1 34:55

This has been a very interesting conversation with you. Today we definitely have to talk more, but before we wrap up, I have two questions for you. Number one your guilty pleasure.

Speaker 2 35:07

My guilty pleasure.

Speaker 1 35:08

Yeah, what is it? Cruises, Cruises.

Speaker 2 35:11

Yeah.

Speaker 1 35:12

Oh, I'm going on my first cruise week, oh where are you going? St Martin, St Thomas.

Speaker 2 35:18

What cruise line?

Speaker 1 35:19

Royal Caribbean.

Speaker 2 35:20

Royal Caribbean is the best. What boat are you going on?

Speaker 1 35:24

Wonder of the Sea.

Speaker 2 35:25

Okay, yeah, Wonder of the Sea, beautiful boat, Great. Did you get a balcony room?

Speaker 1 35:28

Yes.

Speaker 2 35:29

Okay, good. So here's the thing with cruises always get a room where better. I always get a suite, but I always get a balcony room were better.

Speaker 1 35:35

Yeah, we got a junior suite because the suites were filled already.

Speaker 2 35:45

Beautiful. Yeah, junior suite is beautiful. It's beautiful and you will absolutely love it. It'll be a great time, awesome. My suggestion is go to Wonder has oh, actually, I think Wonder actually has Wonderland. So there's a couple of. Don't go into the dining room, spend the money and go to the classy restaurants. The restaurants are so much better than the dining room and the dining room is okay, but the restaurant is a really nice experience. There's Chop's Grill. You want to go there? I think Wonderland is on that boat. It's actually called Wonderland. Now when you go and you look at the menu of Wonderland, you're going to go. I don't want this, trust me, it is fantastic. Also, I think that's an Oasis class which have 150 Park. Also, does that one have the Central Park middle?

Speaker 2 36:35

I believe so. Okay, so that's what? So this is 150 Park, chop's Grill, and if they have Wonderland, wonderland, those are the three restaurants you got to go to. I'll check it out and Giovanni's is really good. I mean, you sound like you're Italian.

Speaker 1 36:51

Yeah.

Speaker 2 36:52

Giovanni's is really good too, so you might even want to buy the meal package, which don't get the drink package. That's a waste.

Speaker 1 37:01

Yeah, never want to do that.

Speaker 2 37:03

But the meal package. You might want to do that just because you get all these things. And if you get an opportunity, do the chef's table Nice, Because the dinners on the boat are the absolute best. That's my guilty pleasure on my guilty pleasure.

Speaker 1 37:17

I love it. Okay, my last question what are you excited about for your future?

Speaker 2 37:24

It's funny. I live to help people. Whenever I have one of my students buys a house or becomes a millionaire to me, that's just exciting me. I wake up every morning to help people. That's pretty much where I am, I me. That's just exciting me, I just get. So I wake up every morning to help people. That's pretty much where I am. I'm at that age where I don't care. I don't have to go to work anymore, I don't have to do this crap anymore, but I enjoy it so much. I enjoy making people, making people's lives better. That's all I live for now. I just live to do it.

Impactful Conversations in Real Estate

Speaker 1 37:52

That's awesome. I love that. Impact. That's my word for the year Beautiful. How many people can I impact?

Speaker 2 37:59

I bet you impact a lot Personally and professionally. Yeah, I bet you impact a lot.

Speaker 1 38:05

I love it. Great stuff, Larry. Thanks for being on the show today. You got it. We'll have you come back again this year.

Speaker 2 38:13

You should call into my radio show one day. I would love to. Every Saturday from 1 to 3 is my radio show on WPHT.

Speaker 1 38:23

I'm on the radio.

Speaker 2 38:25

It's a great show. I also do it on Facebook and LinkedIn and YouTube. It's also SimonCast. You should call in one day. I make fun of real estate agents all the time, but you actually seem like you know your stuff so I can't make fun of you.

Speaker 1 38:37

I spend a lot of time learning the stuff.

Speaker 2 38:39

Good, excellent.

Speaker 1 38:41

Yep.

Speaker 2 38:42

You always got to every day get better.

Speaker 1 38:44

Every day get better.

Speaker 2 38:46

Absolutely true.

Speaker 1 38:46

All right, learn more, you will get them.

Speaker 2 38:49

I'm seeing good stuff with you on Facebook. I see all the stuff that you're doing. Man, man, I'm impressed thanks, larry.

Speaker 1 38:55

I appreciate that it was really great to see you today you're welcome.

Speaker 2 39:00

I look forward to talking to you again yep, thank you again.