How do you know when it is time to take somebody’s chips off the table and put them into your rental portfolio? You will learn the answer to that question and more in this episode.
Jared Vidales joins Brent in this episode to bring light to the question at hand. Jared is a residential real estate operator and developer from Scottsdale, Arizona, who has a noted track record of doing flips and rentals.
In this episode, Jared will talk about when to take somebody’s chips on the table into your rental portfolio. Aside from that, he will talk more about building your rental portfolio and how to grow it. Along that line, he will share the necessity of having an asset management strategy to ensure income flow while expanding your rental portfolio and how to increase your rental from one to 60 or more.
Listen to this episode to learn from Jared’s brilliant ideas and advice.
- His opinion on when to take properties on the table into the rental portfolio
- The importance of having an asset management strategy
- What operational cost means for him
- On how to go from one rental to 60
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How do you know when it’s the right time to start taking some of these chips off the table and putting it into your rental pool?
Yeah. I think it really is case by case, right? So I was actually talking to one of my mentees the other day. He’s wholesaling, he’s making a bunch of cash, right? The first thing I told him is once you have enough breathing room, right? Enough breathing room when it comes to marketing, your overhead, your team, then like you said, start taking some of those chips off the table. It may not seem sexy at first because oh cool, I bought one rental property that maybe spits off a couple grand a year in cash flow after all your debt service. So I guess to answer your question is once you have enough breathing room, take some chips off, put it into a… Just don’t buy like the highest cash flowing property because typically that’s like a D class or war zone type property. Put it into a nice stable property that continues to grow.
Well, let me ask you about that. So what do you think is a nice buffer? Is a 90 days worth of expenses? Is a six months worth of expenses? [Crosstalk 00:01:45]
If you’re brand new… Because like you could close a couple of big deals and all of a sudden you could have six months worth of expenses, but you’re still brand new and inexperienced and easily bring that thing back to zero, right?
So I would quantify it with money, maybe it’s six to eight months, but I’d also quantify it with experience as well. So maybe it’s like one and a half years or two years, once you’ve worked out the kinks in your businesses, you understand that your cash flows within your wholesaling business. You’re able to cashflow, you’re able to predict and say like Holy (beep), cool, I ripped the $300,000 deal. I think it comes down to experience, cash in a bank when you can start putting together your asset strategy or your rental strategy and say hey, this is what I want to go after.
Love it. So when you’re going after… I love that. I love that you’re talking about years of experience, not necessarily the amount because I think that that’s so huge. I think being able to make sure that you have something sustainable in your ATM machine, in your money machine is critical because… And I think it’s critical to be able to take that money that you’re making and get out of your 9 to 5 job, right? Pay off your consumer debts, feel more free to be able to go out there and really, really, really push it.
You know what I mean? A lot of people start out, they’ve got jobs, they’re working, they’re doing all these things and they want to transition into this full time, but you got to have enough. You got to make enough to be able to do that. You know what I mean? And then, here’s my thing, right? So I have a wholesaling business. I only own a couple of rentals and I have the coaching business, right? I feel like between the wholesaling and the coaching, it’s a lot. When you add in a rental portfolio business, that’s another business. The misconception about rentals is people think it’s passive, which it kind of is, but you really have to be on top of those assets or your operational expenses will just crush your cash flow. So you’re exactly right. You have to have a asset management strategy. You can’t just say I’m going to buy a rental, I’m going to rent it out, and I’m going to wait for a check to come.
How do you know? When you say operational costs, what do you mean?
When I say operational cost, I mean… Starting off, you’re going to manage it in house. You have to provide a good customer service to your residences and if you don’t, all of a sudden, boom vacancy. A vacancy will crush any rental portfolio. That’s the one variable that will crush it, right? Because when somebody moves out, boom, 500 to 800 bucks to turn it, carpet, paint, stuff like that and put the next tenant in and all of a sudden your one year of cashflow, it’s gone. So you have to provide a good customer service to your tenants. You have to provide a good quality product to your tenants, right?
You can’t just buy an REO and just put a tenant in there because you’re going to attract one, a bad demographic of a tenant who really doesn’t care and they’re just going to destroy your property, right? So good product, good customer service. And until you’ve wrapped your head around those two things, then you’re ready to start owning property.
And then how do you go from one rental to 60? You know what I mean?
Yeah, it’s extremely difficult.
I want people to know, you know what I mean? It’s like you see people on TikTok or you see people on Instagram, you see people talking about how they have these huge portfolios of properties and they own 100 doors or 200 doors or 1500 doors or whatever else. That’s a business. That’s a full business with a full staff to be able to handle that. You can build that, but you have to be able to understand that that’s another whole business.
Yeah. It’s another whole business, right? I didn’t have the luxury of… Well, I did. I didn’t have the luxury of being back in REO days, of the foreclosure days and you see people who snatched up a thousand property. I started buying and holding really only about 18 to 24 months ago. I was constrained to what the market had to offer, especially here in Phoenix. It’s really difficult, but it all starts with buying that asset well below market value. And once you have that asset below market value, you have way more exit strategies, right? Because my thing is when we go into a property knowing that it’s going to be a rental, we’re renovating that whole thing, right? Because again, it comes down to quality product, quality customer service because that… It may seem like a lot of money upfront, but if you ever look at it from a long-term perspective, nothing will pay back way more in dividends because you’re a good tenant and good product. They’re happy to be there. They’re never going to leave. You’re not going to have some bum living in your home.
If you’re interested in joining the most proactive group in real estate investing, it is the TTP program. Go to wholesalinginc.com/ttp. I personally mentor you. You get my cell phone, we text, we call. It’s crazy. It’s bananas. Right? But it’s the truth because I want you to be as successful as possible and I want to work with you and I love you. So if you’re interested in that wholesalinginc.com/ttp. Check it out, scroll down, keep scrolling. The little scroll thing is tiny, because there’s so many testimonials. Nobody, nobody has more testimonials. Check it out. If it feels good in your gut, sign up for a call. Until next time. You’re the best. TTP.