Hello, friends. And welcome to another episode of Ask Marco. It’s been a while since I did an Ask Marco episode and I plan to do a few here, back to back and just space them out here over the next few weeks. I actually like these Ask Marco episodes because it gives you the listener, the opportunity to submit your question. And many of them, I reply to just via email. And then I just handpick some of them, usually four or five at a time. And I put them into one of these Ask Marco episodes. And the beautiful thing about that is it gives you the opportunity to hear what other people are thinking. And the questions they’re asking that you may not have thought about, but once you hear it, you think, oh yeah, that’s a good question. I’d like to ask that question as well or hear the answer to it.
So it gives you the opportunity to hear what other people are thinking and get into that question and get an answer to it. Even if it’s high level and maybe not superficial, but something that I can put some flesh on. And again, this is never financial advice. It’s just my opinion and my experience that I’m sharing with you. But it’s just an opportunity for you to throw the question out and get some perspective and an answer too. So before I jump into the first question here, just a quick reminder, and I’ll plug this, I guess from time to time, our Power Room Mastermind. Our next event is coming up in lake Tahoe, September 12th to the 14th, and the next event after that is our year end grand finale. If you will, our final event, which is in Las Vegas, December 5th, through the 7th, you can go to where our website at powerroom.com.
This is an incredible mastermind. It is a high end mastermind, great members, great speakers, great content, just a great event, all around fantastic networking. It’s essentially the exclusive mastermind for CEOs, entrepreneurs, business leaders, investors, and you can come as my guest. We allow you to drop in at one of our events, any one that you want and check it out, just get a feel for who we are, what we do, what we talk about, you know, the networking, the dinners, everything. It’s just a fantastic event. If you can’t make one of these next two events, our next event starting early next year in Q1 is in Jacksonville. I don’t have dates for that yet, but it’ll be Q1 in Jacksonville, Florida. Technically it’ll be in St. Augustine, right outside Jacksonville. So I will let you know about those dates when I have them.
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Okay. So let’s jump into our first question here. It comes from Steve. He says, hi Marco. I was scrolling through your episodes trying to find something that addresses current market conditions and what is considered a quote unquote, good deal under these current conditions. In the last six months, I’ve gone from being able to find deals, although rare, still having the 1% rule for turnkey properties today, the best deals I can find are at about 0.8, 5%. And what he’s referring to here for everybody listening is the rent to value ratio or the rent to price ratio. I’ll explain that here in a minute, but Steve goes on to say on top of that insurance costs are rising. You obviously have a great cash flow calculator on your website, but I was curious if you had thought about doing an Ask Marco episode where you address what is considered a good deal in today’s market, especially now that the fed has officially raised rates again.
Thanks. So I’m gonna answer this question to a small level of depth, because I think I’m gonna just tee this up and tease you with a future episode in the near future about this exact question about market conditions and how I feel about market conditions and what’s going on. In fact, I’m actually toying with the idea of having potentially a monthly episode about the state of the market. So that’s where I can go a little bit deeper into this information, but for now, let me answer your question, Steve, this way, the formula doesn’t change, I’ve always said, and you’ve heard me say this over the years, a good deal is a property that’s in a good market, in a good neighborhood with good financials. In other words, it’s cash flow positive. It’s in good condition. Actually, let me rephrase that it’s in new or like new condition.
Ideally, that’s what you want. In other words, you don’t want deferred maintenance and it has to pencil out the numbers have to make sense. So it has to generate ideally a positive cash flow as much as possible. There are exceptions to that rule. You don’t necessarily want negative cash flow. Although there are rare exceptions where that does make sense if you know exactly what you’re doing and you’re in the right market to raise the rents and gain from strong price growth. But being in a good market means a market that has stability. It has jobs, job growth, population growth, both organic and inbound that all provides strong support to the housing market. And it also fuels the jobs and support for housing in that market regarding the 1% rule quote, unquote, that kind of went out the window years ago because property values were appreciating so much and so fast across the country and not just the last two years, but probably over the last four or five years.
And it was far outpacing rents. And so what you saw is that price to rent ratio drop. So it essentially a target years ago of 1%, and I used the a hundred thousand dollars property as an example, a hundred thousand dollars property renting for a thousand dollars a month. You can still find those in some of the markets that we’re in Southern Pennsylvania, some of the Alabama markets, Jacksonville, Mississippi, places like that. So they’re still out there, but they’re becoming harder to find. And fewer, it’s kind of like trying to find a unicorn, f you want to be in good neighborhoods in these good markets. You can still find the 1% rule properties. If you downgrade your neighborhood criteria and you drop from what was, let’s say a B class neighborhood, just a blue collar bread and butter community down to C class neighborhoods.
And I don’t recommend you do that, but you can’t find properties with, you know, a 1% rent price ratio or higher, but stick to that main formula, stick to good markets, good neighborhoods properties in good condition, newer like new, where the numbers pencil out. And the one thing I’m gonna add to this is avoid what are now being considered overbuilt markets. And let me explain what that is. And I can revisit this again in another episode, but there are certain markets around the country right now, where there is so much new construction and there are so many permits being pulled by new home builders, that there is a risk or a high risk of there being an oversupply of new housing inventory that will create a softening of that market because when builders get to the point where they have to move product, and that’s the key word there is they have to move product.
They just can’t sit on a bunch of inventory. They’re gonna start making concessions and lowering prices, and they’re gonna start dropping prices in those markets and putting inventory on the market that is gonna be available to people who are looking for property in the resale market. So that starts to put downward pressure. Some of those markets today include Austin, probably at the top of the list. To me, Austin has become a red flag market, but Austin is a market that is not only seeing a tremendous number of single family permits, but also we’ve seen rapid price appreciation in the Austin Metro, where it is far above the prior peak. In fact, Austin is somewhere around 190% above its prior peak. So that’s a, a market of concern. Dallas is another Nashville, Denver to a lesser degree, Houston, to a lesser degree, Raleigh Durham, Metro area, even San Antonio.
So, you know, just be aware that these markets have a lot of inventory, especially Austin, Dallas, and Nashville. So that’s the caution I would throw out for you today. So to wrap up your question about what do I consider a good deal today? You know, the same principles apply, but just focus on good markets that are not overbuilt, where the numbers still make sense. There’s jobs, job growth. You don’t have to have that 1% rent to value ratio. It’s nice to have, but if you can be above 0.7% or even 0.8%, just do a deeper evaluation and more due diligence. And that still might be a really good deal. So anyway, hopefully that’s helpful to you, Steve, if you have any other questions about that or you want to dig deeper, just contact me or my team here, and we’ll dive in a little further, but we’re still getting really good inventory in about 20 or so markets around the country, mostly on the Eastern half of the US. So if you’re looking for good turnkey rental properties that have a close 1% RV ratio, then reach out and let us know. All right, next question. We have some interesting questions here today. So stick around to the end.
This next one comes from Andrew. He says, hello, Marco. I am a loyal listener to your podcast. And I felt absolutely in love with how easy your podcast is to understand, and the information you provide. I am from Tampa, Florida. I am 16 years old and going into my junior year of high school and listened to a lot of podcasts and books. Every day I started networking. However, I’ve come to a halt of finding either kids, my age to partner with or events I can get into since I don’t own any real estate yet and am not 18, what would be a way I could skyrocket my networking?
All right, well, Andrew, wow. You’re 16. Congratulations. You’ve got your head screwed on, right? This is where I was back when I was in my mid-teens. And then I bought my first rental property when I was 18 and I just stayed focused and made a plan, a simple plan, but I stuck to it and you can do the exact same thing. So congratulations, really happy to hear what you are actually accomplishing here. The fact that you want to network is fantastic. So here’s a few suggestions and tips. You’re probably not gonna find a lot of like-minded students or what you call kids in your school. Although you’re really more a young adult, not so much a kid anymore, but if you don’t have friends or know people in your sphere or circle that you would call like-minded or have similar interests with, or without them, you can look into local and remote, meet up groups, just go online and do some searches.
There are websites dedicated to meetups. I think one is called meetup.com if I’m not mistaken, but just do some Google searches for real estate meetups. You could put, you know, the name of the city you’re in Tampa or some surrounding areas or Tampa Bay or St. Petersburg or whatever it may be just, you might have to go out a little ways. It might be a half hour drive, or maybe even an hour drive. You might have to go to Orlando. I mean, that’s an hour drive, but look up local and remote, meet up groups that you can drop in and join related to that. There was a time where I was going to real estate, investor clubs, REI clubs, all over from San Diego, all the way up to LA. And there were many of them, some of them were really large. Like we’re talking, you know, couple hundred plus people in attendance.
I stopped going to those years ago cuz it wasn’t the most productive use of my time. And then for the most part, they stopped during COVID. But I would imagine that there are REI clubs that have started or sprung up all over the country. So if you can go to a real estate investor’s club meeting, there might be a small fee. It could be 10, 20 bucks to attend. They usually have one or two speakers and you know, needs and wants and they’re all structured differently. But that’s a great way to surround yourself with people who are interested in real estate and doing things in real estate. So meetup groups, REI clubs, there are quarterly and annual events such as the, The Think Realty events. There’s I believe four a year think Realty puts on a conference in expo, which is usually a one or a one and a half, maybe a two day event in different cities.
I know there was one in Tampa just last week and I hope you knew about that one, if you didn’t well now, you know, for next time, but they move them around to different city. Sometimes it’s in Dallas or Houston, sometimes it’s in Baltimore, but there’s different organizations like Think Realty that put on real estate events. The first annual real estate wealth builders conference was I think it was early this year. I was the keynote speaker there and the guy who puts it on, Dustin asked me to come again next year. He’s gonna do it again. So look forward to rub con 20, 23 coming early next year. So that would be a great event. I’m guessing there will probably be about 400 people there, maybe more so there are different real estate events. Of course, continuing education, just look online for continuing education. Just continued educate yourself that necessarily won’t lead you to a networking event, but it might because it might connect you to some other resources.
And in those resources you will find other areas and opportunities where you can get in front of other people and network. And of course, as I mentioned, at the very beginning of this episode, you can join mastermind. There’s masterminds of all kinds all over the country of all sizes. And they probably range from free to, you know, five figures per year. So there’s many different kinds of mastermind groups you can belong to or join. And some of them are specifically for real estate. Some of them are more general they’re about investing or entrepreneurship or personal development. But you know, if you have the means, join a mastermind group and you know, network with people who are very serious and very dialed in into whatever the mastermind is all about. So Andrew, I hope that helps, you know, again, congratulations, stay the course you’re young and I think you’re gonna do very, very well.
Okay. Next question is from Kyle interesting one here. He says, good evening, Marco. I am looking for insight guidance on a situation I am currently faced with my brothers and I have an investor who is interested in investing in real estate, along with us single family homes or duplexes. We are going to use his capital to cover the 20% down payment and closing costs of the property. My dilemma is we are only able to do this. If we put our investor on title with us, he’s not interested in being on the title. We also have the option to let his capital season for 60 days in our bank account. This causes the issue of delaying the purchase of the property, which leads to other issues. My brothers and I came to the conclusion of opening up our own capital investment company. We felt that would alleviate our issues.
Would you have any suggestions or resources for us to get the ball rolling on starting a business like this? Also I would be open to any other suggestions on a workaround for this issue as always your help and guidance is greatly appreciated. Okay, Kyle, well, I think you’re complicating things by going down the road of starting a quote unquote capital investment company, I think that is unnecessary and overkill. There is a much, much simpler way to skin this problem, but it is a good problem, nonetheless. So you’re doing a deal with your brother and you need the investment capital. Someone’s willing to lend it to you. They are willing to front that down payment and closing cost for you. And they don’t want to be untitled, which is an awesome scenario. So here’s what I would recommend. It appears to me the simplest solution to achieving your goal here is to just close escrow with your investor on title solely for the purpose of closing, then remove them from title a period of time, a short period of time after the close.
So what you may want to do, and, and this has been done many times in the past and some lenders don’t actually like this, but you may want to wait at least 30 to 60 days before removing him off title and that should solve your problem. Now, the reason you want to keep him on title for a short period of time, 30 to 60 days, maybe 90, if he’s comfortable with that is because if the lender does a, a Q and a or a follow up check after the close and they normally would do this within the first 30 days or after the first 30 days, right after they just want to tech check title to make sure that it’s in order clean and the people who are the borrowers or co-signers on the loan are still there. So they just want to verify things after the close.
But once if they check it once they check it, it’s very rare that they’ll ever go back and check it. So if your investor partner there is comfortable with being on title for a short period of time, you can solve this good problem very quickly and very easily. Okay. So I hope that helps Kyle.
Okay. The next question is this syndication question coming from lawn and lawn writes in, says very short and sweet. I’m seeking to invest in a syndication, but keep running up against an issue. I barely know these people. How do I trust them with my money? Would love an episode with info on how to vet a syndicator. You don’t know personally, well, this is usually a common problem with everybody investing in a syndication in the beginning until you have a relationship or a history with them. So there’s a lot of information.
I mean, even books that you can purchase on Amazon talking about investing in real estate through syndications, but there’s also a lot of free information online that you can find very simply. You want to investigate probably five different things. One is you want to check out the background of the syndicators. This is usually very general advice. It’s often from the sponsor’s website. If they have one or it’ll be through a prospectus or an offering memorandum or document that they share with you, which will hopefully have their investment philosophy and acquisition criteria, a portfolio of their prior projects, if there are any, of course, contact information and whatnot. So you can speak directly to them and ask questions and essentially interview them. But remember you’re doing due diligence on the sponsor. And so you want to dig as deep as possible, especially if you don’t know who they are, even if they were referred to you.
But you have to remember when you get involved in a syndication as an investment, you’re usually locked in for a good five to seven years. That is gonna be your commitment. So you’re in bed with these people for five plus years, you also wanna look into their experience or track record, you know, how many deals have they done? How did they turn out? You want to build trust with them over time. So you wanna learn what they’ve done before you essentially move forward with their newest and latest deal. So ask questions like how many deals have they closed on? How many have they exited on look into the specifics of each of those deals by reviewing their portfolios? What was their acquisition price and their exit price? What was the rate of return for the investors during, and at the end of that investment, this is information that they can easily provide you if especially if they’re historic deals also consider, are these syndicators doing deals in the same market over and over again?
Or are they spread out in different markets, one deal per market, which adds a little bit of dilution. I think in terms of their experience and track record, which leads to who are the team members look at, who the lead sponsor is. Who’s the person who’s spearheading this general partnership as a syndicator. What’s their experience, what deals have they’ve done personally. You know, you want to get to know that person a little bit better and ask questions. Ideally, if you can get on the phone with them, that is the ideal scenario. And I think that’s important. Consider who the property management team is. Are they self-managing or do they have an outside third party, property management company, property management is a critical piece to the success of a deal. And I think you have to look at that very, very closely cuz they are the boots on the ground.
The syndicator may not be in the same market and often they are not, they’re investing out of market out of state. And that’s absolutely fine, cuz that’s how you’re gonna find some of the best deals, but you have to make sure that you have the right people on the ground in terms of management. So that’s another thing you wanna look into. Then you wanna look into the fee structure, you know, every sponsor will have a different fee structure and they outline that in their subscription documents or their private placement memorandum, but look at what those fees are and make sure that they’re in alignment with what your expectations are as well. And then also ask the question and you know, do they have skin in the game? It’s important to know if that sponsor has their own capital in the deal and their own money on the line.
You know, if they’re invested in it as well, they’ll probably treat it a little bit more seriously and a little better than if they had no money in that deal. Of course, you know, the biggest investment syndicators make is the sweat equity they put in finding the deal, negotiating it, structuring the deal, lining the financing and getting those people on board qualifying for the financing, that kind of stuff. So, you know, there’s a lot more that goes into it. A syndication is not a simple thing to do so they’re bringing a lot of value to the table, but it’s not just that, you know, if, if they have money in it, then that helps a lot. Professionalism is another factor. My pet peeve is communication or poor communication. So communication is critically important in my books. You know, when someone sends me an email, I do my best to reply within 12 to 24 hours.
Sometimes I’m out of town and I’m inundated with email and it might take me a day or two to get back to some people, but being available and able to respond in a timely manner via email and or phone is important. And I actually judge investors and partners and people that way. So, you know, take that seriously because I mean, short of someone being, you know, ill or under the weather or out of town or whatever, traveling, you know, there are exceptions to this, but communication, in general, is an important thing. And then access, access to the syndication team. Remember you’re committed for five to seven years in a real estate deal. So, you know, do you have access to the management team and the sponsors? This is an important thing. Of course, always ask for investor references. Of course, they’re gonna give you the best ones.
They’re not gonna give you any bad references, but it’s always good to talk to prior investors, especially in previous deals and ask them about their experiences with that particular sponsor. Again, you know, sponsor fees, consider what those are. There’s usually, you know, a set of fees that go along with most syndicated deals like the acquisition fee, then there’s the asset management fee. And then ultimately the disposition fee, you know, what is their take on the exit? And of course there are industry averages for all three of these and, and that will vary for each sponsor, their level of experience and the type of deal. But those are things that you should look into. So again, it’s, it’s easy to find information on this and do your due diligence, just check online. You don’t even need to buy a book. There’s just a lot of that information available. So I hope that helps.
Okay. The next simple question here comes from Carlos and he writes in very succinctly. I want to learn how to start my real estate portfolio and learn as much as I can from a great team. Carlos, I’ve said this many, many times, and I am happy to keep, you know, sharing the same thing over and over again. Books have been one of my best teachers and mentors. There are not dozens, but literally hundreds of books on investing and real estate investing. And they are cheap. You can order them from Amazon, get ’em the next day or just an ebook. You can download it to your Kindle, download it to your books app on your phone. But there are literally dozens and dozens of good books that you can read. You don’t need to read all of ’em literally three to four good books that have some overlap will be enough for you to get a great education on real estate investing and how to build a portfolio.
Of course, there are podcasts. You could listen to networking and hanging around other like-minded people that are also interested in investing in real estate or are investing in real estate. Even better could even partner with somebody in the beginning. If it’s someone, you know, love and trust. And of course there are meetups and real estate investment clubs, something we talked about at the very beginning of this episode, plus, you know, various mastermind groups masterminds on real estate investing specifically, but maybe even investing in general. So books is definitely number one. I mean, it’s the fastest, quickest, least expensive way to learn. Of course, there’s a lot of resources online, much of it, which is free. Even our website, our blog at noradarealestate.com has got probably well over a thousand posts and information, everything from market profiles to just how to invest and how to choose a market and analyzing cash flow and what’s cash on cash return.
You can just do a search on our website and find all kinds of great articles. Anyway, I hope that helps Carlos. It’s not hard to get started. Just educate yourself, but also take action. And as you do that, you’ll start to build a great team. And of course, you’ve got us as you know, part of the team that you can rely on, just contact any one of our investment counselors, ask your questions and just allow us to give you some guidance and we can point your compass in the right direction, even if we can’t help you. So I hope that helps Carlos.
I’m gonna end it right there. I had one more that I was gonna add to this episode, but I’m at the 30-minute mark. So I thought I’d just keep it short and sweet, but that is it for this time. If you have questions about real estate, I’d love to hear them and cover them on the show. So just shoot them over to me, go to our website, passiverealestateinvesting.com, go to the Ask Marco link and submit that. Remember to subscribe to the show. So you never miss a future episode. We have a lot of great content coming, share the show with your friends and family, other like-minded people so they can benefit from it as well. Appreciate all the iTunes ratings and reviews. Thank you for listening. I will see you all on our next episode.
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