Don’t Sell Your Rentals

[00:00:00] Mike: [00:00:00] Hey everybody. Welcome back to the show. Today I’m going to be talking with my buddy Joe Lieber, who was on lockdown up in, uh, up in the Cleveland area. And, um, uh, we’re going to talk about how to keep your money busy. Joe’s in a situation where he sold off a bunch of rentals and then he’s got money sitting in a bank and it’s not staying as busy.

He likes to see money in the bank account, but how do you keep your money busy? And there’s a lot of different things that you need to consider with rental properties. Uh, if your money’s not staying busy, then you’re basically sitting stagnant.

Professional real estate investors know that it’s not really about the real estate. That real estate is just a vehicle of freedom. A group of over a hundred of a nation’s leading. Real estate investors from across the country meet several times a year at the investor fuel real estate mastermind to share ideas on how to strengthen each other’s businesses, but also to come together as friends and build more [00:01:00] fulfilling lives or all of those around us.

On today’s show, we’re going to continue our conversation of fueling our businesses and our lives. I’m glad you’re here.

What’s up, Joe? Good to see you, buddy.

Joe: [00:01:19] Hey man, thanks for having me on the show. Appreciate it.

Mike: [00:01:22] Good to see you. Always good to see you and my friends. We’ve been friends for, gosh, I don’t know, five, five, six years anyway, right?

Joe: [00:01:27] Absolutely.

Mike: [00:01:28] So, uh, you’ve always been the guy that’s got like a bunch of rentals, live in an easier life, but I also want to see what happens.

I know you feel a little guilty, like you should be. Working a little harder and sometimes you start doing some stuff only to find out like, man, I don’t want to do that. I

Joe: [00:01:42] do. I do that all the time, man.

Mike: [00:01:43] We all have shiny object syndrome, or are we all like, think we should go play in another sandbox every once in awhile?

So

Joe: [00:01:49] absolutely.

Mike: [00:01:50] Yeah. So Joe, we were talking ahead of time about what do we talk about today, and I know you’ve been selling off a bunch of your rentals. That’s one of the first things I asked you because. As the market is, [00:02:00] there’s not, it’s not a downmarket yet, but you know, we probably, we might be at the beginning of a, of a recession of some sort.

We’ll see. Like nobody knows yet, but I knew you were selling off a bunch of your rentals, uh, from the last time we talked. And I was like, how’s that going? And you’d kind of said like, you know what? It’s good, but. I’m burning away at my principal. You got this money that sits in a bank account. Of course you’re going to get hit with taxes and then you’re also, you know, that money, you got to keep that money busy, otherwise you’re moving backwards.

Right. And so I thought that’d be a good show to talk about is just like the importance of keeping your money busy. Like it’s funny because a lot of real estate guys will like, here’s a picture you’ve seen people like here’s a picture of my bank account or whatever. And my first thought is like. That money’s just sitting in the bank account doing nothing.

Like that’s not, that’s something to celebrate. That’s, that’s bad.

Joe: [00:02:46] It’s really bad.

Mike: [00:02:47] Yeah. So it was kind of interesting. We all work hard to build up something, but you can’t just like take it off the table and let us set an account. You gotta you gotta always keep it busy. And that’s hard for guys like you and me to do it unless it’s inside a real [00:03:00] estate.

Right.

Joe: [00:03:00] Exactly. Exactly. Yeah. I’ve been through so many things, you know, 22 years in this real estate investment space, really my entire adult life, you know? Yeah. And, uh, sometimes you lose your way. You forget as you’re going through the journey, you know, why we get into the business and what do I want out of the business.

And really, I’ve had to take a hard look at those basic principles all over again as I’ve bobbed and weaved through this business man. And, uh. Really, I have always wanted from the days of Carlton sheets, sitting behind the boat, interviewing people in the 1990s was cashflow. Right? And, and that’s what I was really after cash flow for lifestyle and a lifestyle guy.

Right. For the last, since the 13th of March, right now, during this whole covert crisis, I’ve been at my summer home, uh, here at Catawba Island, which is a little place, uh, about an hour and a half outside of Cleveland. But I, I’m here. It’s a yacht golf community just hanging out, chilling, enjoying, not working, but what got me there.

How I get to this point. And really [00:04:00] it was a casual from the real estate that’s allowing me to do this, right? Yup. Yup. And then as I took that journey over the last say, year and a half, selling a lot of my rentals, and yeah, my bank account got real fat, but fear started to set in. Feared it because when the bills still come in, right?

I mean, you know, country club memberships are expensive. Uh, I, I like cars. Uh, maintaining exotic cars is expensive, right?  w w when, when you, I still have Reynolds obviously, but if you, when you have to dip into your savings account to pay your nut, you started to get real nervous, right? Because what happens?

What happens then we get down the road six, nine, 12, 24 months. If I burn that principle. I’m done, man.

Mike: [00:04:43] Yeah, right.

Joe: [00:04:44] Yeah, yeah. You got to do something else. And then a whole nother set of fears. Cause then I said, well, here I’m still an active real estate investor. How does buy and sell houses? Right. Well that’s fine, but now it creates a job, a grind.

Now I have to buy and sell houses or before I like, I [00:05:00] don’t care. Rents coming in. Right. And I just, I just over the last year or so that just the things that just. I’ve had to revisit.

Mike: [00:05:10] Yeah. It’s like the, you know, the average American is the type person that saves up a bunch of money and then they retire and they’re, you know, traditional financial planner will say, well, how much do you have in savings so far?

And basically try to translate, well, how many years will you probably live? And it’s like this pile of money. And like, they kind of. You can like visually imagine like you’re going to be depleting that pile of money and hopefully it depletes right about the time you die, right? And we’re always like, what?

Who the hell does that? Which is most people do that, right? But you found yourself in that same situation where you’re like, Hey, I’ve got a bunch of money over there, but it’s not staying active. And now you’re just basically. Not that it’s dwindling away, but that’s your fear, right?

Joe: [00:05:49] Well, it is because right at that exact time that a lot of the houses sold things, the market really constricted up here in Cleveland.

It started getting real hard to buy great deals. [00:06:00] So although I’m an active real estate investor, I didn’t want to overpay. I’m not going to chase the market up, so to speak, right? No one going in. I’m over paying. I didn’t want to do that, so I’m like, well, I’m just not going to buy it. And that’s all fine.

You can play, you can play tough guy, but you’re going to sit down, play a tough guy with no, you know, with no

Mike: [00:06:18] money in a bank account that’s not earning anything probably, or very little, right.

Joe: [00:06:22] Very little. Exactly. Yeah. You know, I went out here right during coven and I opened an E trade account and I put a significant amount of money in there, and now I want.

Debra wanted to know. I’ve never bought a stock in my entire life. This is my first time ever buying stocks. So I, I don’t know. I don’t know how to research stocks. I barely know how to buy the stocks. I don’t understand what that stuff means. I need your aid. But I go out there and I bought a bunch of stocks, right?

And then I’m sitting there and you know, it’s, I know it takes years for this to go up, whatever they tell me, but dude, the money’s not moving. Like it went down a little bit. Excuse me. It went down a little bit up a little bit, but it’s not nothing, right? Like, you know, so. I’m not [00:07:00] a stock market guy at all.

I brother. Yeah. I put that in a cash flow in real estate.

Mike: [00:07:03] Yeah. The truth is, is the real estate stuff, you know, if done properly, it’s kinda boring as hell, but that’s the whole point. I was like, just let us sit there. Turns off a little bit of money here and there. It’s nothing sexy, but it’s generally, you know, chasm consistency.

Right.

Joe: [00:07:16] And then you forget the rest. I remember I said basic principles. You forget all the reasons why, right? You forget about the appreciation that you know, you forget about appreciation, you forget about amortization, you forget about all the tax benefits, 10 31 whatever you want to do. You forget about those things, your false hope focused on cash flow.

And then if someone doesn’t cash, you’re pissed. Cause, Oh, I got to put a roof on this year. It didn’t cashflow, but you forgot about the depreciation for the property. You forgot about. There was some appreciation. So there are so many reasons, but. You forget those principles sometimes.

Mike: [00:07:45] Yep. Yep. So you’ve been having some, some regrets, it sounds like,

Joe: [00:07:48] right?

A little bit. Yeah.

Mike: [00:07:50] Yeah. Yeah. So there’s nothing wrong with kind of pruning your dogs eye, right? I mean, it’s one thing. You’ve been in this long enough. I mean, you’ve done so many deals. It’s, you got to kind of [00:08:00] prune your dogs, right? If something’s not working, you can get rid of it. But, uh, any kind of thoughts like share, share with us some kind of lessons learned of, uh.

You know, what’s your thinking now after? So how many, how many, I guess, I know you’ve sold hundreds of your houses over the past few years, but what have you sold, I guess, over the past year? A year and a half. That, um, kinda tell. Tell us a little bit more about the story if you don’t mind. So,

Joe: [00:08:20] yeah, no problem.

So in 2014 I peaked at 217 single family homes. And then at that point, uh, the, that amount of doors was either you get there, gotta cut back or you got to go. At least a hundred plus more doors because you’ll need more leasing agents. You need more disposition. Team need more project managers. So at that time, because I was went through a period where I was just buying to buy, I would buy anything.

I decided to cut it down, right? So went from two 17 down to 125 and what I did was I, when I sold those, I took the, uh, the cash from that and pay off the existing data on the one 25.

Mike: [00:08:53] There you go.

Joe: [00:08:53] So that, that’s where. It landed me. And, uh, I still at that time thought, you know what? Maybe the market was so high.

I’m like, [00:09:00] maybe I should just get out of some of these. So I went and sold another 50, and, uh, w w wound up about 75 doors. Right? And that’s where I’m at today. Uh, 75 singles. And then, but still, and it’s still a lot of doors and it’s awesome. There’s a lot of cashflow, but I still have leasing agents.

Project managers, disposition team office, add staff to, to maintain that. Right. Uh, and uh, you know, it’s

Mike: [00:09:22] probably didn’t go down at all from one 25 down. No,

Joe: [00:09:25] it didn’t. And me, I really didn’t sell like the dogs. Me, I was just like selling just, I don’t know, like whatever. Someone called in and wanted to buy.

I was like, yeah, I’ve got a great one over there. So I had sold like these great gold houses to whatever, you know, I just wasn’t really thinking. I thought I was going to sell them all. And then, but as you go through the journey. That. That’s what started happening. I started seeing the casual, not as big, and I’m going, wait a second.

I’m used to maybe, you know, uh, taking a distribution and paying the country club or pain, you know, I don’t know. The Costco bill, whatever. Right? And I’m like, well wait, I can’t do that. [00:10:00] You know, the cash is not there. I can’t believe some reserves. Then I’m going, Oh, well, what am I going to do? Well, he didn’t buy any houses because the market’s so constricted.

Well, go to the old bank account and you take 5,000 out. 10,000 hours and going, wait a second. You got a couple of times you start getting the fear sets in, right? Like, well, if I do this for the next 36 months or whatever, I’m making up numbers. It could be the next 10 years for all I know, but you’re going to be broke.

And at 41 I can’t do that. You know?

Mike: [00:10:27] It’s funny too, there’s just this mindset of like, what are you going to do if you’re not doing what you know? Right. And so our buddy, you know, our buddy Todd Murphy, he sold off almost as entire portfolio in January, right before all this covert stuff happened. And he looks like a genius now, you know?

But he was like, man, I can’t believe how much they paid for my entire portfolio. Like he was just like, he couldn’t say no. Right. And Heinz, they didn’t plan anything. It just worked out that way. But I talked to him a little while back and he like. He’s lost. He doesn’t really know what to do with themselves because that was such a big part of his identity and his day to day life was, was managing that.

And I know he’s going to build it back up, but [00:11:00] you know, sometimes you, it’s not just a financial thing. It’s kind of like it’s part of your identity of who you are and how you know what to do, right? Yeah.

Joe: [00:11:08] Absolutely. It’s part of your identity. That’s all I really know him, and I’m the guy that buys passive cash flowing investments.

I’m the guy that sells turnkey property. It’s just, it’s what I do. It’s who I am, you know? So, yeah, it’s definitely identity crisis.

Mike: [00:11:20] No doubt. Yeah. Yeah. So, uh, what do you think the market is going here? I mean, here we are. Tom, we’re recording this. It’s a kind of entering kind of late April, I guess. Where do you think a, I mean, if you’ve been through several cycles, you’ve been doing this, like you said, 22 years.

Every market’s different, but you know, the truth is, is, uh, if you thought you could sell the top of the market right before a recession and then you could go back and buy stuff on sale, of course nobody can ever plan that. But you, that might be a situation you’re in here is you have an opportunity to go buy back.

Equivalent houses for cheaper than what you sold them for here in the short term. I mean, do you feel like, not that you timed that or [00:12:00] maybe you did, I don’t know your, I know you’re a genius Joe, but, well, I mean, do you, where do you see the market going here? Do you think there’s going to be a dip here? I don’t.

None of us know, but what do you think.

Joe: [00:12:08] You know, if you hear some of these economists and these big shots from the, uh, mortgage bankers association, they say, no, there’s not going to be an issue. But I can just talk about personal experience and I can talk about Cleveland, Ohio, right? So here’s what I do know.

Non QM loans are going by by, right? I mean, it’s subprime, right? They’re not. They’re big part of the market. You see FHA, VA going from five 80 to six 85 goes, you see, just recently, chase wanting 20% down, 700 FICO to get alone. Right. It’s going to create problems in the marketplace. Um, I personally did a, I don’t want to call it a luxury home flip, but a nicer home flip in Cleveland.

That’s about a two 50 to 300 price point. I have a very. Very nice property in a great neighborhood, a rated area, ranch style home, very desirable, desirable. And a market is absolutely flat, [00:13:00] not even a showing. And it’s interesting, I talked to other real, I’m a real estate broker too, so I talked to my other real estate broker friends, and they’re saying the same things.

It’s flat. It’s completely flat. Um, now different price points can be different. Right? Um, but. I also see private lenders coming out there and not necessarily wanting to lend. You’re seeing, you’re lending home, you’re seeing your Lima ones. Uh, you’ve seen Zillow offers Zillow and offer pad, and although they’re not my market, but I know there are other markets, they ceased operations, right?

Mike: [00:13:30] Yup.

Joe: [00:13:31] Well, dude, I mean, if there is no money to buy him, even if you want to buy it. And there’s no money to buy him. If I’m, if I’m a private lender myself and I don’t want to lend, well, how do you get the money to do the deal, right? If no one’s lending, even private lenders, which is big in our business, right in the secondary market, big, so it’s going to create supply.

In my opinion, people still need to sell for whatever reason, or that’s a death or divorce or whatever, and if there’s not money to buy it, the supply simple supply and demand me, the supply increases, supply increases. There’s no demand. The price has to [00:14:00] drop. Yeah. Well, how much will it trap? Will it be 2008 levels?

I think it’s anything like that. No, but I do think there will be some type of reset.

Mike: [00:14:09] Yeah. And it’ll be market specific, like you said. And even inside of markets it’ll be neighborhood specific. So like you said, some of the, if you’re, you know, stuff above the median price point in your market, whatever market you’re in now will slow down faster than stuff that’s below the median price point.

Just cause you know, there still will be first time homeowners buying houses and. They, uh, you know, they, they can’t go downstream too far. So it just depends on the market. Right,

Joe: [00:14:32] exactly. It’s gonna depend on the market and what loans are available and different things like that.

Mike: [00:14:38] Yup. Yup. So what, what’s Joe, you’ve been doing this a long time.

What? What’s some wisdom you can share with people? You and I have a lot of common friends. You’re, you’re in our investor fuel mastermind. There’s a lot of young bucks in there that are aspire to be more like Joe and accumulate rentals and stuff like that. What’s, what’s some advice you can give to people that are active investors that want to keep [00:15:00] more, but maybe they’re not keeping as many as they like, or what’s some kind of wisdom you can share with people that are in that situation?

Joe: [00:15:05] Well, they better. They better keep more. Otherwise, 20 years is going to get behind you and you’re still going to be out there hustling, trying to figure out what the next hottest thing is, whether it’s a lead Sherpa or a sauna or some damn software you gotta use to run your business. You know, um, this business is about, it’s a lifestyle business.

It’s about a freedom and a passion for the business and really, uh, cashflow. I mean, to me, that’s what it comes down to. And, uh. You better figure out a way, whether it’s cash flowing rentals or doing joint venture agreements or some way to put yourself in a position, education business, some way to make it somewhat passive so you’re not having to constantly recreate all the time.

Mike: [00:15:47] Yeah, yeah, yeah. Whether you’re rehabbing or wholesaling, and a lot of people make a lot of money doing that, and I’ve made a lot of money doing that. But it’s a, you’re only as good as your, as your last deal or your next deal, right? I guess so. Yeah. There’s no doubt about it. It’s, it’s a [00:16:00] trade. It’s a, it’s trading time for dollars ultimately.

And, uh, that’s one of the things that are nice about rentals for sure. So, uh, well, Joe, you’ve been a member of a investor fuel from the very beginning. You were, you know, right there, day one, you remember the, if you remember that event, we had like 25, 20, maybe 20 people in a hotel room. Now we’ve got, you know, our typical room has 160 170 people in it at its max.

Any, any kind of thing. Any thoughts you can share on a testimonial wise for investor fuel?

Joe: [00:16:27] Absolutely. I mean, you know, first of all, you have a great group and you have a great group of guys. It’s a wonderful place to be. I love coming. So I come all the time. Um. So here’s my thoughts on a mastermind, right?

I’m 22 years in business. Really didn’t discover, discover the mastermind format until about 2012 and that, for me, in my business was the moment everything changed, right? Was when you start masterminding and there’s, you know, there’s six key principles I’m not going to get into right now, but there are six key principles of a great mastermind, and one of them is the multiplier and influencer effect, right?

[00:17:00] And when you get into rooms that likeminded people. You’re influence number one, and then you can multiply the effect as well. Right. You know, through connections, through opportunities. It’s the only way you’re ever going to really expand your, your business and your mindset and your knowledge. You can’t do this at a local REIA.

There is a difference between a Raya and a mastermind when you’re paying to come to an event like investor fuel. It’s top tier and you want it that way because only the best of the best are getting in that room. Right. And I know you and your team do a great job of screening people, uh, for obvious reasons.

Cause we all want to be around a players and only a players can write the checks that come to these events. So it really has a great weeding out. The process and it’s been nothing but a phenomenal experience and a has really 10 X my business man.

Mike: [00:17:49] Awesome. Thanks Joe. I appreciate that. It’s like, yeah, I know you’re at your, you said you’re at your summer home there, even though it’s still a little chilly up there and you’re a member of the country club, right?

It’s, it’s, it’s kind of like joining a country club. Just the [00:18:00] relationships you can make the knowledge, the opportunities to get around people that are maybe maybe a level or two above you that you aspire to be more like, right.

Joe: [00:18:08] You don’t man. Exactly. Like. And I had to do this many years ago. It was take a hard look at your 10 closest friends, right?

And I did notice that common common thread, you know, we’re all very close in income. Not that it was bad or anything, but when I join a mastermind like investor fuel and I, you know, the, the incomes are significantly higher than, than your network at home, generally speaking. And you grow, a fish grows the size of his tank, right?

And that’s what happens when you’re in a. A place that can vest, refuel you by being around that you grow and you’re naturally going to become a different person with mindset and your income is going to increase. That’s why we’re here. Right. And it does. It fricking works, bro. That’s exciting.

Mike: [00:18:50] Awesome.

Well, we appreciate you. So Joe, I know you’ve got a podcast now. I think you, you know, you’ve been on on my show before. We’ve been talking for a long time, and, uh, [00:19:00] I think you decided to finally pull the trigger and start a podcast here recently. I did learn more about how to connect with you or how to find your podcast or all this other stuff.

Joe: [00:19:08] Oh, it’s awesome. Yeah. Look for me on iTunes. Uh, my podcast is called Cleveland, a real estate investor. It’s specifically about Cleveland real estate, but, uh, it’s a lot of great information. Uh, you know, being a 20 year plus vet and the real estate investment space. I still do, you know, I talk about broader, uh, uh.

Things going on than just clipping real estate. But, uh, you find me there, I’ll look under, you know, cause they, Cleveland real estate investor or my name Joe Lieber and, um, all the information’s there, man.

Mike: [00:19:35] We’ll find, we’ll, we’ll add a link down below for you. So, yeah, I know that you said it’s about Cleveland, but at the end of the day, like I know you share a lot of principles that are universal to you.

I mean, you can’t, for the most part, you know, there’s an element of real estate. If you’re talking about vendors or stuff like that, that’s a, that’s a local, but a lot of it’s hard to talk about real estate much without being kind of universal.

Joe: [00:19:55] Well, it is, right? Even just our little talk here about the mastermind just a few minutes ago.

I mean, you know, that’s, people [00:20:00] want, how’d you do a Joe? How’d you grow that? How’d you 10 X? Well, that was things like that. It was investor fueled. Yep. Brought me to the next level. Yeah, that’s really cool, man.

Mike: [00:20:08] Cool buddy. Always good to see you, my friend.

Joe: [00:20:10] Good to see you too.

Mike: [00:20:11] They save up there. Well, we’ll talk again soon.

Okay,

Joe: [00:20:13] you got it, bud. Bye everybody.

Mike: [00:20:15] Everybody. Hey, thanks for joining us today with my buddy Joe, who was on lockdown. He needed us to come talk to him today cause he’s bored out of his mind. Probably, uh, as are a lot of us right now. So hope you guys are staying safe out there. If you haven’t yet subscribed to our podcast here.

Go to investor fuel.com you can find access to all of the shows we’ve done so far. Of course, you can find us on iTunes, Stitcher, Google, play, YouTube, anywhere where you’re watching or listening to this right now, you can find us. I’d love it if you subscribe and give us a positive review. If you’ve got some good value today, till then, have a great week.

We’ll see you on the next show.

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