Andra Rus 
We’re happy to present to you Alexander Aguilar, a real estate investor who also blogs on Cash Flow Diaries about his journey to reaching financial freedom by investing in turnkey rentals (properties that don’t need any fixing and come with a screened tenant, plus property management). He started blogging as a way to track his own investment strategies and that led to a bigger network of real estate contacts and financial experts. In his own words: “Once you start sharing knowledge it seems to come back at you twofold.”
This interview is rich in tips on how to choose the right investment property, when you should walk away from one and how to choose a property manager you can rely on, and so much more! For example, here are the characteristics of a good investment market, according to Alexander: increasing population, great economy, and affordable real estate.
Read on for even more advice in this highly educational interview!
Q: What is the story behind your blog, Cash Flow Diaries?
About 7 years ago is when I came to the realization that investing in real estate would be the key to reaching financial freedom. I started with flipping a house then moved my way to acquiring rental properties. About a year ago I stumbled upon the world of personal finance blogs and was very intrigued by people sharing their own personal finance and investment strategies. I thought it would be a great idea for me to start Cash Flow Diaries as a means to keep track of my own investment strategies and to share to the world how I plan on obtaining early retirement.
I write all about each of my investments, strategies that I use and even share detailed financial numbers which seem to resonate well with other investors. After all, investing is all about the numbers at the end of the day. I find it motivational and inspirational reading about other success stories and hope that my blog Cash Flow Diaries will do the same to others.
Q: Is blogging helping you be a successful investor? How?
Unsuspectingly, Blogging actually has helped me become a more successful investor. It’s amazing how many other people will reach out to me and share their journey and experiences. Because of the blog, I have been able to build a bigger network of real estate contacts and other personal finance experts who are helping me find better deals and even shaping the way I invest. Once you start sharing knowledge it seems to come back at you twofold. I also find that by sharing my details and journey to the world that it keeps me focused to succeed and continue getting better at everything I do. I love blogging and do not plan on stopping even when I do finally hit financial freedom.
Q: What is a turnkey rental and why do you prefer this approach?
A turnkey rental is basically just an investment property that does not need any fixing, comes with a screened tenant and is cash flowing for you from day 1 when you close. There are companies out there who buy fixer uppers, fix them up, find tenants, provide property management and sell these houses to investors like myself. Living in an expensive market (Austin, TX), I was forced to get out of my comfort zone for finding cash flowing properties because I was not able to find these deals in Austin anymore. It led me to researching other markets in different states to look for these investment properties. I stumbled upon these turnkey rental companies that provided this service to investors like myself and it seemed to be a great fit for me. Buying rental properties out of state is not for the faint of heart however can be done once you find a reliable and trusted source to supply the properties. I have been buying turnkey rentals for the past 2 years in Indianapolis and Kansas City and so far it has proved to be a great investment strategy.
Q: To start investing in real estate, do people need special training and market knowledge?
Investing in real estate can be a means to reaching financial independence and can also be a great way to diversify an investment portfolio. To start investing in real estate I think the more knowledge you have on the different forms of investing the more ammunition you have to make an educated decision on whether or not an investment property is good for you. There are many different ways to invest in real estate which include wholesaling, flipping, buy and hold, note investing and even REITs if you are looking for a super passive way to invest.
I personally go for the buy and hold route because of the monthly cash flow it provides and the tangible asset you own at the end of the day. It is imperative an investor takes the time reading sites like property shark, reading real estate investing books and building a network of experienced investors behind their belt to help gain the knowledge needed to be a successful real estate investor.
Q: How do you choose the cities/markets to invest in? What would you recommend to beginning investors?
If you want to start investing in RE I would always recommend starting in your own backyard. Your local market can be a great source for investing depending on where you live and what kind of investing you want to do. If you happen to live in a market that is too expensive for you then the possibility of choosing a different market is very doable. I personally like to invest in markets that have the following qualities for finding cash flowing rental properties:
- An increasing population. Markets with increasing populations are great for the economy, job industry and overall growth of a city.
- A great economy. Jobs are a huge factor for me when choosing a market to invest in. You should stick to a market with an abundance of jobs and a variety of job industries.
- Affordable real estate with good price/rent ratios. I personally like to purchase rental properties with what I call the 1% rule. The 1% rule merely indicates that the rent price of a given property should be at least 1% of your purchase cost. So if you purchase an investment property for $100k, you should look to have at least a $1000 rent value. This ratio seems to be a good indicator that the property will cash flow to your advantage.
As a beginning investor, you should take the time to analyze the market you choose to invest in as well as the properties in each market to make sure you will make money. After all, the main reason you want to invest in real estate is to make money!!
Q: What are some of the advantages/disadvantages of investing in rental properties if compared to flipping for example?
There are many advantages and disadvantages of the different forms of investing with real estate. Flipping houses can be a great way to generate a lump sum of cash profit which can then be turned into flipping more and more houses. If done properly flipping can be an amazing way to generate income and build wealth. On the flip side (pun intended), flipping houses is not a passive way to invest. It takes a lot of effort and time to flip houses which in my opinion is similar to having a job. In order to sustain your flipping income, you must continue flipping houses.
Rental properties on the other hand is a more passive way to invest in real estate. Once the purchase process is complete, the property can provide a monthly stream of income for many years to come. The more rental properties you acquire, the more income you can make which can eventually lead to not having to work a normal day job anymore. This is my preferred way of investing as I think the monthly income it provides will lead me to early retirement. Rental properties also have their disadvantages. Having tenants and being a landlord is not something everyone enjoys. There will be times when you get a bad tenant, have evictions, late payments and even have your rental property destroyed. It is important you consider all these factors when choosing your preferred method of real estate investing. If you anticipate these types of issues occurring and are prepared to deal with them it will make investing easier. At the end of the day even with the potential negatives, you can still come out on top and reach financial independence
Q: How should investors choose their property managers?
Having property management is a great way to really make your rental investments passive. I personally use property management on 4 of the rental properties I own that are located outside my local market. A property manager can however make or break you. It is vital you diligently vet your potential property manager in effort to find a good and reliable PM. Having a bad property manager can eventually lead to an under performing rental asset. From collecting rent payments to screening tenants it is very important a property manager handles all situations efficiently and in a timely manager.
Be sure to properly screen and interview any property manager you are contemplating on hiring. It is important as well to ask for references of current investors using the PM. Speaking with another investor who currently uses the property manager can be a great way to see how the property management team performs and treats their clients. I have actually compiled a list of 31 interview questions to ask a property manager which I would highly recommend you use when you begin your property management search. You can find the questions here:
31 Questions To Ask A Property Manager Before Hiring
Q: When should an investor walk away from a potential deal? Has it happened to you?
It is very important as an investor to know when to walk away from a deal. There will be times you go under contract to purchase a property and come to find out later on in the process that the property will not be able to provide the initial investment you calculated in your research phase. Here are some of the items to look out for that can break a deal after going under contract.
- Inspection issues. You will want to make sure to get a 3rd party home inspector to inspect your deal and analyze all the potential issues that come with the property. It is very possible an inspector will find problematic issues with the investment property that you were not aware of. These types of issues can end up hurting your income potential and break a deal. Foundation issues, structural damage and other important high priced mechanical items in the house can be a game changer if you have not calculated fixing or repairing these kinds of issues in your initial estimates. If you find any issues from the inspection that will drastically change your numbers and your seller is not willing to fix them I would recommend at this time to walk away from the deal.
- Appraisal issues. Investing in real estate is great because it is possible to make money during the time of purchase. If you purchase a property under the current market price then you are starting off with real estate equity which is great! It is also possible to lose money if you end up purchasing a house for more then what it is actually worth. Obviously I would never recommend you do something like that and having an appraiser come out to appraise the property can save you a ton of money. If your potential investment property is appraised lower then what you are purchasing the property for then now is a great time to re-negotiate your deal with the seller. If the seller is not willing to work with you on the purchase price then I personally would walk away from the deal.
These issues have happened to me and I have had to walk away from a few deals in the past. You will eat the cost of the inspection/appraisal fees but at the end of the day, you will be saving a lot more money down the road if you proceeded with that purchase.
9. Any other insights you’d like to share?
First I would really like to give a shout out to Property Shark for giving me the opportunity to share my story, tips and investment strategy with you. If you have a dream to retire early and be financially free then investing in real estate can provide this for you. It is important to gain as much knowledge as you can on the subject and to actually take action. Opportunities, deals and financial freedom will not be handed to you or come easy. It is important you take life in your hands and take the necessary steps needed to get where you want to be. Good luck!
BIO:
Alexander Aguilar is an entrepreneur/real estate investor/blogger dedicated to reaching financial freedom and retiring early through real estate investing. He is highly motivated and has a deep passion for helping others achieve greater success. He is the founder of Cash Flow Diaries – A blog dedicated to tracking his journey to financial independence and sharing intimate financial details for the world to see.
Twitter: @CashFlowDiaries
Facebook: Cash Flow Diaries
