Real Estate Investing: Maximizing Cash Flow and Profit Split With Jorge Maciel
Introduction
The real estate market is constantly evolving, and it's important for investors to stay ahead of the game. In a recent conversation between Jorge Maciel and Josh, they discussed the top markets for cash flow and real estate investment going into 2024. In this blog post, we will summarize their conversation and provide insights into the best markets for investors. Whether you're a seasoned investor or just starting out, this information will help you make informed decisions and maximize your returns.
When it comes to weightlifting, it's important to challenge yourself and push your limits. In a recent conversation between Jorge Maciel and Josh, they discuss their experiences with cleaning over 200 pounds. Jorge admits that it has been years since he last attempted such a feat, while Josh shares a costly mistake he made in his real estate investment (REI) journey. Let's dive deeper into their conversation and learn from their experiences.
Key Takeaways:
Seek properties with positive cash flow to ensure a steady stream of income and maximize returns. Location is key for vacation rentals, targeting areas near universities, hospitals, or corporate offices.
Thorough market research and due diligence are crucial before investing in a property to avoid potential pitfalls. Learn the processes involved in managing vacation rental properties and consider hiring a property management company as the portfolio grows.
Stay informed about market conditions and adapt strategies accordingly for long-term success in vacation rentals. Boutique hotels can be lucrative investments, especially in established vacation rental markets like Branson, Missouri.
The real estate market selection is crucial, aligning with investment goals and available capital. Consider investing in low-income homes for cash flow potential, such as Section 8 housing.
Choose the right market for Airbnb rentals by researching and analyzing potential markets for profitability. Furnished rentals can attract higher rents and a different demographic of tenants, targeting specific locations.
Finding Lucrative Deals in the Market
The Importance of Cash Flow in Real Estate Investments
Real estate investing has become an increasingly popular way to generate passive income and build wealth. In a recent conversation with Jorge Maciel, owner of BrickHouse Fitness, we delved into the world of real estate investing and explored strategies for maximizing cash flow and profit split. Jorge, who is looking to make his first mid to long-term investment in the U.S., sought advice on finding lucrative deals and ensuring a steady cash flow.
When it comes to finding profitable real estate deals, Jorge was eager to learn from experienced investors like Josh. Josh emphasized the importance of seeking properties that offer a positive cash flow. Cash flow refers to the income generated from a property after deducting all expenses, such as mortgage payments, property taxes, and maintenance costs. By focusing on properties that generate consistent cash flow, investors can ensure a steady stream of income and maximize their returns.
Jorge was curious to know about the biggest mistake Josh had made in his real estate journey. Josh candidly shared that they had purchased a property two years ago that still remained unrented. This experience taught them the importance of thorough market research and due diligence before investing in a property. It is crucial to assess factors such as location, demand, and rental potential to avoid potential pitfalls and ensure a profitable investment.
Diversifying Investments: From Boutique Hotels to Rental Properties
The Potential of Boutique Hotels as Lucrative Investments
Jorge shared an exciting investment opportunity within his family - a boutique hotel currently under construction. Located just a few hundred meters from the ocean, this 12-room hotel promises a unique experience for guests. Despite being in the final stages of construction, the hotel is already generating income through room rentals. Jorge highlighted the seasonal nature of the business, with the highest occupancy rates occurring from October to April.
In addition to the boutique hotel venture, Jorge expressed interest in investing in the Midwest, particularly in cities like Cleveland and Columbus. He was initially unsure about the profitability of low-income homes, often associated with Section 8 housing. Seeking guidance from Josh, who had experience in these markets, Jorge wanted to explore the cash flow potential of such properties.
Josh shared his own experience of investing in the Midwest, specifically in Columbus, Ohio.
Finding Profitable Markets for Airbnb Rentals
In a recent conversation with Jorge Maciel, Josh discusses the importance of choosing the right market for Airbnb rentals. Just like picking a long-term rental market, it is crucial to research and analyze potential Airbnb markets to maximize profitability. Josh suggests using websites like AirDNA or Rabbu data to estimate rental income based on the property's address. By doing thorough market research, investors can make informed decisions and find lucrative opportunities in the vacation rental market.
The Benefits of Branson, Missouri as a Vacation Rental Market
Josh mentions that Branson, Missouri is an established vacation rental market with great potential for profitability. Unlike other markets that may experience fluctuations in demand, Branson offers stability and consistent rental income. This makes it an attractive option for investors looking to generate passive income through Airbnb rentals. By investing in a property in Branson, investors can tap into a market that has a proven track record of success.
The Process of Acquiring a Vacation Rental Property
Jorge asks Josh about the process of acquiring a vacation rental property. Josh explains that they purchased a property in Branson for $185,000, which was already set up as a vacation rental. They then made some updates to the furniture to enhance the property's appeal. The partner they bought the property with had secured a line of credit, allowing them to purchase the property in cash. Josh estimates that the property will generate around $115,000 in revenue with expenses totaling approximately $50,000. The profit is then split between the partners.
Finding Deals in the Vacation Rental Market
Jorge is curious about how to find deals in the vacation rental market. Josh explains that while some properties may be listed on the market, it is essential to explore other avenues as well. He suggests networking and connecting with local property owners who may be interested in partnering or selling their vacation rental properties. Additionally, hiring a property management company can be a viable option for investors who do not want to be actively involved in the day-to-day management of their Airbnb rentals.
The Importance of Learning the Processes
Jorge and Josh discuss the importance of learning the processes involved in managing vacation rental properties. Josh advises that in the beginning, it is beneficial to be actively involved in the management to save money and gain valuable experience. However, as the portfolio grows, investors can consider hiring a property management company to handle the day-to-day operations. This allows investors to focus on expanding their portfolio and maximizing their profits.
The Impact of Market Conditions on Vacation Rentals
Jorge asks Josh about the impact of market conditions on vacation rentals. Josh explains that just like any other real estate investment, market conditions can greatly affect the profitability of vacation rentals. Factors such as supply and demand, competition, and local regulations can all impact the success of a vacation rental property. It is crucial for investors to stay informed about market trends and adjust their strategies accordingly to ensure long-term success.
The Future of Vacation Rentals
Jorge and Josh discuss the future of vacation rentals. Josh believes that the vacation rental market will continue to thrive, especially as more people seek unique and personalized travel experiences. He also mentions that the COVID-19 pandemic has shifted the way people travel, with many opting for private accommodations over crowded hotels. This presents a great opportunity for investors in the vacation rental market. However, Josh advises investors to stay vigilant and adapt to changing market conditions to stay ahead of the competition.
Josh and Jorge Maciel also discusses about their experiences in real estate investing. They touched on topics such as finding profitable deals, cash flow opportunities, and different investment strategies. Jorge shared his plans for investing in a boutique hotel and renting out rooms on Airbnb, while Josh talked about his successful rehab projects and partnerships.
They showed the importance of diversifying real estate investments across multiple markets, such as Columbus, Dallas, Johnson, Missouri, and Lake Tahoe. The authors emphasize the value of conducting thorough research using platforms like AirDNA and Rabbu to determine the potential income of Airbnb rentals.
They also highlight the benefits of investing in established vacation rental markets like Branson, Missouri. Branson, Missouri is highlighted as an attractive vacation rental market due to its stability and consistent rental income.
Additionally, the blog post touches on the significance of finding deals on the market, managing properties effectively, and considering long-term rental options for consistent cash flow. Overall, it is crucial to stay informed about market trends, take advantage of low interest rates, and prioritize cash flow when making real estate investment decisions.
The Importance of Market Selection
When it comes to real estate investment, market selection is crucial. Jorge and Josh agree that you can find good deals in almost any market, especially in the Midwest. According to Josh, you could literally throw a dart in the Midwest with your eyes closed and still find success. However, the market you choose should align with your investment goals and the amount of capital you have available.
Determining Your Nest Egg
To determine the best market for your investment, you need to consider your nest egg. How much capital do you have available to invest? Jorge mentions that he would be willing to invest north of $75,000. Josh suggests that with $100,000, you have more than enough to invest in a long-term rental property in the Midwest. This opens up a range of possibilities for investors with a decent amount of capital.
Balancing Cash Flow and Appreciation
Jorge expresses his desire to have the best of both worlds - cash flow and appreciation. While he acknowledges that it may not be possible to find a market with crazy appreciation like California, he believes that a decent appreciation combined with cash flow is ideal. Josh agrees and emphasizes the importance of being realistic in your expectations. It's all about finding the right balance that aligns with your investment goals.
Exploring Midterm Rentals
Josh introduces the concept of midterm rentals, which are medium-term rentals that cater to corporate housing and travel nursing. These rentals typically range from 30 to 90 months and offer higher cash flow with less effort. Jorge mentions that his girlfriend is a travel nurse and sees the potential in this type of investment. By targeting specific areas close to facilities, investors can maximize their returns and minimize vacancies.
The Benefits of Rehabbing
Jorge admits that he has never rehabbed anything other than his gym. He's always been hesitant to take on a rehab project because he's heard horror stories about bidding wars with contractors and projects going over budget. However, Josh reassures him that rehabbing can be a profitable venture if done correctly. He suggests starting small with cosmetic renovations, such as painting and updating fixtures, before moving on to larger projects.
Finding the Right Contractors
One of the key factors in successful rehabbing is finding the right contractors. Josh advises Jorge to do thorough research and get multiple bids from different contractors before making a decision. He also recommends checking references and asking for examples of their previous work. By taking the time to find reliable and skilled contractors, Jorge can avoid the headaches and delays that often come with inexperienced or unreliable workers.
Budgeting and Managing Costs
Another important aspect of rehabbing is budgeting and managing costs. Josh advises Jorge to create a detailed budget for each project, including all materials and labor costs. He also suggests adding a contingency fund of at least 10% to account for any unexpected expenses that may arise. By closely monitoring costs and sticking to the budget, Jorge can ensure that his rehab projects remain profitable and don't eat into his cash flow.
Maximizing Cash Flow with Furnished Rentals
Josh introduces the idea of maximizing cash flow through furnished rentals. He explains that by furnishing rental properties, investors can charge higher rents and attract a different demographic of tenants, such as traveling professionals or students. Jorge is intrigued by this idea and asks about the logistics of furnishing a rental property. Josh advises him to start small by purchasing basic furniture and gradually adding more as the demand for furnished rentals increases.
The Importance of Location
When it comes to furnished rentals, location is key. Josh explains that properties located near universities, hospitals, or corporate offices tend to attract more tenants in need of furnished accommodations. He suggests that Jorge research local demand and market trends to identify the best areas for furnished rentals in his chosen market. By targeting the right locations, Jorge can maximize his cash flow and ensure a steady stream of tenants for his furnished rentals.
Managing Furnished Rentals
Managing furnished rentals can be more time-consuming than traditional rentals, but the higher cash flow potential makes it worth the effort. Josh advises Jorge to consider hiring a property management company to handle the day-to-day operations.
The Costly Mistake
Josh reveals that his biggest mistake in REI was an Asian property in Hudson Columbus. He purchased the property two years ago with the intention of renting it out, but it still remains unoccupied. This mistake has cost him a significant amount of money. However, he sees it as a loss tax write-off. He proceeds to share the story behind this costly mistake.
The Unforeseen Circumstances
Josh explains that he bought the house without realizing that the two neighboring houses were sober living houses. These houses are meant for individuals who are undergoing rehabilitation and transitioning back into society. This unexpected discovery was a major oversight on Josh's part. He acknowledges that better research could have prevented this situation.
The Initial Plan
Interestingly, Josh initially bought the house with the intention of turning it into a club. However, due to the unforeseen circumstances, he had to change his plans. This unexpected turn of events added to the complexity of the situation.
The Lengthy Renovation Process
Josh further explains that the renovation process for this property was far from smooth. The contractor he hired took 14 months to complete the project, which was already delayed by six months. This delay resulted in additional costs and further contributed to the overall loss. The house, which was supposed to be a flip, ended up being a significant financial burden.
The Extensive Renovation Costs
To make matters worse, the renovation costs for the property were substantial. Josh invested $135,000 to completely renovate the house, including new plumbing, electrical work, HVAC systems, and aesthetic upgrades such as granite countertops and hardwood floors. These expenses were initially justified by the expectation of a profitable flip.
Learning from Mistakes
Reflecting on his costly mistake, Josh emphasizes the importance of thorough research and due diligence in any real estate investment. He advises others to carefully consider the location and potential challenges that may arise. Josh also highlights the significance of having a reliable and efficient contractor to avoid unnecessary delays and additional costs.
Pushing the Limits in Weightlifting
Switching gears, Jorge shares his experience with pushing his limits in weightlifting. He recalls the time when he attempted to clean over 200 pounds, a feat he hadn't tried in years. Despite the initial struggle, Jorge was determined to challenge himself and see how far he could go. With consistent training and perseverance, he eventually achieved his goal and surpassed his previous personal record.
The Front Squat
Jorge explains that one of the key exercises he incorporated into his training routine was the front squat. This exercise helps to strengthen the muscles used in the clean, particularly the quadriceps, core, and upper back. By focusing on improving his front squat, Jorge was able to build the necessary strength and stability required for successful cleans.
The Hang Clean
Another exercise that Jorge found beneficial in his journey to clean over 200 pounds was the hang clean. This variation of the clean starts from a standing position with the barbell held at the thighs. By practicing the hang clean, Jorge was able to work on his explosiveness and technique, which are crucial for executing a successful clean.
The Squat Clean
Lastly, Jorge incorporated the squat clean into his training routine. This exercise involves catching the barbell in a full squat position after the clean. By performing the squat clean, Jorge was able to improve his mobility and flexibility, allowing him to achieve a deeper squat position and maintain proper form throughout the lift.
Setting Goals and Tracking Progress
Both Jorge and Josh agree on the importance of setting goals and tracking progress in their respective endeavors. Whether it's in weightlifting or real estate investment, having clear goals helps to provide direction and motivation. By regularly tracking their progress, they were able to identify areas for improvement and celebrate their achievements along the way.
Consistency and Patience
Jorge emphasizes the need for consistency and patience in weightlifting. Progress may not happen overnight, but with consistent training and a patient mindset, one can gradually improve and reach their goals.
Conclusion
The challenges and mistakes faced by Jorge and Josh in their real estate investment journey. From the costly error of buying a property next to sober living houses to the delays and additional expenses incurred during the renovation process, they have learned valuable lessons in vetting neighborhoods and managing contractors. Despite the setbacks, they were able to appraise the property for a higher value and repay their investors.
Choosing the right market for Airbnb rentals is crucial for maximizing profitability. By conducting thorough market research and analyzing potential markets, investors can make informed decisions and find lucrative opportunities.
Learning the processes involved in managing vacation rental properties and staying informed about market conditions are also essential for long-term success. With the future of vacation rentals looking promising, now is a great time for investors to enter the market and capitalize on the growing demand for unique travel experiences.
When it comes to finding the best markets for cash flow in real estate investing, the Midwest is a solid choice. With a decent nest egg of $100,000, it is possible to achieve both cash flow and appreciation, although not at the same level as high-appreciation markets like California.
One interesting strategy to consider is investing in mid-term rentals, such as corporate housing or travel nursing, which can provide higher cash flow with less effort and expense. By focusing on localized areas and involving family members in the rehabbing process, investors can maximize their returns and avoid costly mistakes.
Moving forward, they have enlisted the help of a property management company to handle the rental process. With a focus on continuous learning and adapting their strategies, Jorge and Josh are determined to succeed in their REI endeavors.
