Hybrid Investing, Long Distance Rentals, & Management w/ Mike McKinzie | BiggerPockets Podcast 085

TL;DR

Mike McKinzie shares insights on hybrid investing and property management.

Transcript

are you looking to become a better real estate investor and hang on because you're about to experience another episode of the world's most popular real estate podcast the bigger pockets podcast but before we get to this week's show i wanted to invite you to become part of our community biggerpockets.com the real estate investing social network the ... Read More

Key Insights

• Mike McKinzie emphasizes the importance of due diligence in real estate investing, advocating for understanding market conditions and property values before making purchases.
• Hybrid investing, a combination of buy-and-hold and flipping strategies, can maximize returns by leveraging appreciation and cash flow.
• Effective property management is crucial for long-distance real estate investing, with a focus on communication and using external contractors for objectivity.
• Mike suggests maintaining a balance between cash flow and appreciation, selling properties when rental income becomes less than half a percent of the property value.
• Networking with property managers can provide opportunities for acquiring properties with existing tenants and management, simplifying the investment process.
• Mike advises against relying solely on appreciation, highlighting the risks of market downturns and the importance of maintaining cash flow.
• For new investors, understanding the distinctions between different property classes (A, B, C) is essential for aligning investment strategies with financial goals.
• Mike underscores the value of resilience in real estate investing, learning from failures, and adapting to changing market conditions.

Questions & Answers

Q: What is hybrid investing, according to Mike McKinzie?

Hybrid investing is a strategy that combines the benefits of buy-and-hold and flipping. It involves purchasing properties with the potential for appreciation while ensuring they at least break even in cash flow. This approach allows investors to maximize returns by leveraging both appreciation and rental income.

Q: How does Mike McKinzie suggest managing properties from a distance?

Mike McKinzie suggests using property managers for long-distance property management, emphasizing the importance of communication and selecting managers who use external contractors for repairs to ensure objectivity. He also recommends networking with property managers to find properties with existing tenants and management.

Q: What criteria does Mike use for deciding when to sell a property?

Mike McKinzie suggests selling a property when the rental income drops to less than half a percent of the property's value. This indicates that the property may have appreciated significantly, and selling it could provide capital for reinvestment in properties with better cash flow potential.

Q: What is Mike's approach to property management?

Mike prefers property managers who communicate regularly and use external contractors for repairs. He values transparency and expects managers to provide updates on all significant issues. He also emphasizes the importance of being willing to fire underperforming managers.

Q: How does Mike McKinzie view appreciation in real estate investing?

Mike McKinzie views appreciation as a potential bonus rather than a guarantee. He advises against relying solely on appreciation due to market volatility and emphasizes maintaining cash flow as a more stable investment strategy.

Q: What is Mike's advice for new real estate investors?

Mike advises new investors to understand the differences between property classes (A, B, C) and align their investment strategies with their financial goals. He also stresses the importance of resilience, learning from failures, and adapting to changing market conditions.

Q: What role does networking play in Mike's investment strategy?

Networking is crucial in Mike's strategy, especially with property managers. He leverages these relationships to find properties with existing tenants and management, which simplifies the investment process and ensures a smoother transition into property ownership.

Q: How does Mike deal with tough times in real estate investing?

Mike McKinzie emphasizes resilience during tough times, having experienced personal and financial challenges. He advises finding ways to reduce costs, such as living modestly or taking on additional work, and staying focused on long-term investment goals despite short-term hardships.

Summary & Key Takeaways

• Mike McKinzie, a seasoned real estate investor, shares his journey and insights into hybrid investing, combining buy-and-hold and flipping strategies to maximize returns. He emphasizes the importance of due diligence and understanding market conditions before purchasing properties.

• Effective property management is crucial, especially for long-distance investing. Mike highlights the need for communication with property managers and the benefits of using external contractors for repairs. He also discusses the strategy of selling properties when rental income becomes less than half a percent of the property value.

• Networking with property managers can lead to opportunities for acquiring properties with existing tenants and management. Mike advises against relying solely on appreciation and stresses the importance of maintaining cash flow. He also discusses the distinctions between property classes and the resilience needed to succeed in real estate investing.