90. Optimizing Your Real Estate Portfolio

Just when you look at this time last year , when you're setting goals for a full year and you start trying to strive toward those and you see that you're actually hitting those goals , it's incredible and it's really gratifying . It motivates you to set goals for the next year . In this call , this is going to be our last one for 2023 .

It's going to be an open session and then again , starting in 2024 , we're going to bring on a lot more guests . But I just wanted to reiterate what this group is .

The Acaba Home Financial Freedom Mastermind Group is for those that do not believe they were put on this earth to work 40 to 50 years or to hopefully retire at the age of 65 , when you're too old and too immobile to actually get out and do things .

It's for those that believe they can achieve financial freedom faster and quicker so that they can optimize their life and be able to do more of what you want on a day-to-day basis and gain back your most precious asset , which is your time . Super excited to have some more members join and to continue to connect and learn about what you have going on .

Today's going to be no different . So tonight it's going to be an open session . If you have any questions , feel free to throw them in a chat and or jump in . But one thing I wanted to cover tonight is something that I've been focused on over the last month . It's not always about acquiring more units .

At times , what you want to do is optimize the portfolio that you already have . For example , during 2020 through really like middle of 2022 , there was an incredible run-up in the prices of homes . They appreciated rapidly because of all the money that the government put into the market . That money is still circulating .

There's still some room to go for these properties once interest rates come down a little bit . But there was an incredible run-up when interest rates went up . What a lot of people predicted is hey , there's going to be a crash . These prices are going to go low , low , low .

For some coastal markets , ie California's or the Arizona's of the world , sure , that may have been true , but for our location and other hot markets like the Southeast , what has really happened ? Is it stagnated a little bit , maybe declined in some parts of those markets a little bit , but for the most part it's remained steady or even gone up slightly .

With that in mind , if you bought a house , especially , and put more than a 5% or 10% down you bought it as an investment In 2020 or 2021 , it'd be a good idea to look at how much equity you have in that house and do you have the ability to remove PMI ?

I can tell you that I actually submitted for PMI removal on three properties that I purchased between 2021 and 2022 . I've gotten the response back on two of them after we did the appraisal .

One of them I put 5% down on and that helm is appreciated so much that they actually said hey , you've achieved that 20% ownership , we're going to remove the PMI , which is a significant amount of savings . I'm talking $100 a month . The other one that they've already approved was one I put 15% down on as a DSCR loan .

Now that one they say I have about 25% or so ownership in that one because it's appreciated . They were able to remove the PMI there and that gave me about another $200 a month . There's ways to create even more cash flow within your portfolio without actually going out to buy other ones or trading the unit .

It can be as simple as just submitting a request to your mortgage company to remove your PMI . Highly recommend , if you have not looked at it , to go ahead and take a look at that piece , especially if you bought your home in a hot market more than 18 months ago . I think it's a good time to take a look and see if you can get that piece removed .

I'm going to hop off my soapbox . That was my main piece for today . I did get excited about that and I'm always looking to optimize the portfolio . If there's any questions , any comments , feel free to throw it into the chat or join live and I'd be happy to answer anything that you have . One other piece I want to cover is starting in 2024 .

We're going to start a financial freedom series on YouTube where it's going to be some five minute recordings where we talk about different pieces needed to achieve financial freedom and how you can zero in and use your skill set to get there . I'm excited about that series to launch . We're recording a few videos as we speak and it's in with the editors .

We're going to get that thing going , I believe end of January or February I don't quote me on that but it's going to be coming pretty soon . I'm excited to be able to pass that along to you as we head into the new year . This is an open session . Please feel free to join via the chat and or call in live .

This is going to be the last session that we have for 2023 . I'm excited to connect with the Acopahome members and really wish you a happy new year as we head into a fun field 2024 . Yes man , what is up man ?

Like it's just that time period you can remember it feeling kind of slow at times and things that nature , and before that definitely feeling slow , but now it's like , dude , these years go by quick .

And then you get it and it's like , oh , I want to get this one , I want to build an empire . It's like you can get the empire and you're still going to want to build more . So you've got to look back and understand how far you've come and enjoy the process while you're still striving for tomorrow .

I think , now that I've gotten the first property , I've like taken a bit of a deep breath , right , and I've started to at least tell myself and try to implement more of enjoying the journey and , like you know , not just thinking about the next deal , next deal , next deal , like actually , you know , enjoying what I've got and , like David Green has been saying

you know recently , just like keeping what you have is a flex right now , right , not even growing more , like especially where the economy is at , just keeping what you've got and maintaining that . So I tried to be happy in that , but still want to consistently grow , for sure , and keep that momentum .

So like not not be complacent just yet and not be , you know , satisfied , I guess I'll say just yet . You know happy where I'm at , but not satisfied overall , right , like I definitely want to take it farther .

Hungry is , hey , I still want to continue to strive , but what you just said is literally I don't know if you heard me earlier talking about optimizing but keeping what you have . What David Green is saying is true , and one of the things I started doing and I'm highly recommending a lot of individuals do as well . I don't know about .

It'd be a good exercise for you to take a look at as well . But for the homes that are purchased in 2021 and 2022 , that was an amazing run up in the market of prices . Right , these homes were just appreciating at a rapid rate . Now we're getting back to a normal rate because interest rates went like crazy .

But one of the things that we tend not to think about is hey , how can I just optimize my current portfolio , right , instead of the next one , next one , next one and so PMI , right ? That's something that's real , it exists on your portfolio . So , from a personal house , which I put 5% down on , as well as two investment homes where I put 15% on .

I actually reached out to the mortgage companies about a month ago and each of them required you to put a payment in . But I requested like , hey , I want a PMI removal . And the first thing they said is , hey , you haven't paid down your loan enough for that .

But I just got on the phone and said , hey , guys , I believe that it's gone up in value for this , that and the other reason I want a PMI removal . And so they asked you to send in a check . Right , they make it kind of hard to do this , but they asked you to send in a check to pay the appraiser .

They had the appraisers come out to two of the properties Now the third one we're still waiting on , and with both cases they actually said , hey , the value is much more and your PMI can be removed . Even my first house , 5% down . And so the PMI costs for those two houses equated to about $550 a month .

So that's $550 that's now in cash flow , or $550 pay increase per month , just from asking , sending in a check and making it happen . So that's yeah , it's a way to optimize your portfolio .

It's like one month old , like now , right , this week it's one month old . Imagine when that starts getting into the mainstream over the next year and what that's going to do to the value of the small multis .

But what I look at is , hey , this home is going to cover itself , dude , I am all in right , because , even if it doesn't increase in value which is highly unlikely , right , right , about a 30 year period , right . And that's how the tax gets paid off . And guess what ?

You can then take that X amount that you paid for it , where you really only put down 5% or 20% , and you can use that . So it's exciting being in this game and actually listen to a different podcast earlier this week , the one that Brandon Turner started the new one , a Better Life . Have you listened to that at all ?

I was like , all right , let me take a look and listen to the one that he did with David Green , right , because it felt like the good old times and man , they were just dropping nuggets and nugget after nugget , and the one point that they drove home which is clear in my mind and that's why I'm still trying to acquire more and things that nature was just

ask your parents , or even just look back 30 years what were rents , right ? What were people paying for rent ? What were people paying for a house ? You can get a house in California for 99K and 30 years ago , right , you could rent a home for , you know , $150 , $200 , you know like legit per month , right . And now that's unheard of , right ?

People are paying two grand in New York . They're paying five grand , and down here we may think , man , five grand is crazy , it would never be that down here . But give it 10 years , yeah , give it 20 years , give it 30 years with the money that's been put into the market right and how much is flowing around .

Like it's highly likey that in 30 years you're going to be paying 10X what you're paying right now . Like somebody could be paying literally 10,000 to 15,000 a month in rent . It sounds crazy right now but I'm sure they thought 2000 a month was crazy 30 years ago .

So we're only reasonable to assume that in the future , rents are going to increase , home values are going to increase , especially over a long enough period , Right , so that's why I mean I'm right there with you , right , that's why I definitely want to continue to acquire .

But also , for me , it's like and I've even started to reconsider my investments in , like , retirement accounts , cause I'm like you know , there's really only a few different asset classes that you're like , that you're going to get into , that most people are going to get into , right , that I say , I guess our mainstream , I think real estate is one of those and I

think , looking around , I think this is over time , the safe is bad , like , at least for me , and what I can understand , right , and like , I think , if you're a finance guy or like you know , you , you have a , you know a way with numbers that may be playing the stock market or like even playing crypto could be , you know , a solid play for you .

But I feel like , even when you're looking to get into something simple , right , and you're looking to get into something like stable , but like I guess proven is what I'll say , right Cause , like everything else is kind of You're not sure .

Like I've heard stories in day told me , actually , and the reason he got into real estate is because the first day he started on his job he met someone who they had been there for like 30 years and they had planned to retire next year , like you know , that time the following year , but they couldn't because the stock market had like dropped drastically so their

retirement had like kind of tanked . How it's like man , and like that's a real story , like that that should be happening . Like that happens to me , not like where it'll tank , but I'll look . I'm like , oh man , I lost like 10k , like Not great . Like you know , I'm not like I'm not like hurting off that you know , thank God .

But like man , like it's really a roller coaster , right , at least the way I see it , especially it . I just like this , the , the , the stocks , the , the charts can do what they want . Like actually I have zero control .

And I don't Like the Trumps and like they're like Charlie Munger is like those are the guys like moving the market right , like their positions . I he'll pull out of something like the market , like move percent right .

Everybody's running for the hills he's killing companies like yeah , yeah for real , but man , for me , I feel like I don't have as enough control over that asset class , specifically right , which I feel like is the other , like most popular one , as opposed to real estate , to where I feel like this is my , this is going to be my bet For a long time to come .

There's a reason , right , when you watch the founder movie , like , it's less about the burgers , it's more about , hey , the real estate the McDonald owns , you know , and that's made Multiple generations the richest in the world , the 401k piece . I'm with you with one caveat , right .

If you're working for a company and I did this for many years if you're working for , say , a fortune 500 company , that's going to match X percent , then it makes sense in my mind , right ? Because now you're getting free money added to it and it's growing tax-free and things that nature .

It does suck that you can't use it till 65 , and I hear they're now trying to push that to 75 or something Like . Don't quote me on that , but I heard something I was like what ? But , to your point , majority of my funds are in real estate .

I still have a solid retirement from the years that I put into it when I was at the W2 , but I'm not actively adding to it and now just use that as like a backup , right ? So , for example , when I closed them a deal earlier this year . They're like hey , we need you to have X amount reserves . I was a guard .

It's either I move it out of this other account , which I really do not want to , or I have to , like you know , shuffle some stuff from the businesses into my personal account , because I don't keep much of my personal , or I could just pull a portion in the retirement and then put it right back . Right , so I was a guard , let me do that .

So I pulled that and then put it back , like the next week after closing and everything was good . So I use it more for stuff like that , maybe in the future . I do want to explore , because I've heard people being able to get loans against it or something like that . Have you heard about that ? Loans against your 401k ?

So , yeah , that's definitely a thing , and I think , even like now that you're you know off the W2 , you can even do something like a . They've got like self-directed 401ks . I know that for an IRA , I'm pretty sure , but I think for your 401k you could use like the whole thing .

I Don't know if you can do it in your deal , but I know you can use it to invest in other deals . So , other deals , you're right .

There is interest , but you pay it back for yourself , which is like okay , and it's honestly kind of nice that they do that , because then you can in a way , keep up with the market , right .

So right now my rate is like nine percent on my 401k loan , which is like fine , because my Portfolio at best is gonna do like I mean , it's actually done fairly well , but I think a good portfolio is aimed to do like 10% , right .

So if you're paying yourself back almost the same , it's kind of like , in a way , you can look at it as like , oh , you're not missing out on you know any returns right by having your money invested . But yeah , so you can use it for that 15 year term .

You can also use it for a five year term , which I'm doing now , and , yeah , like I'm also with you that if you have the match , like you have to put your money into that , like my , my company , they're doing 50% . I mean it's like oh , there's no yeah .

So definitely plan to forever take advantage of that .

And I guess what I was saying in terms of the retirement accounts is like for me , like IRAs , right , and like specifically having a traditional IRA or even a Roth IRA , I'm kind of reconsidering , like do I want to continue putting my money in this bucket or Just keeping this in a more liquid place so that I actually can use it for real estate ?

Now you can do permit per year , which is cool , and it's just another Benefit . The way I look at it is like a catch-all right . It's something that , hey , at the end of this thing , if there's a lot of like you know , hey , I have a bunch of mortgages that I want to wipe out .

You can just look at eight , that thing at 65 , wipe them out and now you got pure cash flow . It's kind of how I was looking at it for a bit . If you have that disposable . Now , the thing I was doing on the side of that because I was in sales and I was making like commission things that nature Is I also open just a regular Vanguard account .

I Used that as a backup to the savings , so I had the Vanguard investing in the SMP 500 . I still do that and that's one that's not tied to an IRA or 401k . I could pull it anytime .

But it just goes with the market a little bit and it works better than a savings account because the market should , over time , give you like an 8% to return , something like that right .

But one thing I wanted to cover to I love what you're talking about with the 401k and taking like a loan from it because you can , and it almost acts as like a force savings . That's literally what real estate investing is as well .

The more properties you own , the more you have to keep them reserve and every month you're paying down that mortgage right With with the money that's coming in and you're gaining more equity , which is for saving . So it's like it's taken out of your hands . You're not gonna miss that mortgage payment and it's making you save .

When you talk about the 401k , there's one difference that want to make sure we highlight . When you're within a company and you have a 401k , you can take loans against it , no issue , and the person that's actually backing that loan Believe it or not is the company . The company's the one that's holding those hands and they're kind of backing that for you .

Once you leave a company and now you have that 401k things that nature it gets a little more difficult . So , like the loan I took on , mine , quote-unquote is one that Vanguard offers where you can , for any reason , pull Once a year , once every 365 days .

You can pull as much as you want from there , but you've got to return it within 60 days or you get hit with that penalty . So it was literally just a show money , you know , and then putting it right back . Right show and put it back , and if you do pull it and hang on to it , you're getting that 10% penalty .

And now it gets taxed at your current tax rate , which could be significant right you could be looking at . If you factor in everything , a 40% hit easy . So for every dollar you're getting 60 cents .

So I wish I would have taken the full 50k the first time yeah in hindsight , because the rate was way better . The term was much longer and now I'm locked into a much shorter term with the worst rate . So In high I'll probably do that better . The next time around .

That's adjustable based on the Fed rate and commercial loans are adjustable and so the Fed cutting interest rates or talking about cutting interest rates is music to my ears because literally , like the loans that we have on the projects and Louisville and the loan on the he lock I have , they adjust based on the Fed index rate so they come down , my interest rate

comes down and now the monthly payments lower . You know it just increases everything . It makes it a little bit .

So I'll use this a lot for when I'm booking travel and I'll like use the travel points and whatnot . And I've tried to be a bit more savvy with the you know point using and hacking .

I don't want to call it hacking because I'm not doing anything that sophisticated , right , but at the end of the day , I'm trying to understand if I want to continue trying to do that and if it's worth it , or if I just want to kind of abandon that and go with my checkings , right , like I think it's easy to say , oh , like , you pay off the bill it's in

the month but like there's a certain point where you can fall behind on that , yeah , and I'm kind of at that point where I'm like , oh , like man , it's like getting tough , like it's getting close , yeah , right , and I'm like man , I don't know if that sort of risk is really worth it . So , yeah , reevaluate that .

No , what I've tended to do is for like my reoccurring stuff , like the monthly bills , things that nature , I put that on the credit card and then I just transfer money to it , and I even do it just enter , like once a week I may check it and just okay , let me transfer money to it just to make sure we're good , and then , for the new credit cards , only

get it if I'm doing something specific . So , for example , buying a house , I get a house , I'm turning a couple of Airbnb's . I'm going to look for a business credit card or a personal credit card that has 12 month interest free . I'm not even really worried about the points like that , unless I give you one cab . I'll give you two examples .

Right earlier this year , I bought a four plex and two of the units that turned into a B&B's and I needed a good amount of money to do that and furnishing things at nature .

So I was looking for 12 month interest free so I can pay that off over that time period , right , and use income from the Airbnb , and so I didn't really care about the point to not stuff .

I was focused on that In 2021 , I bought a personal home and then turn the inlaw suite into an Airbnb , and for that one I was willing to splurge a little bit and things that nature , and I had the cash ready in the account , and so I was looking more for the points .

So I went and got , like you know , a Delta card or a Marriott card , one where you're going to get many points that you can utilize , and I just swipe the card and then paid it off immediately , and then I actually put the card away , like I don't even use those cards .

I just put it into like a safe , far away and just went back to using my other cards . So that's two ways I do it Right .

But anytime I have a new property , especially if I'm going to do something B&B related with it , I'll get a new card that's attached to the property and because I have one a bank account that's attached to that property as well , I'll just set it to auto pay , right .

So , like , hey , all the bills are going to hit this card , whether it's electric , gas , water , cleaning , going to hit this card , and then , on the day it's due , it's going to auto pay from the account to that card .

It was like , if you look at the card , we probably spent close to I don't know , definitely over half a million , like between half a million and a month we spent on that card this year , right Geez , doing all these properties .

But now , moving into the next one we were talking about this a little bit like , I think , earlier this week or last week moving my current one into an LLC right and like starting to get credit under that LLC and like opening up credit cards under a business's name rather than just my name , or even like as a sole proprietor , as a business right , because I'm

going to . It's getting to the point where I know they're going to be like yo , like you got like 10 credit cards , like giving you another one , or like your limit is going to be like 2k , you know . So , yeah , I feel like that's something I'm going to have to deal with sooner rather than later , and that's definitely something in the new year .

I want to button up , like get this moved into an LLC , maybe even , like you know , have I don't know , I don't want to make it too complicated or too crazy , but like to the best of my benefit , right , maybe like heaven , ill see that . Like does the management right and like pay myself that way , like you know , managing the different BNBs and whatnot .

I don't know right , but definitely something I want to approach and like get tied up for sure .

Working with a lawyer they can draft everything , get it all together and then you move one property into the LLC and kind of go from there Literally . When we created the Acaba Home LLC , it was for my properties . Right , it was to like put some property I was always buying in there . And then I started managing one other unit .

I was like all right , you're not just throw it in the same LLC , it's fine . And then , fast forward , it's like dude , we got like a bunch of units under management . We got to separate these two . So then I will create another LLC and move all the properties that I own out of this to where now the management company is one in its own .

So I guess what I'm getting at is , until that management company is making X amount and you can decide that dollar amount , I don't know that you need a whole separate LLC . It's when we started making serious like hey , five figures each month cigar .

Let's move this thing , separate the two , because if something happens over here I don't want it taken down the properties .

I look at mine at least once a week , but really probably two or three times a week , but I have like breaks in between meetings . I'll just read through and it keeps you focused . You're like , ok , yeah , I did , I did want to do that . Let me make sure I put some more attention on this and and it helps you achieve it .

And the cool thing is , when you look back at this time of year , like on last year , you're like , wow , I really did hit the goals a set , yeah , so yeah , I'm all about it now , writing it down and kind of having it , having it there .