Today my guest is Victor Jiracek. Victor is a real estate fix and flipper based in Gainesville, Florida. He completed 40 excuse me 20 flips last year and is on pace to do an additional 30 flips for this year 2021. Ironically, his best flip was a $64,000 net profit deal that almost that he almost backed out up. And in just a minute, we're going to speak with Victor about what makes a successful flip, and how to get started to do your own flips.
J. Darrin Gross
I'd like to ask you, Victor Jiracek, what is the BIGGEST RISK?
Yeah, no, I think that's that's great question, happy to answer it. I'd say it's all about the numbers. So I always teach and preach. It's like profit margin, like margin of error, like how much you know, profit, do you have potential in the deal, because if anything goes wrong, like a takes longer than you want, or doesn't sell for as much as you want, you have to go over repairs, like that's all going to eat into your profit margin. So the more profit buffer or profit margin you have, the better. So again, it's all about the numbers. And there's been a lot of deals where like we set out to make 30 40,000. That's, that's great. And then one issue came up, and then another issue came up and another issue came up. And then we walked away with 10,000. But luckily, we had that initial, you know, profit buffer to work with, or else we would have been in the red. So with that same example, like if we initially wanted to make, we said, like, Hey, I just want to make 15,000. Like, if I can make 15,000 on this, I'd be happy. And then the issue comes up in that issue, another issue another issue, and then suddenly, you're in the red. So that happens a ton. So that's why I recommend in terms of risk, like just protect yourself, like if you buy any, any property for the right price, like every single thing can go wrong, and you can still be profitable. But again, it's you make money when you buy is, is the segue from that. But it's really like profit margin buffer, just in case anything goes wrong, and it will go wrong. That's the other thing. It always takes longer than you want. And it always costs more than you want.
Today, my guest is Joe evangel. St. Joe is the executive coach with over 5000 hours of experience under his belt, as well as the CEO and partner of one of the top Self Storage development companies in the country. And in just a minute, we're going to speak with Joe about the opportunities in self storage and what you can do to level up your investment game.
J. Darrin Gross:
I'd like to ask you, Joe, evangelist at what is the BIGGEST RISK?
Absolutely. And I have insurance background as well. So I mean, I'm not going to answer from an insurance perspective, but I understand where you're coming from. And, and look, I think insurance is one way, you know, we could talk about risk, but really, when we're talking about risk in life, and we're talking about risk and success and growth and contribution and creating something that, you know, when we talk about legacy, wealth, or legacy building, I think about legacy as when I create that thing, there's some kid 100 years from now, who's never heard my name, who's going to be impacted by that, because his grandfather, and Father, you know, taught that, you know, took it down the line and created that long term legacy and wealth, right? In order to create that there's no way you can do it without risk, right? Everything we do is risk, you drive your car to work in the morning, it's a risk, but you don't not work, right, you don't not go to your job. It's the same thing, I think in our industry, is there's going to be a lot of risks. But the one way that we can create risk mitigation is through proper due diligence through making sure we check all of our boxes through thinking 12 months to two years in advance or five years in advance in some in some cases, right? So, you know, when it comes to like, let's say Self Storage development, for an example, there's a lot of outliers, right, the market could change the the the price of materials right now has gone through the roof. And so we build in contingencies for these things, we pay attention to the what ifs, we look ahead to, you know, making sure that we ask the right questions and do the proper due diligence. You know, we don't buy sites that, you know, used to contain an underground oil spill or you know, have major water issues or any that type of thing. So I think the best way to mitigate risk when you're in the development business and in your in the construction business, is to do the proper due diligence, like you see here, most of the nightmare stories of big developments gone wrong. It's because someone forgot to ask the right question. someone forgot to do the right study, someone skipped paying for the feasibility report and just went in all in on a gut feeling. You know, one of the things about these big deals that I like is there's so many people involved in the approval process, right? It goes through 20 different hands before we say yes, and before we even decided to go take investor money in. So we want to make sure that we're mitigating the risk to create the best possible upside, knowing that it's going to go wrong, that we have problems, things happen, right, and then being surrounded by really good problem solvers. So when they come up, we have a plan B and A plan C and a plan D.
Today, my guest is Manny Renteria. Manny is a 15 year veteran of the solar industry, and has been designing commercial solar systems for over eight years. He is a founder of one up solar, an industry leader and residential, nonprofit and commercial solar installs in San Diego. And they are expanding their reach to the entire country. And in just a minute, we're going to speak with Manny about the opportunities in solar for real estate investors, and specifically more commercial aspects.
if you're willing, I'd like to ask you, Manny Renteria, what is the BIGGEST RISK?
So the biggest risks that we run as a nationwide consultancy, and myself myself personally, as a consultant that has, that has a phone with with over 1000 clients, and that call me You know, every other day is, is, is not meeting the performance, right. So I've, I've made this mistake, you know, when I, when I first started consulting, in the consulting business signing agreements, on behalf of service providers, so I would be the the in between the service provider and the customer. And so, in this agreement, I'm the one presenting disagreement to the customer and saying, hey, these are all the benefits of, you know, doing solar with, with my, with my service provider. And so in these agreements, it's it's not, it hasn't been a standard to have a performance guarantee. And that I think, is the biggest, biggest ticket item for me, for my customer. And for him, even for the for the service provider, is to have that, because now without that I cannot sell anybody's product, I cannot promote or sign anybody's agreements, unless there is a performance guarantee, which covers me, and it covers my, my, my client, in this case. And what that is, is very simple if if your system is, is out there and is producing power, but the power that it's that it's supposed to be producing, let's say I presented you with a proposal that says, hey, this, this system is is supposed to produce 10,000 kilowatt hours every month, okay. And for the first year, you know, multiply it by 12, that's 120/3, whatever that is, right. So, so they sign up based on the fact that you showed them, you know, a performance estimate on the proposal that they signed, and then the agreement didn't really have any performance guarantees. And what happens is, a year later, when this system underperforms significantly, and and your customer ends up with with a system that doesn't produce or meet their needs, and on top of that, now they have a huge utility bill, why because all the power that they didn't produce is now coming from the utility and now they have this extra bill on top of whatever, you know, if they're financing, then they have the only have two bills. And so what ends up happening is I have to go and explain why the system is underperforming, or whether or not they need more panels. And I'm stuck in between, you know, explaining to the customer, hey, you know, your system didn't produce because these trees are still in the way or something like that. So it's really, really important that that a performance guarantee is set in place by any service provider. And then that performance guarantee has some sort of sort of sort of monetary compensation in in the event that the system underperforms in a certain year or every two years and typically what a performance guarantee does is every two years if the accumulated power doesn't equate to this much you get reimbursed at this rate. So that to me now is is one of the biggest risks that I that I've had moving forward. And so now I always look for that in service providers to give me that performance guarantee. Otherwise, I'm out there, you know, exposing myself and my company as as you know, as being untrue or just on I don't know, just not not trained, I guess
Today, my guest is Charles had cell. Charles is the CEO of EA property care, a prop tech company based in Boston that provides smart building solutions for landlords and developers that operate over the cellular network. And in just a minute, we're going to speak with Charles about tech for property that can help boost your net operating income.
if you're willing, I'd like to ask you, Charles. Hansel, what is the BIGGEST RISK?
Charles Hadsell 32:36
Yeah, sure. Darrin, I think, you know, when I thought about this, I think the biggest risk I think about is technology rescue, you know, even even alluded to it a little a little earlier in our discussion, right of kind of the early generation water bugs having so many like false alerts that it kind of caused the owner to like be dead in because the alerts and now you have a real issue. And now you're, you miss it. So I think technology changes rapidly, you know, and this kind of comes back to my time and some doctor as well, we look at the pace of innovation on putting more electronics into smaller places and asking like these, you know, end nodes of the network to do a lot more you rather than sending it back to some centralized server, you're having decisions made at the very edge of the network. So reliability is like is like very important for these, these these applications. And I think with semiconductor technology, reliability is continually improving. But there's always that risk of a component failing at the wrong time and leading to like a bad outcome. You know, so that's why we kind of like to take the approach of kind of layers of redundancy, you know, like, so for example, like to prevent, like water loss in your basement or in the basement of a building, have a sensor to tell you, if someone left the exterior door open, then have a sensor that tells you it starts to get cold, then a sensor to tell you that there's a water problem, you know, so you have kind of three layers of redundancy there that could kind of prevent, prevent a disaster. So So that's kind of how I think about risk is like a technology is changing rapidly, you need a platform that could adapt to that. So you're not kind of stuck in the stone age's with the platform that's, you know, out of date are no longer relevant. And then also like the kind of I say that the connectivity risk, you know, of a, that power outage happens, what happens to your system, we saw what happened in Texas, you know, a few months ago where all that led to all that damage. So that's why we covered this a couple different places on the show today, you know, cellular i think is the right technology medium for these IoT systems and these rental property and like landlord applications, just because it's up, it's up when everything else is not up. So that's kind of my overall kind of thought of you technology risk is kind of the big one and that's how we really like to wrap your head around minimizing the impact and putting redundancies in place.
Today, my guest is Matthew Ricciardella. Matthew is the founder of Crystal Spring, excuse me, Crystal View Capital and has over 18 years of experience in the real estate industry. Crystal View Capital is a private equity real estate firm that specializes in acquisition and management of self storage facilities and manufactured housing communities across the United States. Known for its in house acquisitions and management team and unique company culture. Crystal View Capital is vertically integrated, disciplined to its investment strategy and has a proven track record since a firm's launch in 2014. And in just a minute, we're gonna speak with Matt about self storage facilities in manufactured housing.
J Darrin Gross:
I'd like to ask you, Matt Ricciardella, what is the BIGGEST RISK?
Well, I think it's a great question, obviously. And I think there's a lot of answers to that question. But I've, I've thought about this, obviously, in depth. I think, for me personally, in what we do, by far, the largest risk is overpaying for an asset. You could take a good investment and make it a poor one, by paying the wrong price. Or vice versa, you could take a mediocre investment and make it a wonderful one by paying the right price. So we focus diligently on not overpaying. And the way we do that. There's a term actually I think, Charlie Munger had this term, which is Warren Buffett's partner. And he said that risk is inextricably bound up in the price that you pay for an asset. And I think that rings true for me in a major way, the way we mitigate that risk to answer the other part of your question, Dan, is, by and large, we don't compete with the rest of the buyer pool that's out there. way we do that is we buy most of our properties off market. So we create a bond in a relationship with a seller where we're dealing direct with them without a broker. And that's how we put probably 80 to 90% of our deals together. Right now, as I mentioned, the two asset classes are white hot. Because of that. There's bidding wars, there's auctions, you have to compete in those auctions, and you offer the highest price and you win. But question I have is, Are you really a winner? Or are you a loser? I mean, you paid more than everyone else out there. So we like to focus on finding our deals without competing. And I think that's how we lay off the risk. So as you would use the term in the insurance world where we mitigate our risk to a large extent.