On the show today we have… Top 10 Real Estate Investing Breakthroughs with Sean Katona!
Listen on: Apple Podcasts | Stitcher | Spotify
Show Links:
– Simplified Properties
– Checkout Sean’s last podcast with us at #84
– Listen to Natalie Kolodij’s podcast #103
– Seankatona.com (has my top 10 video on demand)
– Sean’s 7 Figure Case Study
Show notes for Top 10 Real Estate Investing Breakthroughs with Sean Katona!
The Vantastic Life is…
– is in Chelan WA!
Checkout The Get Better Project to get the at-home workouts that Joe has been doing and writing for the last 2 years.
Julie
Sean is one of us, and we love what he’s doing. He’s company is Simplified Properties.
Welcome back Sean!
Set a goal big enough that you have to become a new person to reach the goal.
Sean
Yeah, I’m not sure who to credit that to, but I love thinking about that.
Julie
#1 get started sooner, done is better than perfect.
Sean
I had a few friends/family reach out and ask what you’d teach your younger self. I’ve done good and I’ve lost money on deals.
So I was thinking about what was fundamental changing for me.
This largely has to do with analysis paralysis or the perfect deal or the perfect partner.
There’s not going to be a perfect deal. Hindsight is 20/20, but with education we can power through the analysis paralysis.
We have to think about the 4 pillars.
It’s easy for the us to get great returns that I we don’t think about.
Julie
Do you think people should move right into passive income and skip flipping?
Sean
Not necessarily. I think that I’ve learned a lot from the flipping, and wouldn’t want to miss out on those learning experiences.
Julie
#2 is outsourcing.
Sean
What I’ve learned is that I’m not good at a lot of things. Generally I’m not the best person for the job. As soon as I could afford to do so… the Quickbooks comes off my plate, and many other things have come off my plate.
Julie
What are your top 3 outsourcing things?
Sean
Today I’m blessed to be able to outsource everything. All I do is find great new deals, and raise private equity.
Everything else is lower value.
Julie
If someone is just starting out. 6-9 deals… what do you think are the best things to be outsourcing.
We should mention Profit First and Mike Motorbike, and setting up your business the right way. Checkout our podcast #38 and get your accounting systems setup to protect yourself.
Sean
My guess is that it’s going to be different for everyone, but you should see what your time is spent on each week. The time that’s not producing income for you.
Then look at the low hanging fruit that doesn’t cost you a lot of money.
You shouldn’t be writing your own direct mail, you shouldn’t be a contractor. You could be losing $30-50/hour to be making $100’s to $1000’s of dollars an hour.
I had to rewire my brain to think this way.
Julie
I have this guy name Kirk that does everything for me. Finding an all around go to person for my life. Like a house manager on call.
Sean
Like a quarterback.
Julie
#3 all markets are not equal.
Sean
I grew up in Seattle, today I live in Southern CA. But I’m thinking about the National economy. Rent to price ratio, job growth. CA and WA are very different than WA for what landlords can do.
If you’re leaning towards passive income you should be thinking about these.
I have a couple rentals in Dallas that I’ve never seen. I get double digit returns.
The same goes for commercial. I can get twice as much income out of the area that I can in my back yard of Orange County.
Julie
Thinking about average people. It’s so individual. To get your cash flow covered first. Get some cash flow going.
One of the ways to do it would be buying turn key rentals.
Sean
Memphis vs Dallas. Memphis has more cash flow but not as much appreciation. And visa versa in.
You need to think about what your family needs more at that time.
Or you should diversify with both.
Julie
How are those doing right now with Covid?
Sean
All of my residential is doing good right now. The commercial is another story.
Julie
We’ve had Jennifer Beadles on the show recently and you need to be connected to Addicted to ROI.
#4 path of progress
Sean
I was thinking about buying a good house in a terrible neighborhood. Nobody wants to live there. So I wanted to switch that up and focus on buying the worst house in a great neighborhood.
The same thing can be done with commercial. There are a lot of places that a retailer wants to locate.
You can get a steal of a deal out in the middle of nowhere, but it might not be the best idea.
Julie
I have friends that invest out of state and I ask them how hard it is to manage. You need to find that threshold.
You can change a property but you can’t change what’s around it.
Sean
Yeah totally!
Julie
#5 get laser focused and specialized.
Sean
This was very important for me. I was working in corporate, and then learning about all these different real estate investing strategies, and then flying around the country teaching. I was the jack of all trades, and it was good because I learned a lot, but I needed to focus.
But all I’ve done for 24 months is narrow down to one market and getting to know it really really well.
I only have to do 1, 2, 3 really juicy deals a year to do really well for my family and our investors.
Julie
I think you said that when you got laser focused your income went up 10 times.
Sean
Yep, that’s accurate. These bigger deals can be 7 figures. And change your life.
Julie
#6 solve a big problem. The bigger the problem, the bigger the pay day.
Sean
When I looked back on the deals that were the best for me. It was the people and scenarios that had the most motivation for me to solve their problem.
The the number one thing that I think about now. Is that person going to have huge value from working with me.
Julie
When you were looking back were you doing deals to do deals?
Sean
Totally! I was doubling every year, which looked good, but it was an image thing.
I can do 2 deals and have them be more profitable than doing a bunch of deals.
If you have a big machine that you need to feed then you might have to keep the deals going.
I did the opposite and got really lean.
Julie
#7 bigger is better
Buy a bigger property. That is my 100% feeling and how I roll.
Sean
Anyone who has taken the time to understand the numbers will probably appreciate this. If you’ve done a loan it’s paperwork, negotiation time, it’s inspection period.
If I’m adjusting a price on a commercial deal… that could be $300k. Where it’s much less on a residential deal.
Or one new lease can mean a LOT of money on a commercial deal.
Julie
How do you feel about… I think that people don’t think they are qualified for the bigger deals, and start with the smaller one’s because they are smaller.
You were that guy, and started doing the bigger deals. How did you flip that switch?
Sean
I come from pretty humble beginnings, so I was clueless from the start. So no awareness. And then the bigger so it must be riskier. But what people don’t realized is that you don’t have to have every single piece to do the deal. You could be the credit partner. You might just know who to bring the deal to. Now everyone has a few percentages of of a large building.
I read the books, and found the guru’s, and learned a lot.
I’ve very selective about my Rolodex and the rooms that I’m putting myself in. If they can do it, maybe I can do it too.
Julie
What do you think those parts of the puzzle are…
You have finding a good deal
The business plan to stabilize the deal
The financing part of it (People don’t understand the money part) how do you get the money you need to close?
Sean
Looking back, I would have ridden in the passenger seat of someone who’s done it a number of times.
If you screw up a multi million dollar deal, that could blow you up.
I must have offered on a hundred properties before I got one.
I had this pride thing of wanting to do it on my own. But I could have shortened this timeline significantly.
The mechanics are straightforward. I only work with accredited investors. I don’t think this is the hardest part.
I had a lot of folks who had invested with me in residential. But we had to figure out what that looked like as an equity partner. That stuff is pretty much all black and white.
Julie
And like you said, ride along on someone else’s deal.
Sean
You’re getting paid to learn!
Julie
People ask me why I invest in syndications, but I collect the pay checks.
Sean
Right!
I’m an active investors and I’m also a limited partner. We parked money in a class A apartment building.
Julie
Right!
#8 tax advantages that are insane
Sean
Phantom losses and depreciation. Imagine all the components that go into an apartment building. These engineering studies get done, where they get depreciated. You can get your taxes lowered because of this depreciation for your other business and income.
Julie
We want to tell you all one of the favorite people that I’ve been following is Natalie Kolodij is dropping massive nugget bombs! She’s an accountant that’s specializing in real estate investing.
Sean
I need to disclaim that I’m not a CPA or giving tax advice. But my accountants didn’t tell me this. So you need to find the right people that will understand this.
Go find a CPA that really understands this stuff.
Julie
Can you drop that link for Natalie, Joe? Yep, #103.
So those tax advantages are huge part.
#9 don’t do this alone
#10 do more partnering sooner in your career
Sean
I probably already covered that enough already. What do you have, and what don’t you have. Understand where you’re at. And nearly any deal is possible with the right people.
Julie
What I say is… think about what you bring to the table? Maybe money, maybe time…
Let’s talk about today’s predicaments with Covid-19. What have you been up to since the last time we talked?
Sean
I think I had just closed a big deal, the biggest deal that I’d done up to that point. And thank you to my wife and mentors and people in my life.
There’s a 7 Figure Case Study in the works that I should give to Joe.
It’s about how to do all the parts.
In Jan I sold another shopping center. 14 months from start to finish, and sold it at absolutely peak.
In July of last year I bought another shopping center in Tucson. I have a gym in there that walked away on their lease with 3 years left. It’s an Albertsons based center.
I’ve put my acquisitions on pause until Q4. It’s ugly being an owner or landlord right now. Businesses can’t open and make money, can’t pay rent. Their cash is zero and pay is zero.
I think the opportunity that’s coming is going to be an absolute tsunami! I’m educating all of my investors about the opportunities coming our way.
We are going to have the some things that could be the biggest of our lifetime.
Julie
Are you planning to buy these and operate as retail?
I think class B apartments and warehouses are the biggest opportunity.
The last time I owned retail I had to pay 2 million bucks.
Sean
I’m on contrarian.
Retain is getting pummeled. I’ve lost 25% of my rent role. But if I can buy retail for half of what it’s worth…
Where are you going to get your nails done, or go to the gym… I don’t think retail goes away. You might wear gloves, or masks.
Look at things that aren’t going to change.
In an era post Covid… are people going to stop going to restaurants? I doubt it.
Julie
The problem is the vacancy and the demographic of the market.
With the deal that I lost money on… it was thrown on my desk to get it renovated and leased up. It was a great lesson in not having speciality build outs.
It seems like having smaller spaces rather than huge anchors would be a good idea.
Sean
That becomes part of the strategy. If you have the lowest cost and the most value, you have a competitive advantage.
Those tenants are going to land somewhere.
If we can do some forecasting and good due diligence.. we might be able to get into a box that we hadn’t been into in the last 20 years.
I reserve the right to pivot, but it seems like an opportunity.
Julie
Like with the stock market, that I’ve jumped into. It’s allowed me to pick up some really nice long term stuff.
Sean
Ditto.
Julie
You are going to be the retail expert guy.
Sean
I call brokers all day long. I was to see what happens with the election. I’m getting all the dry powder ready.
Costco and Home Depot are on fire right now.
Julie
What about changing to higher and better use…
Sean
Totally!
Julie
Good stuff! Follow along with Sean.
Sean
SeanKatona.com I have my top 10 video there with PDF for swipe file. That’s a good overview. Google me, I’m everywhere on the socials.
And I’ll send Joe the 7 Figure video.
Julie
Checkout our online meetup/mastermind at https://meetup.com/Seattleinvestorsclub
It’s actually national, so join us on Thursday’s at 11:30am PST.
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