10 Rules for Successful Real Estate Investing and the Importance of Management

The Myndful Investor Podcast

10 Rules for Successful Real Estate Investing and the Importance of Management

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Episode Description

Real estate investments are a great way to amass generational wealth and passive income streams. But how do you choose a deal? How do you put together a team that will help you succeed in the longterm? And how do you expand and diversify your portfolio?

Today on the show we have Marco Santarelli and he’s going to answer all of these questions for us. Marco is the founder of Norada Real Estate Investments; he’s been in this business for several decades already. He will share his 10 rules of successful real estate investing. If you’re looking to take your training wheels off and jump into this space, this is the episode for you!

What We Cover

02:32 - Marco’s background and the first lesson you need to learn about real estate investing.
06:13 - Why people hesitate to take action towards financial freedom and how to gain that confidence.
10:31 - The 5 core people you need to have on your team if you want to run a successful business, and not just a job.
14:48 - What does a perfect candidate look like and how to select your real estate team and the property management company.
18:33 - The number one rule, i.e. the first thing you need to do before you even think of investing.
19:53 - The 10 rules of successful real estate investing and how to apply each of them in your business and life.
30:19 - Why is diversification so important in the real estate portfolio with Marco’s diversification method explained.
33:53 - How to accelerate your wealth generation and magnify your ROI through direct ownership.
36:43 - The biggest investment opportunities we can expect in the next 18 months.
41:03 - How to connect with Marco and find his websites, podcast, and social media.

Watch the Podcast

Read the Transcript

Steve Rozenberg  00:06
Welcome to the Myndful Investor podcast show, which we are now doing in the live podcast on Facebook. I'm Steve Rozenberg, I'm head of investor education for Mynd Property Management. And we created the Myndful Investor, really to help investors understand the ins and outs of owning real estate, all the good as well as the bad. And understanding that really, you know, I've learned firsthand that investing is a team sport, you can't do it on your own, you've got to understand that it takes a team to be successful. And it takes very valuable members of that team. And those team members may come and go as time goes on: people you start with may not be the people you finish with. And having a good management company is really the, I would say the spinal cord of someone being successful, because whether or not you buy a good deal or a bad deal, I've learned that does not really matter when it comes to actually getting the return out of that deal for the next 5, 10, 20, 30 years. And so we created the Myndful Investor show to bring on experts talk about how they help people, what they do to help people and kind of everything that goes along with that. So today, we have Marco Santarelli, think I got it right, pretty good as I could get it probably. Marco is a real estate investor. He's position 925 on the Inc 5000 list, which is pretty, pretty cool. I got to stay with the staff of 10 people, founder of Norada Real Estate Investments, and they basically help people acquire investment properties nationwide, which is what we do at Mynd, we're 19 investable markets currently. And you know, at the end of the day, there's not many of us around there, there are not many real estate investors, when you look at the grand scheme of everything, the investor community is actually pretty small and to get someone like Marco on, I mean, the guy's been doing this for a couple of decades. Unless, you know, I'm mistaken. I think he's helped several, several thousand people. Is that is that right, Marco?

Marco Santarelli  02:06
Yes. Cool.

Steve Rozenberg 02:11
So I'd like to let you know, we're gonna kind of pick his brain a little bit, kind of learn a little bit about Marco what his company does, and just kind of understand the dynamics of what he brings to the real estate table. So, Marco, first of all, thank you for taking the time. I appreciate you, you know, spending some time with me today and our guests. Can you tell me a little bit kind of just about yourself and how you got to where you are today?

Marco Santarelli  02:32
Sure, Steve. So first of all, thank you very much for inviting me on and to spend some time with you and talking to your audience and sharing, you know, your nuggets of wisdom and maybe some of mine. So it's great being here. To your question about getting started, you know, it really goes back to when I was a teenager, I was actually fascinated by money. And I wanted to learn how wealth and financial freedom was created because I looked around and I saw people who had that financial freedom and one of the common denominators that I noticed amongst all these peoples that they always had real estate. Now, usually they created it in real estate, but sometimes it was business. But what was common amongst all these people, they had a portfolio of real estate that gave them passive income. And I thought, that's brilliant. So I just set myself on a path to study both entrepreneurship, as well as study real estate investing. And so I started buying books and binders and all kinds of courses and consuming that content. When I turned 18, I was old enough to qualify for financing. Having a pretty well-paying job at a grocery store, I saved up enough for the downpayment, bought my first condo, was really a townhome unit on the end of a block, and put in some work, fixed it up a little bit, rented it out. And that was just signage back then there was no internet. So it was a sign in the newspaper. But I managed to lease it and manage it. And I held it for a number of years. And I did extremely well on it. The biggest mistake I made on that property, which is really one of the first lessons that I think people should take away is unless you are absolutely desperate and you are in an emergency, you'd never ever, ever sell your real estate. You can trade it laterally, you could trade it up, but you'd never sell it just for the sake of selling it. You don't want to take quick profits, you want to multiply your profits. And that's a key concept is basically leveraging or compounding your gains into more gains. But that's how I got started in real estate. And then just to kind of jump forward many years back in 2003 and into 2004, I got back into real estate full time, acquired 84 doors in nine months. It was just a very rapid accumulation of property. And people were coming to me all the time saying: Marco, can you coach mentor, or help me and my answer was sorry, I don't have time. I'm just too busy doing what I'm doing. But I do have properties I do a deal flow. Happy to share them with you. And that's how my business today 17 years ago was born. It was basically people paying for the education, which I highly encourage, but not pulling the trigger and investing in first, second, third, 10th property. So I just wanted to be the guy at the end of the food chain that had the company providing those what we call turnkey, cash flowing rental properties today.

Steve Rozenberg  05:20
Okay, so let me ask you this. And I completely agree, I think that there's a disconnect. And I probably not just real estate, and people that are starving for information. They want data, they want to be able to take action. But there's a large gap between once they have that to actually doing it. And so and you know, I don't know if it's the words we tell ourselves, the negative self-doubt, the fact that it's not a number one priority. I don't know the reason. But I, I think we all know that there are many people that go to courses, they buy a course or a seminar or something on emotion. And then you know, they let that negative talk creep in. What are your thoughts as to why don't people actually follow through to get there, you've been doing this a long time you've helped thousands of people, is there a common thread to that to getting people to actually take action?

Marco Santarelli  06:13
I think initially, a lot of people don't take action because of fear. They’ve learned enough to be dangerous, and they know they want to invest in real estate, but they talk themselves out of it. Because, they believe that there's still more that they need to know to avoid making a big, big financial mistake, or stepping on a landmine, or falling in a deep hole that's going to be hard to get out of. And often speak because they have a feeling of lack of competence. Well, let me rephrase it, let me rephrase that it's a lack of confidence. But that's because of a lack of competence. And so I always say, if you want to increase your confidence, increase your competence. And all that means is, it goes back to the first rule of my 10 rules of successful real estate investing, and that is to educate yourself, the more you know, the better off you're going to be, the more successful you'll become, you know, the saying is, the more you learn, the more you earn. There's a lot of truth in that. And so people who learn a little bit, get excited, people who learn a little bit more than that become somewhat competent, but a little bit dangerous for their own good. And it's only because they're talking themselves out of it. It's not that they don't have the capability or capacity. You mentioned yourself real estate as a team sport. And I truly believe that because we always bring the players to the table that you need, you're not doing this by yourself. But when you surround yourself with people who have the experience and the competence, they're just going to hold you by the hand and guide you through. And that's exactly what my investment counselors do here is we hold you, by the hand figuratively and walk you through it. Because we've been there, we've done it 100, a 1000 times. So educate yourself to increase your competence. And that will increase your confidence. And that will help you get over that, that fear, that barrier. But most of the time, it's really just fear. Because if, look, if you want to do this, and you have the credit, you have the cash to do it, there's no reason why you can't move forward, you're just talking yourself out of it.

Steve Rozenberg  08:07
So when you talk about the team, what do you consider as essential members of the team? And the reason I ask this is, for whatever reason, I've noticed, and I've been, you know, like you haven't done this quite a while. And I've noticed that for a lot of times when it comes to money, and maybe retirement level stuff. This is where we don't want to look dumb or appear ignorant. And so instead of appearing ignorant and asking questions, and we think that actually makes us look more ignorant, or you know, not educated, we actually hold it in, and we try to do it ourselves. And that's normally when things go off the rails and bad things happen because they're trying to do it themselves. So what would you suggest is the proper way? I guess I've got another question. But before I go there, I want to ask this one. What are the proper questions that people should ask themselves to get them over that hump of thinking they should do it themselves? And then the follow up is, what types of people do they need on their team to garner that success?

Marco Santarelli  09:13
Okay, well, the first question is a good question. And I'm not exactly sure what the answer is, because I think the question is different for every person. But if you just stopped to ask yourself the question, how much do I actually need to know before I'm ready to move forward, to take that first step, to start writing offers or looking at property or making that phone call to whoever it need be? You got to ask yourself, How much do I need to know at what point Am I ready? And you have to answer the question, you have to ask the question, when will I be ready to find it, write it down black and white. It has to be absolutely clear. Now you know what the target is because if you can reach that target, now you have no more excuses, you've hit it. So I think you need to be honest with yourself and define it. What that, that goalpost or you know that that goal line is? But the answer to that is going to be different for everybody, because everybody has, you know, different levels of knowledge and competence and courage and whatever else.

Steve Rozenberg  10:14
And then the second part what, once they decide they're going forward, whether it's local or out of state or out of the country, then I don't think it matters, I think it's, you know, it's four walls and a roof. It's the business model, in the four walls in the roof, who should they have on their team?

Marco Santarelli  10:31
Well, I like to say there are five core people that you will have on your team that you work with either on a regular basis or on an as-needed basis, for each and every deal. And in no particular order, the first person is typically your acquisitions, team or acquisitions person. So that's going to be either the wholesaler, the real estate agent, real estate broker, the turnkey property provider, you know, an another investor who's selling off their portfolio, or their properties. But basically, it's the people that are going to bring you the deals to look at to analyze, and maybe put under contract and purchase. So you need someone, at least one person who's your acquisitions person to find you and bring you deals, the second person is going to be your property manager, very important team player, it's the person who I say, you live and die by this person, you know, property management is critically important locations important. But property management is very important, because this is the person who's managing not just your property, but your assets. And they're the ones who are helping you serve your customer, which is your tenant. So your property manager is critically important. And you want the right person there. The next person is as-needed. And that is your lender or mortgage broker, whoever the loan officer is, that could be more than one person because you could be working with multiple loan brokers, loan officers, and lenders. So you need your financing. So that's your lender. And then the two people are kind of the ongoing support people. And that is your asset protection attorney, which you don't talk to every day. But you know, as you make changes to your portfolio or add to it, you're going to use your asset protection attorney to help you put the structure in place to protect your budget. And then last but not least, is your tax advisor. So and I'm not talking about someone who does your QuickBooks, I'm talking about someone who gives you a tax, saving tax, deferring strategic advice to help you minimize the impact of taxes, not just for on your real estate side, but your entire portfolio, your entire life.

Steve Rozenberg  12:40
So let me ask you this, and I completely agree with all of those. And I would go, you know, obviously, since Mynd manages properties, and I used to own one, I'm very adamant that I just like I'm sure you are, I have seen many people purchase great deals and run them into the ground because of the poor business model. And vice versa. I've seen people buy bad deals and have great business models, and run them into the ground as well. And it's all the operation. And I think that the biggest challenge people have when it comes to owning a rental property is, you know, when you see all the fancy social media and the hype of how to buy a house and how to flip the house and all these things. Well, that's the job, right? That's not creating wealth, that's just you know, you're creating money, but you have to work for the money unless it's a true business that runs without you, which most people doing that role do not have. Having an asset that continually runs as having the property management company running, I think is essential. I also think that when it comes to having this asset class, there are certain things you want to make sure whether it's the all these people that you just mentioned. And I think the one missing ingredient that people do when it comes to selecting who they want to work with, is having that expectation meeting of making sure that they are aligned with the strategy, with the end goal in mind. And you know, what I explained to investors that I've spoken to over the years is when you own that property, you own a business, and that four walls and a roof, you are the CEO of that business. The property management company is the operating system of that business. But it still falls on you the CEO, you know, a lot of people I think they want to abdicate the growth of wealth, and they want to put it in and forget about it. I don't know your thoughts, but I think that that is a very, a recipe for disaster. And I think that's how a lot of people end up putting themselves in trouble is they just want to kind of hand it off like a mutual fund and never see it. What are your thoughts on that? And how do you find the right management companies, the right people on your team? What questions do you ask?

Marco Santarelli  14:48
Well, you're right. Most people take a lazy approach. They want to have someone else invest and manage their money and that's why mutual funds and ETFs and you know, these big companies that essentially take your funds, whether in an IRA or 401k, and invest it, quote, unquote, you know, in a portfolio and give you, you know, marginal skim skinny returns. So, so attractive is because people are generally lazy when it comes to a lot of things, especially their finances. And so rather than try and figure it out on their own, read books, and you know, take courses and educate themselves on real estate or stock investing, or whatever it may be, they figure, okay, well, let me just save the money and then hand it over to a fund manager or, you know, my employer's 401k plan. And that'll be good enough, it'll get me to retirement, and it'll have a comfortable retirement. Well, that may be true. But it is certainly going to be underwhelming, it's going to underperform. And it's really not the best way to go. If you just took a little bit of responsibility for your financial future, and you educated yourself, and you opened up the world and looked around to see what other options that are out there and how you could participate, you would be far, far, far better off. So most people, unfortunately, whether this is just a human characteristic, but are pretty lazy about it. So to your question about property management, you know, it's important that you have a conversation with at least one but multiple management companies before you get started working with them because you want to essentially vet them. You know, whether you call it an interview or not, at the end of the day, you want to have, you know, a warm, fuzzy feeling in your belly. For starters, you want to know how they operate, what their fee structure is, what's in their agreement in terms of what they're responsible for. And what you're responsible for. A lot of this is pretty boilerplate, it's going to be pretty common for management company to management company, but exit fees, turnover fees are going to differ, how they handle repairs, and maintenance is going to differ. Larger, better companies, what I call full service, professional management companies are what I prefer to go with. And so what that means is, it's not a one-man show or you know, just a mom and pop operation, they actually have support staff built-in. So there's someone assigned to repairs and maintenance, they will dispatch their people, whether it's an internal handyman, or they outsource it to a plumbing company. They will have someone in charge of marketing and leasing, they will have someone in charge of accounting and the books, they will have someone who's running the business. So they have support staff to run a full operation. So that means if someone got hit by a bus, you wouldn't be left high and dry, managing your properties because there's no one else to step in and support. So this is a critically important thing you want great management, I can't stress that enough. I've had, I've had all kinds of property managers good and bad. I've even had a real estate agent who was my number one person, my acquisitions person doubling up as my property management person. And she was good at the acquisitions part of it, she was okay at the property management side of it, but it fell short. There were a lot of problems. And ultimately, it just came to a head where she ended up stealing $6,000 of collected rents from me, never to be found again. And I realized that she was basically just moonlighting as a property manager and trying to spend most of her time as a real estate agent. So those things don't work. You got to watch out.

Steve Rozenberg  18:15
So and this brings me back, kind of I'd like to step back a little bit, because you mentioned earlier that you have 10 rules. I'm curious, could you highlight what those are? And how, how could somebody who you know, maybe they don't use you, or they don't know anything about how did they implement those in their life?

Marco Santarelli  18:33
Yeah, well, if you want me to highlight, I can just quickly, quickly touch upon them, if you want me to drill down, you know, if you got the time for that, I'll do that too. Either way, those are found on both of our websites. So if people just visit our website, they can find it, it's actually a sticky post. So it's always at the top, you can't miss it. Cool. So we actually talked about the first rule and that is essential to educate yourself. You know, I like to look at knowledge as a currency it's something you can earn, bank, spend and which means you use it, you can apply it. So you know knowledge being a currency, you know, you need it. So if you don't accumulate knowledge and education, you're doomed to follow other people's advice which goes back to what you were saying about you know, the whole thing of, of investing passively with other people managing your money and you really just your success is based upon their competence and their luck. If you want to be a good or great investor, you have to educate yourself and really it takes you to a whole nother level you from bad you become good from good, you become great. And then that becomes your you know, your executable power to create passive streams of income not just for yourself, but your family and your generations to come, your heirs so that you passed along. So that's rule number one: educate yourself. You want to just keep flying through these.

Steve Rozenberg  19:49
Yeah, yeah, I think they're great. I think I'm interested I want to know.

Marco Santarelli  19:53
Okay, all right. So, so number two, again, you know, just had a 30,000-foot level is to set investment goals. Now I know everybody listening to this has heard the concept of writing down your goal setting investment goals. But the reality is, is probably less than 5% of people actually do that the less than 5% of people actually write it down and review it on a regular basis. It's mind boggling, but been proven statistically, it's been proven through studies that time and time again, people who write their goals are far more likely to achieve them or reach them or get close to them. So the difference between a goal and a wish is that a wish is something like, Oh, I want to be rich, but when you write it down, you make it very clear, specific, measurable, Aattainable, and you put a time stamp on it, you set in motion, something in your subconscious, and the power of the universe to move you towards that goal and make it happen. And Napoleon Hill talks about this a lot in all his books, I mean, great reading, start with thinking Grow Rich, read it once a year, because he talks about the power of the subconscious mind and goal setting and what it does, but just set clear and specific investment goals, because that becomes your roadmap, your roadmap is your action plan, and that is what sets you on the path to be financially independent. And, you know, and it just doesn't have to be real estate, it can be goals about your health, wealth, and well being your family travel venture fund, you know, whatever you want. So third, is something that people made a mistake back in 2003 2004, or five and 2006. People who call themselves real estate investors, and I say that in air quotes, were really nothing more than long term speculators, they were buying properties in the hopes of flipping 6, 12, 24 months down the road, because property markets were appreciating so quickly and so strongly that they thought that, oh, the real estate investing means buy, hold for a short period of time and then flip. Well, that worked for a lot of people, but it also hurt literally millions of people. And that's what led into the, you know, the real estate crash after 2006 and ultimately created the great recession of 2008. So, you know, speculating is nothing more than gambling. So don't chase after appreciation, you only invest in prudent value-based investments where the numbers make sense from day one, if it's not cash flowing from day one, it's not an investment. An investment generates cash flow. And if it's not putting money in your pocket from day one, that's not an investment, you're speculating. So that leads to the fourth rule, perfect segue. So if you're not speculating, that means you're investing for cash flow. And that's basically the rules invest for cash flow. With very rare exceptions, you always want to buy investment properties that have positive cash flow, the higher the better. It doesn't have to be astronomically high, but you do want cash flow, because that is what's directly related to your before-tax income. So it's putting money in your pocket. And cash flow is a beautiful thing. Because it's passive, you earn income, you know, checks in the mail, they say you get your income every month, every year. And that's measurable, tangible, real dollars. But as you get cash flow, guess what's happening, your property will not only appreciate over time, on average, if you're right in the right markets, but you'll also gain equity through the amortization of the loan. So you're basically gaining through equity growth on the appreciation side, you're gaining equity through the amortization of the loan, and you're not paying it, your tenants paying it. But cash flow is what I call glue. It's the glue that keeps your deal, your property, your investment together, because well, that is paying for itself. Your net worth is increasing, you're gaining net worth, you're gaining equity. And that's why you want cash flow as well as the equity growth because you're strategically placed in the right markets. Any questions so far?

Steve Rozenberg  23:49
No, no, I mean, it's funny because a lot of these I 100% agree with and I and I kind of speak the same thing. You and I are very much in tune and in line with what we're saying. I get it.

Marco Santarelli  24:03
Yeah, great. All right. Cool. All right. So the fifth rule is to be market agnostic. And what that means is you're not married to any one market, in a lot of investors make the mistake of being mistakenly told or educated or indoctrinated by the so-called gurus that you have to invest in your own backyard, you know, within one or two mile radius of where you live. Well, that works if you're in the right market, like if you happen to live in Indianapolis, or Jacksonville, Florida, or Memphis, Tennessee. Sure, you could invest within your own market, because the inventory is there, the market makes sense. The fundamentals are there and the numbers pan out. They make sense. But yeah, a lot of Americans and most people for that matter because most people live on the coastal markets and some of the higher-priced areas. You know, the numbers don't make sense. So the country is made up of 504 ish, and they keep changing the numbers but about 505 metropolitan city statistical areas, each one of these markets, operates on their own fine fundamentals, their own dynamics, their own supply and demand. And so that means every real estate market is local. And so that means if you have investable capital, you have to look around the country, as if you're looking at the stock section of a newspaper, and trying to decide which stock or which company is the best company to invest in? Well, it's the same thing in real estate, you have to look at the market and say which markets are going to provide the best returns and the greatest stability for my investment capital. And that's how you have to look at real estate markets, all real estate is local, they all move based on their own dynamics and fundamentals. So only invest in the markets that makes sense at the time that you're investing. And, and that means you have to disconnect yourself from the whole philosophy of investing in your backyard.

Steve Rozenberg  25:48
You know, it's funny, you say that because I have this conversation with many people. And they may say, why can't invest in real estate because I live in the Bay Area, and it just hasn't worked. Right. So my initial you know, rebuttal to that is I asked him, I said, you know, do you own any stock? And they said, they said given the name of the stock you own. Chase Bank? Okay. Chase is located in Massachusetts. So before you bought Chase Bank, did you only buy it because it was in your neighborhood? No. Did you go to Chase Bank and touch the building and kind of go into the board of directors and make sure everybody was okay, and happy before you actually bought the stock? No, you bought Chase Bank stock, because numbers, ratios, dividends, all of that. So, real estate is an asset class, just as stocks are an asset class. So either you don't understand asset class investment, which is this, or you're you know, you're hypocritical of your investing strategy. And when you put it in that perspective, you buy real estate based on numbers, you sell real estate based on numbers. It never says anywhere that you only invest in your local area, because you can drive to it, the fact that you can drive to it, and think that you should drive to it is another challenge in your business model that's telling me you're thinking of this as a job, you're not thinking of this as a business that operates without you, which is almost having it out of drivable destination makes you have to make sure the numbers work, because that means you can't go fix it yourself. You have to make sure that it's running like a business and leveraging people in time. That's kind of the way I run the analogy of it myself.

Marco Santarelli  27:21
Yeah, no, it's exactly right. Exactly. Right, Steve. Yeah. So with that in mind, you know, that kind of segues to the sixth rule, and that's: take a top-down approach, a lot of investors make the mistake of being presented a deal, you know, property, they analyze it, they like what how it looks and renovated, it's pretty, the numbers seem to make sense. But they pay little attention, if any attention to the street, the neighborhood, the area and the market that it's in. So my sixth rule is taking a top-down approach. And that means that you're always making sure that your investment choices, the markets, neighborhoods, and properties are in alignment with your goals. But you also start with the market in mind, work your way down to the sub-markets or, or, you know, areas within that market, because, you know, you look at Atlanta, or Dallas or any areas. I mean, it's not just Dallas, Dallas could be the city in the middle, which you went in. But you know, you've got all these sub-markets all around it. So you look at those sub-markets, like Arlington, for example. And then you start looking at neighborhoods within that market. And then you look at the property. So it's like a funnel approach, you take the top-down approach. So that means you're considering the market and the location before you're considering the property. So, you know, the reason you do this is because housing markets have their own local economy, they've got their own unemployment job growth job, you know, population growth, migration could be net positive net negative, you want to consider all these things. There's also you know, the dynamics of you have an abundance of supply or lack of supply, how much demand is there? These are things that always change pricing and shift the dynamics of that market. then ultimately, you look at neighborhoods where you look at amenities, schools, crime, you know, renter demand, do the numbers make sense? Are you getting, you know, close to 1% of the purchase price, as far as monthly rent, it doesn't have to be 1%. But that's kind of a loose target that we shoot for, at least in the 25 markets that we're in. And then, you know, finally, you look at the property, and you choose the best deal within the market at that time. And that's what it means to take a top-down approach.

Steve Rozenberg  29:35
Oh, no, I just gonna say that that, you know, I think a lot of people they, well, you and I both know, a lot of people do this backwards, they pick the house first, then they try to run it through a strategy that matches the house. And they don't even know if it's getting them closer or further away from their actual goal, as opposed to getting their goal, creating the strategy. And the last piece of the puzzle is the actual house or the property, whatever kind of investment you get, and I think I like that How do you say that because, you know, you start at the end and work it backwards. And many people, you know, they, they want to be so busy being busy, they just want to get a deal. So they get a deal. But then they realize that maybe this deal, they don't even know what to do with it. Now they're like I have this house, what strategy doesn't match? And that's where I think people get in trouble.

Marco Santarelli  30:19
Yeah, absolutely. So as time goes on, you start to build your portfolio, you know, you get to a point where you need to start diversifying within real estate. Now, this is not exactly the same as the person buying in any other, you know, asset class like stocks and bonds. Basically, what you want to do is focus on one market that meets your investment criteria and build a portfolio there a footprint, I call this three to five properties in three to five markets, that's kind of my rule of thumb. So pick a market that makes the most sense for you at this time, that meets your investment goals. And by three to five properties in that market, then what you do is you move to another market that also aligns with your investment goals and fulfills your ultimate strategy. But you know, what you're trying to build and build another footprint, there are three to five properties, again, under professional property management, so you got three to five, here, three, and five there. And you do this three to five times. So ultimately, you're going to have anywhere from, you know, nine to 25 properties depending on how big of a portfolio you want. But it's diversified across three to five markets. And this is the way you diversify geographically. So again, going back to the concept of all real estate being local, what's happening in let's say, Houston, Texas, is different than what's happening in let's say, Kansas City, Missouri, which may be different than what happens in northeast Pennsylvania. And that's what diversification is. So the underlying reason is to diversify within the real estate asset class is really just to have your assets spread across different economic sectors. Because again, it goes back to that fundamental concept of all real estate being local, and it minimizes your quote, unquote, risk, something, you know, impacts one market negatively, it may not and should not affect you elsewhere.

Steve Rozenberg  32:05
Got it, makes sense.

Marco Santarelli  32:07
Number eight, we've talked about, you know, quite a bit already. And that just uses professional property management, I can't under you know, undressed or underscore that important concept enough, you really need to have the right people on your team doing that unless you are brilliant at, you know, managing tenants, you know, how you have good marketing skills, strong people skills, you understand tenant-landlord laws, you can handle tenant complaints and excuses not that they happen all the time. But you know, you've got, you're competent, you can do it. I know, people who manage their properties from 2000 miles away successfully, it's doable, but you need to have cut your teeth, you know?

Steve Rozenberg  32:45
Yeah. And, you know, it's funny, because I think of I think it's not the same, but it's kind of the same in the sense that I think of being an airline pilot, similar to managing a property in the sense that they don't pay you when things go, right. You're paying for when things go wrong. You're paying for when the tenant says, I lost my job, I'm not leaving. And you're gonna have to figure out how to get me out of the property. Yeah, if you've never done this before, and you're in California, and it's a Kansas City investment property, how do you know the local laws, what, especially with COVID, and all the other stuff going on, same thing, you know, flying a plane, same thing you don't pay us for when things go right, you pay us for when things go wrong. And that's when we earn our money? So I always think of it don't think of what would you guys do on a daily basis? Is it worth my hundred dollars a month, or whatever that whatever the fee is, it's like, when you're standing in front of the judge, and you stand to lose almost everything that you've ever built? Because you said the wrong thing. You took the wrong action or did not take the action, then I would say ask that question then. And I think that's when the value of the team and having the right people on your team making smart decisions. That's when they earn their money and it’s valuable.

Marco Santarelli  33:53
Yeah, exactly. Yeah. So from there, it's really more of a broad general type of rule, if you will. And that's just to be a direct investor, which means you're maintaining control, if you own your own portfolio, you're like the CEO of the company, as you were talking about before you call the shots, you set the directives and you have your team, the people that are working with you, below you if you will, but with you are essentially managing those assets and taking care of your taxes and everything else. So I like the concept of being a direct investor with few exceptions. I don't necessarily like investing in funds, partnerships, especially paper-based assets, like reads, you know, New York-based reads. I like to have direct ownership in real estate. Now, that doesn't mean you can't invest in syndication. If you know the team, you know, the partners and you there's a high level of trust and you're you have direct ownership through the syndication in the real estate. That's okay. But, but the concept doesn't change, be a direct investor. Don't leave it up to fund managers or corporations. And then lastly, Not least, I call this rule even though it's a, you know, a general principle of real estate investing one of the major major benefits of investing in real estate. And that's your ability to leverage your investment capital, you know, there's very few if any assets out there that allow you to take a little bit of capital, your savings and leverage at five to one where you can borrow other people's money, and control 100% of the asset 100 and get hundred percent of all the benefits, including the tax benefits, the depreciation, but only put up 20% of that investment. So that's very powerful because it accelerates your wealth creation, it magnifies your overall rate of return, and just puts you on the fast track to become financially free and wealthy through real estate.

Steve Rozenberg  35:48
Yeah, those are great. And you say these are all on your website?

Marco Santarelli  35:51
Yeah, it's in the blog section on both websites, it's the first thing you see at the very top, literally says 10 years of successful real estate investing.

Steve Rozenberg  35:59
I love those. I love those. Those are very valuable and very, very relevant. I think they're actually timeless. I would say they are very, you know, any industry any market any time. And so I appreciate that. And I know we're almost out of time. But if you don't mind, could you pull out your crystal ball? And give me your predictions for the next 12 to 18 months? In the real estate industry? Do you see the opportunity? I see Personally, I see a lot of opportunities coming. Not yet, but I can't come in. But what is your professional prediction of what's to come? And what, you know, where do you see the best opportunities?

Marco Santarelli  36:43
Well, the best opportunities are definitely going to be in the residential real estate space, retail commercial. And retail is not an area I would want to be looking at right now. I don't do much, I do some but I don't do a lot in the commercial, real estate side of the equation. I am involved in commercial real estate projects. But they're not. They're not retail-based. They're typically manufacturing and operations based. So there's already revenue there. But I'm very bullish on the residential side of the equation, because housing, housing household formation is still very low across this country, we are not keeping up with the demand for housing. And the problem is, is that the demand for housing is not only increasing, but it's accelerating, and in part because of COVID. So you're going to see demand for rentals demand for residential housing increase continue to increase. Interest rates are very low. In fact, they're at historic lows, and they're going to continue to stay that way. In fact, there's a strong argument to see them continue to draw. So you're going to see even lower mortgage rates, all this is going to continue to fuel housing and growth in housing. Now, the fact is, is that a lot of people still can't save up enough for a down payment to buy a home. So the size of the tenant pool is going to continue to grow. This means for people like you and me, and people listening to this, there is a great opportunity to invest in real estate and provide safe, clean functional housing to people who need that housing. So you can do good in the world by providing that service, and that you know that offering safe, clean functional housing to these people who need it by being a prudent real estate investor. That's the thing we'd like to talk about and teach. And then ultimately, you know, we have the properties for them to do that in the markets that we talked about. But that's my prediction is that demand will continue to stay strong. On the residential side. My favorite is single-family homes. But, you know, we, you know, we work with single families duplexes for plexes. I like them all, but the single-family homes just always been my favorite unit of real estate.

Steve Rozenberg  38:59
Yeah, I agree. I think there's gonna be a lot of opportunities. You know, I think right now we're in a bit of an emotional buying frenzy. And I think people are buying based... This is very, I'm sure, like, you remember, I don't know if you do, but this is very reminiscent of 2006, 2007ish, right before it went dark. And it reminds me of where you're in Orange County, it reminds me of the grand finale firework show at Disneyland before it goes dark. And so it's like everyone's in this frenzy. And it's going to go dark. And the people that are sitting on the sidelines, like you and myself and others, you know, astute investors are just waiting. And pretty soon, it's, you know, we'll go finding deals when it's in the dark. And I think the opportunity will be there. I personally think more wealth will be created in the next 12 to 18 months than in the last decade. And I think a lot of you know, it's a market correction. We had it in 2001. We had it in 2008. We had it in 2014. We have it again, it's about a seven-year cycle historically. I think we're just seeing the cycle repeating itself. We can call it whatever we want. unprecedented. systemic, not systemic, but it's the correction, the market is correcting like it always does. And I think we're just seeing the correction and the investors that have gone through these cycles. And those of you that are watching, hopefully, you're kind of understanding this, that this is something that has happened for years and years, just because there wasn't the social media and online presence doesn't mean that these market corrections did not already happen. They've always happened. And I think they will continue to happen. I think that utilizing you know, your services, I think is great, because they can get guided, a guiding tour, basically being walked through how to do it. And I love the fact that you promote, you know, management companies like mine manage property management and other facets of the team concept, to secure that wealth and keep it as opposed to just buy it and saying, Hey, good luck. Take care. So, Marco I really, really appreciate your time. Thank you so much. If somebody wants to get ahold of you, they want to talk to you to learn more about your services. How do they find you on online social media, all that?

Marco Santarelli  41:03
Yeah. So thanks for having me on. Steve. This has been a lot of fun talking about this. I really enjoy talking about this. And the more people we reach the better it is. So appreciate the invite. Yeah, you're getting hold of me and my team is pretty simple. We just basically have two websites. It's noradarealestate.com. The sister website and the link to each other is passiverealestateinvesting.com and Passive Real estate Investing is the name of my podcast. So passiverealestateinvesting.com is just the home for that podcast.

Steve Rozenberg  41:37
Cool. That's great. And then so they can get you to know, right in and any other social media, Instagram, all that stuff. They can find you.

Marco Santarelli  41:44
Yeah, it's all on there. Yep.

Steve Rozenberg  41:46
Okay, great. Well, Marci, thank you again. And for those of you watching, if you're looking for property management services Mynd is in over 19 investable markets. If you're looking for a team to help you strategically grow your portfolio, whether you have one property, 5, 10, 15 properties or you're looking to grow that definitely come look us up you can go to our website at mynd.co. And again, this is all about the part of being a team and building your strategy. So we've got a lot of educational content on there and all of our geographic regions so you know if for some reason you own one property in Portland, Oregon, you may want to buy something in Texas, Tampa, Charlotte, Atlanta, any of these markets, at least take a look and see. As Marco eloquently put it, see if it aligns with your strategy to reach your goal before you purchase it. So this is when you have the conversations, not after and you're under the gun because now you got to get it rented that's, to me is not the time to be seeking out expert counsel and guidance. So everybody on behalf of Marco and myself, Mynd Property Management. Thank you so much for watching. We will be back next week. And look forward to more Facebook Live with everybody. We'll talk to you guys later.

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Meet Marco Santarelli

Marco Santarelli is an investor, author, and founder of Norada Real Estate Investments, a national real estate investment firm offering turnkey investment property in growth markets nationwide. He is the host of the Passive Real Estate Investing show, where busy people learn how to build substantial passive income while creating wealth for the long-term. Marco is also the creator of DealGrader™, a scoring system that measures the investment quality of a real estate investment, giving you an overall snapshot of its profitability and investment risk.

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