Episode 9 with Michael Albaum
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HIGHLIGHTS FROM THE PODCAST:
00:56 - How Clay started in the IRA business
1:51 - How to get started in investing in your IRA 3:20 - Learning the differences in traditional vs IRA
24:26 - Learning things you can and can't do with investing in your Checkbook Control Model
26:00 - How does Advanta IRA help you 28:13 - Mistakes newbies can avoid 30:18 - How you can win big with an IRA FULL TRANSCRIPT OF THE PODCAST AUDIOMichael Albaum: Michael Albaum: One of Roofstock's biggest value add is basically having a packaged property, ready to go for someone to make an offer on. They have all the tools, all of the information at their fingertips to be able to make an informed offer. Spencer Sutton: Hi everybody, welcome back to another episode of the Atlanta Real Estate Investor Podcast. I am one of your hosts, Spencer Sutton, and I've got my co-host with me, Matthew Whitaker. And we also have Chris Stewart who's joining us now as a co-host. So welcome guys. Chris Stewart: Thank you. Appreciate it. Matthew Whitaker: What's going on, Spencer? Spencer Sutton: Yeah, I'm all right. Matthew Whitaker: Super pumped today about our guest. Spencer Sutton: Yeah, so we have Michael Albaum with us from Roofstock and he is the head coach of Roofstock Academy. So man, Michael, thanks for joining us. Michael Albaum: Oh, my pleasure. Thank you all so much for having me. It's a pleasure to be here. Matthew Whitaker: Well, we are huge Roofstock fans, and I always tell this story when I'm talking about you all, but there's only been a few people in the history of GK House, now Evernest, we changed our name, that walked in here and told us, "This is what we're going to do. We're going to create this marketplace where investors can buy and sell homes." And typically when you all walk out the door, we do a big eye-roll, "Just another one of those." But over the last four or five years, you all have done an unbelievable job of executing on that. So tell us a little bit about the history of Roofstock and a little bit about the platform, Michael. Michael Albaum: Yeah, absolutely. Well, I'm so glad to hear that the eye roll didn't come to fruition on that one. So it started out... Matthew Whitaker: It usually does. Spencer was doing all the eye-rolling, I believed in you guys. Michael Albaum: I know I was like. Matthew Whitaker: I said, "Spencer, these guys are going to do it." Michael Albaum: I said, "What a waste of time? That was the biggest waste of time." Spencer Sutton: I would say, "How's the view from under the bus, and then you just got thrown right under there?" Matthew Whitaker: I know, he does that all the time. Spencer Sutton: That's pretty usual around here. Michael Albaum: So I'm totally going to butcher the story here, but I'll do my best to give you the 10,000 foot bridge version of it. So one of our founders was looking at, oh, and a bunch of homes out in, I believe at the Texas market, and wanted to sell a big portfolio of them, and went up about to a couple of different brokers and said, "Hey, I've got this big portfolio of homes. I need to sell them." And he just kept getting passed over and passed over. And he said, "Man, there's got to be... Why aren't there any brokers who are willing to take on this portfolio? It's easy, they're all cash flowing, they're candidate, they're all investment properties." And he said, "There's got to be a better way." Michael Albaum: Fast forward, some trials, tribulations, and some meeting of the minds, and Roofstock was created, a way to buy and sell investment properties online. And so it was able to service big institutional clients that are looking to sell big portfolios of homes, as well as the retail buyers and retail side, who are looking to the individual person that's looking to invest in properties at a distance. And so the idea was to be able to sell cash flowing rental properties by keeping the residents in place, is a big plus for the sellers. And on the buying side, folks can buy a cash flowing asset day one, kind of plug and play, and start generating cashflow from the get-go. Matthew Whitaker: What I think is amazing about Roofstock is you're basically, because the background of the people like you that are building this business, you all have institutional acquisition background. And so a lot of the cool thing about the Roofstock platform is the institutional level data, data, or data, that the platform allows the kind of newbie investors to have access to. So can you talk a little bit about the site and the data and where you're pulling that information from? Michael Albaum: Yeah, absolutely. So, so much of, I think Roofstock's value out is the marriage between technology and meeting the real estate market. So, before Roofstock goes into any new market, there's tons and tons of diligence that's done on the market, using John Burns data, is one of our biggest sources of information. And for those of you listeners who might not be familiar with John Burns, he's generally accepted as one of the chief economists in the space and his company publishes amazing data, super up-to-date, super relevant, very data and metric driven. So that's one thing that we're using to forecast into new markets. And then also keep folks up to date with our existing markets that we're in. Michael Albaum: It's funny, we actually just recorded a podcast with the head of our data science team. And we were asking him this exact question is... Roofstock has something called the neighborhood score, so we were asking him, where is the information coming from for this neighborhood score? And it's a rating on a star system, one through five, five being the best, one being the worst. And a lot of information is coming from the census, the census Bureau at the census tract level. So we're able to get information about schools, about crime, about population, and about appreciation that that market has seen in the past to give folks kind of a high level overview or flavor of a market, again at the census track level, what a neighborhood or what a market is looking like. Matthew Whitaker: So you get all this institutional level data and John Burns by the way, for anybody who's listening is a great follow on LinkedIn. He always is posting information, especially if you're a remote real estate investor. He's a great followup because he's always posting information on the SFR market, on the small multi-family market, just the rental market, including big multi-family, so great follow on LinkedIn. Talk a little bit more about what are some other things that an investor that might come to your site for the first time will see. I mean, I'm sure the rent's on there, they can adjust some things, talk about kind of the widgets they can move so that they can decide on an investment. Michael Albaum: Yeah, absolutely. So one of Roofstock's biggest value add is basically having a packaged property, ready to go for someone, make an offer on, they have all the tools, all of the information at their fingertips to be able to make an informed offer. So we've got two properties that you'll see, two genres of properties that you'll see on the website. One is called the Roofstock exclusive, and that's a property that you won't find on the MLS, it's not on Zillow, it's on a Redfin, it's only on Roofstock. That situation where the seller has come to Roofstock and said, "Please sell my property." So Roofstock actually goes through a certification process with every property that gets submitted to this site. And it's a pretty thorough process, and in that process, we are collecting a resident ledger, there's a resident in place reviewing the existing lease, if there's a lease in place. Michael Albaum: We're actually doing an inspection on the property and publishing that for our end users to look at before they even make an offer. So there's a bunch of things that immediately disqualify a property from being listed on the site. So about only 15% of the properties that ever get submitted to the site end up making it on to the site for being for sale. So if you're seeing it, it's already been vetted, it's already been combed, and those are the Roofstock exclusives. So on all those properties, anybody can view the resident ledger, the inspection report, and that like you were mentioning, we have a bunch of financial metric calculators as well on the site. And so you can adjust the down payment amount, you can adjust your loan interest rate, you can adjust your purchase price, closing costs, all the different factors that go into evaluating a property we can actually manipulate. Michael Albaum: And we also have a section where you can pull up a proforma. And so you'll get a snapshot view of what Roofstock estimates their income and expenses to be on a given property, and the end user can manipulate all of those values and all of those inputs to see, "Okay, well, if I can get insurance for this much, or what if my property taxes go up to this much, how does that change the performance of that property?" And so we have metrics like cash on cash return calculated, cap rate calculated, gross yield, and anticipated appreciation as well, and we couple that with graphs and charts to give folks not just a one-year snapshot, but kind of a holistic long-term view of, "Hey, if I hold this property for 5, 10, 15 years, what does that look like, given the appreciation assumption? What does that look like given the cashflow assumption?" Michael Albaum: The other kind of property that we have on the website, it's called a Roofstock select and that's a property that anybody will find on the MLS, but likely to be listed on Zillow or Redfin. And that's the property that our data science team has just seen on the MLS, but wants to highlight for our investors. So you'll get the same metrics, the same assumptions, the same input values that you would on the exclusive properties. But the difference here being that none of the diligence is done in advance. Once a Roofstock user gets that property under contract, then Roofstock will go ahead and do all the due diligence for them on their behalf at no cost to the buyer. Matthew Whitaker: And for somebody who's never been to your site, what level of access can I have being completely anonymous? And then what do I sign up for to have access to? Michael Albaum: Yeah, great question. So anybody can go to roofstock.com and view all of the active listings. And then once you pull up a property, there's all kinds of filters you can set to come through properties. Once you pull up a property, you can access all of the evaluation tools and the income and the expense projections of the performer, but you just need to make an account, which is totally free, you're not going to get spammed after you make it to access what we call the diligence vault or the due diligence documents that we have pulled in advance of the inspection report, the resident ledger, the lease abstract, all that kind of good stuff. You'll need to make an account for. Spencer Sutton: If you're an investor and you're out of state and you're looking to buy in Atlanta, I think you really need to understand how valuable all this is. I mean, we talked to so many investors who are.... They're looking for houses, they don't have one source to go to, the diligence is kind of all over the place. Matthew Whitaker: They rely on diligence from the seller. This house is perfect. This thing is amazing. Spencer Sutton: It's on the best street and then they'll call us and we'll say, well, we'll give them whatever information we have, we can't even go out to all these houses and vet them. So like if you're listening, this is a tremendous value and just a great need in the marketplace. It really is a simple way to get started for sure, and kind of a comfortable way to get started. Michael Albaum: I think a lot of our end users come, either they're just getting started or they just love the ease of use of the site and of the transaction process. And so something I should mention, I think Roofstock gets mislabeled a lot of times as a turnkey company or a turnkey provider, and so just wanted to kind of shed a little bit of light on that. Turnkey providers are typically buying properties, renovating them and then selling them. Michael Albaum: And that's all under the same guys or the same company name. So Roofstock is more of like the eBay, should be thought of more of like the eBay of the real estate investment space properties are bought and sold and it's a marketplace for facilitating those transactions. So Roofstock doesn't own the properties that they're selling 99% of the time. There's a few instances where they might, but again, 99% of the properties you're seeing are some seller owns them, they've come to Roofstock to facilitate that transaction, as was looking to sell them. So I just wanted to clear that up for any of your listeners that might be confused and may have heard it labeled as a turnkey company or turnkey provider. Matthew Whitaker: And we actually know people who sell houses through you all, and they have a great experience. Some turnkey providers actually sell through the platform. So that's maybe where the mislabeling comes from, but Roofstock does no renovations that I know of in Birmingham or Atlanta, where were some of your preferred vendors. Matthew Whitaker: It's not just onesy twosies, right? I mean, we're talking about if somebody has a portfolio getting back to the base case, which is why restock was built, if somebody has a portfolio of homes that they want to sell, or they want to buy portfolio of homes in a market, Roofstock's a great way to do that transaction as well. Michael Albaum: Absolutely. So we've got listed on the site individual properties, as well as portfolios. And as part of those portfolio offerings, the seller will stipulate how many properties need to be purchased as part of that portfolio sale. So for instance, I was looking at a portfolio the other day, it had 47 properties, the seller only required someone to buy two out of the 47 in order to kind of peel off that portfolio. So that'll be stipulated as well, but a super great place to pick up multiple properties simultaneously from an ease of transaction standpoint. You can often get better financing when you're picking up multiple properties simultaneously. So a lot of reasons to both buy and then also to sell because Roofstock handles so much of the due diligence for you on your behalf, both as a buyer and a seller. Matthew Whitaker: So I didn't make great grades in school, but- Michael Albaum: You're in good company. Matthew Whitaker: ... I came late to the value of education. So let's get into your role at Roofstock and working for the Academy. Tell us a little bit about that, if somebody wanted to get started. Michael Albaum: Yeah, so the Roofstock Academy kind of at its inception at Genesis was a program that we developed to help educate either seasoned investors, looking to get into a new business or a new asset class or scale their portfolio all the way down to your rookie investor that has maybe heard about real estate investing, but doesn't know a whole lot about it. And so the goal is to help create great investors, kind of that's the mission statement at a core level. And so it's not to teach people how to invest on Roofstock, it's not to teach people that have already done this before, we just want to help people make great investment decisions. So everything we talk about in the Roofstock Academy is applicable across the real estate investing space. And so has a couple different components to it. So one is it's got on-demand lectures. Michael Albaum: So I think right now we're about 50 hours of on-demand lectures, covering everything again from just starting out your basic financial metrics, all the way up to scaling, a disposition selling, and then ownership and operations, what that looks like, what investors need to know. It also comes with one-on-one coaching and I, as the head coach do a lot of that coaching, we've got numerous other coaches as well. And so I think that's a real big value for a lot of folks. At least that's the feedback I've received is, "Hey, you know what? The lectures are great, I'm able to learn concepts, but then to apply it to my personal situation, having that one-on-one coach is really helpful." And again, it's totally unbiased, I have no financial incentive for anybody buying properties at all or through Roofstock, so it's really just to help folks out. Michael Albaum: Then we have a exclusive Slack channel and Slack for those of you listeners who might not be familiar, it's an instant messaging program, like a Skype or a Facebook, so we can connect real time students among students and also students to coaches. So it's really great to get quick questions answered. Then we also do smaller group coaching sessions on a regular basis. We do a monthly book club where we have a lot of the authors come in and join us for those sessions and chat about the books, which is a lot of fun. Michael Albaum: The last two pieces that I'll mention is we actually right now have a cash back incentive. So if folks end up enrolling in the Academy, we're giving them $500 cash back for every property they close through Roofstock up to $2,500. So you can actually make money purchasing properties through Roofstock, which is kind of cool. The program cost is 1250. And then the last piece of it is we offer a full lifetime money back satisfaction guarantee. So I always joke with people, if you end up enrolling in the program and you can't stand the sound of your coach's voice, or you don't like the material, return it, no question's asked, you'll get your money back, full refund, just as long as you haven't used any of those cash back incentives. Chris Stewart: Whether it's a new student basically, or somebody that's new to the business, or whether it's someone who's been in it awhile, what's a common message that you share with them that's a must, regardless of which level you're coming in on? Michael Albaum: Yeah, I love that question, Chris. So I think the kind of biggest piece of advice that's universal across the board is build a buy box and get really sharp on what your requirements are. And for those of your listeners who might not be familiar with what a buy box is, it's basically a framework that helps you identify a go investment for you versus a no-go investment. Because, Spencer, you and I might have very different requirements or very different goals about what is we're looking for. So a great investment property for me might be a terrible one for you, or Matt, a great investment property for you might be a terrible one for me. Michael Albaum: So getting really specific around your financial metrics, what kind of cash on cash return you're looking for? What is your cashflow look like on a monthly basis down to the physical characteristics of the property? Are you looking for a three, one, because you want to add a second bathroom that's in value. Are you wanting a multifamily, are you looking for single family? So getting very specific. And I find that even with a lot of seasoned investors, they're just kind of grabbing at straws, picking up good deals wherever they go, because they seem to be good deals. But so again, getting really specific is pretty universal across the board. Spencer Sutton: I'll tell you what my Bob box was. Michael, back when I was wholesaling houses, if I couldn't wholesale the house out, I bought it and held it as rental. That's the worst strategy there was, it was the absolute worst buy box. I kept all the crap that nobody wanted to buy and said, "Oh, we'll just rent it out." Spencer Sutton: It's not a good strategy. Matthew Whitaker: Well, I'll tell you how smart I was. Spencer was my coach. So, if he was already... Spencer Sutton: I didn't charge you enough. Matthew Whitaker: Well, you still owe me that $2,500. Spencer sold me two of my first three houses, and I've been stuck in this business ever since. Spencer Sutton: It was a lot like my high school dating advice only went out with girls that would say yes. Matthew Whitaker: It's true. Spencer's like, "I promise you, this is a good deal, Matthew, you're going to be so rich." Spencer Sutton: You're going to love it. Matthew Whitaker: You're going to be so rich. Spencer Sutton: The first house I sold them, I actually never went inside because I had fleas, so I just sold it. I've never been inside, but he bought, whatever. Michael Albaum: Definition of a real friend. Spencer Sutton: That's right. Matthew Whitaker: All kidding aside. I really think that if investors will get a coach, whether that's somebody in the market or somebody like the Roofstock Academy, that'll walk them through deal by deal, somebody that's been through a number of deals and kind of knows all the things that... The pitfalls that somebody can get into. I just think that's an easy way to get started. Ironically, I'm thinking about investing in a new asset class and this mental model of, I just need to find somebody that is willing to essentially walk me through it. I'll spend all the money, we'll split the profits. Like there's not a person out there that is an investor that wouldn't be like, "Yeah, I'll do that. I'll just help you and split the profits." Matthew Whitaker: So coaching and education in this business are a must. And I think it's important to constantly value education to this business because the only way to keep up with where the market's going, like what Spencer and I were doing back in 2007, 2008, or really since 2004 just doesn't work today, it just doesn't. So if we are stuck in that, then we're not going to be able to capitalize on the new opportunity. And we've had quite a bull run in real estate, but there's still ways of making money in real estate. It's crazy to me that people might be sitting on the sidelines waiting for some softening in the market because you can still make money today, you just have to have a strategy and know what you're looking for. Spencer Sutton: That's really amazing because of all the investors we've interviewed on both of our Birmingham and Atlanta podcasts, the best ones are still education junkies, they still are sponges, they still want to learn, they still want to grow. So I think that's a valid point. Michael Albaum: I think it's so huge, and I think there's this kind of age old adage, that if you're the smartest person in the room, it's signed find new room, surround yourself with people that are smarter than you, that are pushing you to do better and do more, and don't ever stop learning. I think you guys nailed it. Matthew Whitaker: I was wondering why Spencer comes in my office all day. Spencer Sutton: I know I'm looking for somebody new in there, I'm looking for a smarter person. Matthew Whitaker: So pivoting on education, you also have a podcast. Michael Albaum: Yeah, so we do. So Roofstock has a podcast it's called the Remote Real Estate Investor. And so we are kind of unique in this space, in that we target exclusively remote investments because that's 99% of our user base on Roofstock is the folks that can't invest in their backyard, so they come onto Roofstock as a platform... They'll comes to the Roofstock Academy to learn what that process looks like. And so that's really our user base, that's what we try to cater to. So we talk about all things, remote real estate investing. Matthew Whitaker: Michael, talk about some shows that a lot of people are listening to that somebody might want to go over there and listen to. Michael Albaum: We just did a podcast with our head of data science, that was really interesting, I was mentioning that before. And then we also just had on actually, he's a good friend of mine, Zach Braverman, he's a CFP, certified financial planner. And so we were talking about all the different ways folks can access capital that might be a little less traditional or a little less Orthodox than they might be familiar with. So those two are a lot, a lot of fun. Matthew Whitaker: Michael, that was a setup, we did one with you about six months ago, and I was hoping that you would say that but let's end that this thing right now, I'll tell you, he said the worst ones are. Michael Albaum: Well, actually that it's funny, I often talk about that episode with so many folks in the Academy, especially... Matthew Whitaker: Michael, come on, come on, don't make it up now. Michael Albaum: I'm groveling now. No, in all seriousness, I get the question so often of, "Hey, what's going on with COVID, what are you seeing? Where's the market going?" And that podcast we did with you is just so burned in my mind when you mentioned that, Hey, we're at 98% occupancy." We've never been at 98% occupancy. So I really hold that episode pretty paramount in my discussions with folks about kind of where we are in the market cycle with COVID, how that's affecting things. So, well, I didn't mention you there... Matthew Whitaker: I could tell Michael, it was top of your mind. Michael Albaum: This is what I get for not asking what questions are being asked before we record. Matthew Whitaker: That's right. Michael Albaum: There's new right, serves me right. Matthew Whitaker: Again, back to a serious question, tell us what you tell people about finding a property manager? Because you can buy home right, but a property manager sure can screw up an investment. So what are the questions when you're coaching somebody that they need to ask a property manager? Michael Albaum: Yeah, I think the number one question is what's the number for GK Houses. Matthew Whitaker: We changed our name, Michael, my gosh. It's Evernest. Spencer Sutton: We're Evernest. Matthew Whitaker: It's Evernest. Michael Albaum: Oh, my God, yes, strike two. Spencer Sutton: Oh man, oh man, this so bad. Matthew Whitaker: One more and we're and we're out. We'll give it a try Michael Albaum: The question needs to be, what's the number for Evernest? Spencer Sutton: There you go. Matthew Whitaker: Formerly GK Houses. Michael Albaum: Formerly GK Houses, yeah, DBA Evernest. As part of the Academy, and that's to just gets you harping on the Academy, we came up with a property manager questionnaire that we recommend folks to run through when interviewing any type of property manager. And I think one of the best things that folks can do when selecting one is interview multiple, because it's only when you have that comparison between multiple, that you really start to see, "Okay, which ones rise to the top and which ones kind of fall by the wayside." And so asking questions about fees, asking questions about where they manage properties, asking questions about what kind of assets they manage, do they specialize in single family or multi-family, or are they some kind of in-between, how many properties do they manage and what their physical footprint looks like? Michael Albaum: Those are, I really think some of the big ones and getting some clarity on what type of management company you're working with. And then also asking about what kind of services they offer, can they handle rehab? Can they handle turns on an owner's behalf? Because so many of our users want to be really passive. And so I think that's really important to make sure your values are aligned and expectations are aligned with whatever vendors you're using. So property managers, I would say, definitely can make or break an investment. I've had my fair share of terrible property managers, and it's a real headache. Matthew Whitaker: Good deal. Well, Michael, this has been really awesome. Thank you so much for coming on the show. Again, if you haven't already subscribed to us, please do that, but also subscribe to the Remote Real Estate Investor. It's really great, they've got a bunch of different information. Obviously, ours is hyper-local to Atlanta. I hope somebody would go over there and listen to Michael and also consider joining the Roofstock Academy. They can find Roofstock Academy just right on the main website there? Michael Albaum: Yeah, so it's on, it's typically on roofstock.com, but if you go right to roofstockacademy.com, that's an even easier place for it. Matthew Whitaker: Awesome. Thanks, Michael. Michael Albaum: Thanks for having me on guys, really appreciate it. And I only get beat up too bad, so I thank you all for that. Matthew Whitaker: All right, everybody. And listen, if you enjoyed this episode or any of our other episodes from this podcast, make sure you leave us a five star review, share it with your friends, and we will see you on the next episode.
