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Low interest rates? Rising rents? Strong appreciation? But still feeling anxious about buying your first rental property? In this episode, you'll hear from someone who may help reduce that anxiety. Yianni Garcia is a mortgage broker who was aware of the opportunity presented by low interest rates and a strong rental environment. And he knew that he wanted to become somewhat semi-retired in five to 10 years. But spending a large chunk of hard-earned cash is not easy. So he dealt with his investing anxiety by educating himself. He joined RealWealth in 2019, started pouring through webinars, listings, and pro-formas, and bought his first single family rental just last year. In this episode you'll hear more details about his RealWealth story, including where he's purchased his properties, why they were such great choices for passive income and appreciation, and what his plans are for the future. As a mortgage broker, he also has lots of great information about loans for investors. You can fast track your own retirement plan by joining RealWealth, for free, at realwealthshow.com. As a member, you'll have access to the same educational material that helped Yianni. That includes the Investor Portal where you can view sample property pro-formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more. And please remember to subscribe to our podcast and leave a review if you like what you hear! Thank you! TRANSCRIPT [music] Speaker 1: You're listening to the Real Wealth Show with Kathy Fettke, The Real Estate Investor's Resource. [music] Kathy: 3.25% interest rates for investors, rising rents, rising home prices, but you're still feeling anxious about buying investment property? I'm Kathy Fettke. Welcome to the Real Wealth Show. Our guest today is going to share how he was able to get through the anxiety that most people feel when they're about to embark on something new, especially when that something requires a very large amount of cash. Yianni Garcia, like many young people, doesn't really want to work until the typical retirement age of 65. He wants a better plan that allows him to be able to spend more time with his future children. As a mortgage broker, he saw the opportunity to take advantage of today's very low-interest rates and very strong rental environment to buy, refi, and then buy some more in order to build a large portfolio that will speed up the path to be somewhat semi-retired in 5-10 years. Well, Yianni, welcome to the Real Wealth Show. We're so excited to hear your story. Yianni: Thank you for having me. I'm so excited to be here. Kathy: Let's start with what brought you to real estate, to begin with? Yianni: Sure. I am a fairly new investor. I started investing in 2020, and I attended-- Kathy: Wow, what a year to start. Yianni: [chuckles] I know. My timing was very lucky, I would say. I feel very blessed about that. My very good friend Zeona McIntyre invited me to a Real Wealth network event in the fall of 2019 in Jacksonville. That's where we met. I got exposed to so many people in the network. It was like a crash course of 20 plus different markets. That's really where the lightbulb went off. I said, "Okay, I really want to stay tuned in and see where I can find my first investment property." After I did that, [00:02:00] I started just every week, tuning into webinars and reviewing listings that I would get from different agents within the network. I finally settled on a little 100-year-old brick bungalow in the south side of Chicago. It's a section 8 property. Initially, I was-- it was my first investment property so to buy something that was so old, although I had been gut-renovating in 2016, and what attracted me to that property was just the high level of the cash on cash return. When I first got that inspection report, 40 pages on it, I'm like, "No, I can't do this. This is way too much for me." Kathy: You didn't buy it or you did? Yianni: No, I did. I did Kathy: You did? [laughs] Yianni: I did. Kathy: What got you to buy it after seeing the inspection report? Yianni: Well, I spoke to Leah and she's like, "Listen, you're getting the home for an incredible price. A lot of the things in this report are quite cosmetic and you can actually, since you offered asking price, this could be a good position for you to negotiate for those things to be fixed." She coached me through how to have that conversation with the seller. They agreed to have a 95% of everything on that list. Kathy: Wow, amazing. Yianni: We did a second inspection. Everything's cleared. I've been income-producing with that property since August of 2020, it's when we close. It's been great. The returns are incredible. All my cost is about $700 a month, and I make $1,600 a month on that property. Kathy: What? Yianni: Yes. [laughter] Kathy: Leah is a fantastic coach. Wow, that's amazing. Good for you. What a slam dunk. That is a scary first investment because Chicago doesn't have the friendliest landlord laws, their taxes [00:04:00] can be high, they've got some issues with their pension funds. They're in the news a lot. An older home, it's like buying an older car. It's not a new car, so things can break down unless they've been replaced. Even sometimes with an old car, when things have been replaced, they break down still, so that was definitely risky so I'm really glad to hear that it has turned out well for you. Do you think the values have gone up since you bought it considering what's been happening nationwide? Yianni: I think they have. One of the things that attracted me to this property was the rental income. I knew that with such a high level of rental income, my expectations on appreciation were less for this specific property. What I will say is that initially, I was very hesitant about section 8 because you have preconceived notions of what that means and is it going to be difficult tenants or whatever, that bias that I had before I went into it. What I found was that it was actually a brilliant first investment because it's guaranteed income. If the tenant loses their job or gets sick or gets COVID, for whatever reason, they can come up with their portion of the rent payment. The housing voucher kicks up to 100%. Also, I never get a late payment because the housing voucher that they received, whether it is 70% or 80% of the rent, is dependent on them putting their 20% or 30% on time. It's just a recession COVID proof investment. I wish I could say I had the foresight to do that. It was luck, in many ways. That felt really good and safe as an investment. I did for my second property, which I bought a few months later, I bought it in Ocala and it was a new field-- Kathy: That's in Florida, for those who don't know where Ocala is. Yianni: That's in Florida, yes. Ocala, Florida. Kathy: It's a little town in Florida, but it's growing and you probably will learn about it soon enough because it's growing quickly. Yianni: It sure is. [00:06:00] That team calls it the corridor of progress because they refer to all the manufacturing and healthcare systems and all of the blue-collar jobs that are coming into that part of Central Florida. I bought there. The rental income, although was still very attractive, was less, but I had higher expectations for the appreciation. What I've seen in terms of appreciation there has been remarkable. I bought that property for 136, a 3:2, one-car garage. Kathy: $136,000? Yianni: 136. Kathy: I just want to be clear, because some people when you say 136, they don't know what you're actually saying, because that's a very low price for a new home. Yianni: A new home, yes. Kathy: A new home? [laughs] Yianni: I snuck the last of those-- Kathy: You sure did. Wow. Good for you. I'm a little jealous. Yianni: I feel really lucky on that one, too. At a price over $200,000 recently and this is a loose appraiser. I use a tool called Homebot to keep track of the value of my home as the equity grows. Yes, it's around $200,000 now. I closed in February. Kathy: Good for you. Wow. Good for you. Wow. That's amazing. That's amazing. It really comes down to value, right? People will live in fear often, myself included, that "What's coming? What's next? Are we at the peak? Prices have been going up for over 10 years, what's next?" and it can be paralyzing. When you remove that fear, and maybe you didn't have that fear, and you just look at the asset alone and forget about all those distractions, a $136,000 house in Florida and an area that's growing, the chances are pretty good. It's going to be fine, no matter where the market is headed. Yianni: Absolutely. No, I couldn't agree with you more. Listen, I think the money that I have in the market has done really well. [00:08:00] When I talk to investors, I'm a loan officer by trade, and so when I talk to real estate investors who are on the fence about, "Well, do I buy a home or do I keep my money in the market where it's doing so great?" I think both strategies are good. I think having a diversified portfolio where you're doing both, is really where you want to be because now, I have income-producing properties that are appreciating and I also have my portfolio, which is doing great. There's a certain comfort that I get from knowing that I have my hands in different areas and I have things that are building wealth, not just in one bucket. Another thing that I think about, unless you've done-- If you're a new investor, this may not be as obvious, is how you can leverage mortgage financing to scale your real estate. A property that I bought for $136,000 that appreciated so much over the span of less than a year, I can pull equity out of that home to fund my third and fourth real estate investment. Creative ways of using a cash-out refi to then fund future investments is a way that you can start scaling this. For new investors, that doesn't immediately click sometimes, you have to walk them through what that possibility looks like. Kathy: I started in this industry in mortgages too and I will say that is a great place to start. Well, anywhere is a great place to start. If you start in title or as a real estate agent or in mortgages, you learn things that a lot of people just don't know, I certainly didn't know before. When you learn leverage and come in from that angle, and are able to see all the options that most people don't know about, just the one very simple one that you can get 10 investment property loans backed by the US government. At ridiculously low [00:10:00] rates. What kind of rates are we looking at right now on investment properties? Yianni: Rates are still at historic lows. We're starting to hear and feel like there's going to be in the next quarter and two quarters, we're going to see a bit of an uptick, but rates are still in the low 3s for conventional investment properties. Kathy: What? I should know this, but I just can't believe it. Okay, I got to go get some loans. [laughter] Oh my gosh. Yianni: I have clients that perhaps can go the conventional route and get a conventional investment loan. Even non-QM products or unconventional lending products, they may not have their personal income to be able to qualify for investment property, but we can use the future income projections of the property that they're purchasing to qualify them. Those are alternative or non-QM products. Those products typically have higher rates, but even with those types of products, we're seeing low and mid 4s. Kathy: For a fixed rate? Yianni: Fixed-rate, yes. Kathy: Oh, come on people listen to this. This is-- non-QM, again, to just break that down for people who don't know loans, that's a qualified mortgage, so what's a QM versus a non-- what is that? What's the difference? Yianni: Sure. A qualified mortgage or a conventional mortgage would be something like FHA or conventional, which are government-insured. Those loans typically carry lower down payment requirements and they carry lower interest rates. I would say those are the most affordable and most popular ways of investing. Those are the most popular products, but let's say they do require your personal income, so your W-2 income or your tax returns are of a certain amount, you have a debt to income ratio to qualify for those loans. Let's say you don't have that income, but you still want to invest, you have good credit and you have cash, [00:12:00] You can use a non-QM product or an alternative product to buy an investment property. What we use to underwrite that loan is the future projection of income from the property that you're buying. If the bank, if we can project, "Okay, this home is going to make enough to cover the debt," then we can use that to qualify you for that property. The down payments for those, they're dependent on credit score, but we can get them as low as 15% Kathy: 15? Yianni: 15. Yes. Kathy: Wow. Wow. Our investment counselors are just so good. They're the ones who are all over this stuff. When you join Real Wealth and you talk to one of the investment counselors, they are not surprised by this information because they know it. I have been busy with syndications and other things and I haven't honestly paid attention to some of the lending. I still have more loans I can get because we're in mostly commercial loans at this point. Now you've got me fired up. Yianni: It was not common. You typically see the alternative products, they do 20, 25% minimums, so I happen to be with one of the largest independent lenders in the country so our product portfolio is just huge. Kathy: Amazing. Oh, that's so good to know. I'll make sure that our investment counselors know that you can maybe offer some of these services to our members. Let's go back to your investing story. You started in Chicago. You bought an older home in Chicago, a more tenant-friendly city. That's worked out. Then you went bought a new home, complete office. Complete opposite. Brand new home in a more landlord-friendly area of Florida. It's gone up tremendously in value. These are two very, very different products and very diversified. One is high cash flow. One has been very high appreciation. They're probably both appreciating and they're probably both cash flowing. Just one is cash flowing more, one is appreciating [00:14:00] more, very good diversified portfolio so far. Did Leah coach you on that or was that just a gut feel you had? Yianni: No, Leah was instrumental in all of this because as a new investor, I just didn't know what I didn't know. It was just always great to have that objective third party. She'll tell me-- she lays it down how it is. If there's something that doesn't look good, she'll tell me, "Hey, that doesn't look good for this reason." I was able to build trust with her very early on and feel like I had a really solid coach, even when some things went wrong and things were unexpected or whatever the issue was. She was a great partner. Kathy: That so great. If you don't mind me bragging a little bit about our incredible investment counselors, because they are all investors themselves, we have always wanted to make sure that they were coming to their coaching with no strings attached so to say. A real estate agent is looking at commissions for the most part. I didn't want our investment counselors thinking about that. I wanted them to just look for the best investment so they're just on flat salaries. They don't gain or lose anything by referring to different opportunities for you. They just are really looking at what's best for you. I love that. What's next? Yianni: That's a good question. My partner and I, we live in Miami Beach and we have a beautiful condo that we rent. Some people are like, "Why did you rent your primary home and then own investment properties?" That was by design. We just felt for our primary, we want to have something at a much higher price point and so I didn't want to sit on the sidelines until that moment came. I wanted to invest and start building wealth leading up to that. I think for us, the next step may either be, we may want to do another year here because we just love Miami Beach and the condo that we live in and do another investment property [00:16:00] in the meantime. Then in 2022, buy a home here in Miami. Listen, I think for us, for gay parents, it's very expensive to have children. That was a big motivator for us, for investing in real estate. We knew that the service (family planning/adoption) runs for about $150,000 per child. It's a big number and we knew we had to build things now and put them in place so that we could be able to family plan two to three years down the road. That was the motivation behind it as well is, what can we do now? We have our W-2 income, we have our careers, but what can we do with our assets so that two to three years from now when we're ready to have children, we can start that process. That was a big motivator for us. Kathy: Beautiful. I was going to ask what your why is and that's it. If you don't have a clear why, then it's just a process of buying houses and renting them out. You've got to know why you're doing it. Yianni: That's true. That for us. When the kid comes, it's not just the investment that we have to make to get there. I'm very jealous of my straight friends that don't have to think about that. [laughter] I always tell them when they're complaining how they're stressed out about their kids, I'm like, "Well, at least you didn't have to go through that whole process." Kathy: Yes, you might be stressed that your partner is pregnant, but you didn't have to pay for it. [laughter] Yianni: Yes, exactly. It's a whole different-- It's emotionally very intense too. Another part of it was when the kid comes, I want to have the freedom to be able to pick him up or her from school at 2:30 and be able to take a step back from the traditional 9 to 5 and have a little bit more freedom. I do see real estate as a path to that, to be able to be more of a full-time parent and have my business be secondary. Kathy: Awesome. [00:18:00] Do you plan on sticking with Florida or are you going to diversify further? Yianni: I love Florida. For me, my properties I get emotionally attached to them. It's like they're people. I have my old lady in Chicago and I have my baby in Florida. I think Florida would be something I want to explore. I have experience doing short-term rentals. I started doing Airbnb in 2011, so I've been doing it for about 10 years and I switched more to the property management side of it, so I help other people monetize their luxury listings on Airbnb and Vrbo but I want to be able to do that for myself. I'm thinking that's an area that I'm interested in, is figuring out where I could buy more of a luxury property, a single-family home. Or maybe in St. Petersburg or Panama Beach, or some of these areas that have a lot of regional traction year-round for travelers. Kathy: Yes. I love that. I know that some of our teams provide those rarely, but they do come across them. When you go with luxury, you have a bit less competition because generally, the institutional investors aren't looking at those. Yianni: Sure. That's a good point. Kathy: As a final tip, what would you say? You've obviously made some really good decisions. What kind of tips would you give to new investors? Yianni: Well, I would say stay educated, I think it's important to tune in and consume as much of the information that's coming from the network because the information is there. It's up to you to register for those webinars, sign up to receive pro formas and listings, schedule meetings with your investment advisor to ask questions and not be afraid of asking dumb questions because that's the only way you're going to learn. I think, that for me was number one, is just educate yourself, carve out an hour or 2 hours, 3 hours a week to do this because the people who say they're too busy to [00:20:00] learn how to invest or how to find a property, I worry about that because if you're too busy to invest time in something that's going to ultimately afford you your financial freedom and your independence, then you are basically a slave to whoever you're working for or doing. You really have to carve out time to do the things that are going to help you retire early or achieve your dreams, right? I think having that discipline, even if it is an hour a week, doesn't take a lot, but educate yourself and leverage the resources to do that. At the same time, I think not be so afraid to pull the trigger. I think that first investment property is always so scary because so much of your savings are going out the door, and there's so many potential unknowns. Once you do that, you take that first step, you make that first investment, and you get that first rent check, and you see that first proof of income, you're like, "Wow, I have an emerging business. This is something I can scale." That becomes very inspiring, but you have to take that first step. Kathy: Yes. I'll tell you another thing that I've been enjoying is looking at my loan pay-down. Something I hadn't done before because I didn't hold the loans long enough usually, but now I look and I'm like, "Oh, my gosh, look at all this equity we've created" just from paying down that loan, not even including the appreciation and everything else. All right. Well, it has been such a pleasure to have you here. And I think you're going to inspire a lot of people in their acquisition process. Yianni: Thank you. I appreciate that, Kathy, and have a good day. Thank you for having me. Kathy: Thank you for joining me here on the Real Wealth Show. We would so appreciate it if you would subscribe and leave a review, you'd be surprised at how much that helps our rankings. We really, really appreciate it and I read them all. You can do that on iTunes or whatever podcast player you use. Thank you so much in advance. In return, I want to make sure you have access to lots of free education and information that goes beyond the Real Wealth Show. You can get that at realwealthshow.com, where we go much more in-depth on these topics. Just click on the Learn tab [00:22:00] and learn all about the ins and outs of financing, asset protection, tax benefits, and so much more. You can do that at realwealthshow.com. Speaker 1: The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com. [00:22:31] [END OF AUDIO]