{"id":79431,"date":"2016-08-10T05:00:56","date_gmt":"2016-08-10T11:00:56","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=79431"},"modified":"2021-03-16T12:06:14","modified_gmt":"2021-03-16T18:06:14","slug":"real-estate-investors-learn-dad-stewardship-properties","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/real-estate-investors-learn-dad-stewardship-properties","title":{"rendered":"What Real Estate Investors Can Learn From My Dad’s 800-Unit Business"},"content":{"rendered":"

After spending my last article sucking up<\/del> giving much deserved praise<\/a> to Josh, Brandon and the rest of the BiggerPockets team, this week I will turn to my father.<\/p>\n

Unlike most real estate investors, I had the privilege to learn firsthand<\/a> from a seasoned real estate investor, my dad\u00a0Bill Syrios<\/a>, who has been investing in real estate since 1981.<\/p>\n

It certainly hasn’t been easy for him and progress hasn’t gone in a straight line, but I believe my dad’s journey can be\u00a0very instructive to new and seasoned investors alike. From humble and uncertain beginnings, he has built a company that now owns over 800 units in four states and has seven partnerships in various real estate-related ventures. And, of course, he has had the honor of being on the BiggerPockets Podcast<\/a>.<\/p>\n

Humble Beginnings and the Long Game<\/h2>\n

The first thing that becomes crystal clear when looking at my dad’s story is that real estate does not bring with it overnight success. It’s a get-rich-slow scheme, as I like to say. And there is no better illustration of this than my dad.<\/p>\n

My father\u00a0made his first foray into real estate investment in 1981 in Portland, Oregon. He had virtually no business experience, and, well, it showed. Indeed, he basically failed in Portland and didn’t have any success until he started again in Eugene, Oregon in 1989. Even still, it took until around the mid to late ’90s before he could say, “I’ve been successful in real estate.” Don’t expect overnight results, folks.<\/p>\n

By the way, here\u2019s a tidbit likely from my dad\u2019s lack of business background —\u00a0his unorthodox way of gauging success. Other than for banks, he doesn\u2019t calculate his worth by number of properties owned, net value, cash flow, or even net worth — but by his “net debt.” His perspective: As long it\u2019s good debt (debt on appreciating items), the more he has, the better off he is. \u201cIt\u2019s not the one with the most toys that wins,\u201d he says, \u201cit\u2019s the one with the most debt.\u201d That\u2019s the long game perspective.<\/p>\n

My dad also says he fears regret more than he fears mistakes, and that\u2019s another tidbit worth contemplating. If you sit on the sidelines, worried and waiting, what are your opportunity costs? Which deals are you missing, and could they have helped you build a financial foundation of success that is still waiting to happen? You will undoubtedly make mistakes —\u00a0I’ve made a ton<\/a>, so has my dad, and so has every other investor that has done well. Learn to embrace mistakes as a learning tool instead of dreading\u00a0them. That fear\u00a0will just keep you paralyzed and unable to make the next step.<\/p>\n

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Related:<\/strong> 7 Life-Changing Lessons I Wish I Knew as a Real Estate Newbie<\/a><\/em><\/p>\n

In fact, one of the biggest mistakes my dad has made was just selling properties. He\u00a0has\u00a0told me more than once that “every property I’ve ever sold [other than one’s we planned on flipping<\/a> from the get go], I’ve ended up regretting.” This is best illustrated by the\u00a0story of one of the properties he sold in Portland back in the mid-1980s. As he described\u00a0it on the podcast<\/a>:<\/p>\n

“I bought a property near Mount Taber, [a] beautiful area in Portland…\u00a0I bought it for $60,000.\u00a0I put some money into it, about $70,000 I had into it. I sold it for that amount, and the couple that bought it from me was named Michael and Julie. This is interesting…\u00a0I happened to meet them, my wife and I — just a couple of years ago. They sold it at the very bottom of the market in Oregon… in \u201984, I think, it was for $66,000. They lost $4,000. Then they turned around and told me, ‘Would you like to know the rest of the story?’ And I knew what was coming. I said, ‘I don\u2019t think so.’\u00a0‘Ah we\u2019ll tell it to you anyway.’<\/p>\n

‘The property recently sold for $950,000.'”<\/p>\n

One property would have all but made him a millionaire!<\/p>\n

There are certainly those on the BiggerPockets Forums<\/a> who don’t approve of the “buy and hold forever and never sell” model, but I think there’s a strong case to be made for the “buy and hold and only sell if there’s a really, really good reason to” model. After all, if you don’t need the money, why sell? If you need to raise money for another great investment, OK, that makes sense. Although, if you can raise it another way, I think that’s preferable. Or if you’re sure there’s a major recession coming, that would also make sense to sell (although, these are usually not easy to predict).<\/p>\n

But given all time and energy it takes to find\u00a0a new property as well as the transaction costs and taxes involved, is it really worth it? Furthermore, if you have long-term debt, the principal pay down will accelerate each month you make a mortgage payment. If you sell the property and finance a new one, you start over at the top of an amortization table. (On a side note, one of the major influences on my dad to get into real estate in the first place was looking at an amortization table\u00a0and the corresponding concept that your principal will reduce over time as the cash flow pays for the mortgage.)<\/p>\n

Simply put, buying and holding real estate for the long-term is a great way to become wealthy.<\/p>\n

Treat Real Estate as a Business (and Not a Hobby)<\/h2>\n

It has been stressed on this website many times that you need to treat real estate investment as a business and not a hobby<\/a>. But it’s worth saying again. And my dad’s story perfectly illustrates this. Again from the podcast:<\/p>\n

“I had an informal relationship with my tenants….\u00a0sometimes I didn\u2019t even do rental agreements. My construction skills were less than lousy, and I needed to hire people out to do certain things, so I made so many mistakes in starting out in Portland… reading [a book on property management]\u00a0kind of said you got to treat this — even if you only own one property — from day one, you treat it as a business…<\/p>\n

“[So my tenants] didn\u2019t realize I was out, you know, from my regular brick and mortar office, just happened to be out that day and I could meet them at a restaurant, but that was my office. That\u2019s where I\u2019d meet tenants so it wasn\u2019t so informal as to you know, hey, you know, meet them at my house and bring them there. That wasn\u2019t a good thing. It wasn\u2019t business minded. I was entrepreneurial in nature, but in college, I never took a single business class, and that\u2019s when I realized I needed to treat real estate from the first property on as a full blown business.”<\/p>\n

From day one, you need to start moving in the direction of systematizing your business<\/a> and treating your tenants, contractors, sellers, and the like in a friendly, but professional manner. For example, when I first came to Kansas City and started investing here, we started in areas of town that were rougher than we expected. We made the mistake of being too lenient on late rent, partial rent, payment plans, and the like. In this case, it was fear that if we didn’t, we’d have a mass exodus of tenants and a bunch of empty buildings in rough areas to deal with.<\/p>\n

Related:<\/strong> Two Real Estate Lessons I Learned by Watching the TV Show Million Dollar Listing<\/a><\/em><\/p>\n

But as you might expect, the tenants started to walk all over us. In the end, we had to systematize our approach and become less informal and more professional to right the ship; no more breaks for late rent, 72-hour notices go out on the 12th with no exception, only one payment plan per tenancy, etc. Shockingly, once tenants realized they couldn’t get away with shenanigans anymore, the shenanigans, for the most part, went away.<\/p>\n

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The Riches Are in the Niches<\/h2>\n

While it may not sound like it from a guy who has seven partnerships going on, my dad’s company\u00a0is where it is today because of its focus on mastering a niche. Remember, he’s been doing this for 35 years, so those partnerships were built up over a long period of\u00a0time. It’s not that you should never do anything other than your primary\u00a0niche. It’s just that you shouldn’t move on to another unless you’ve either mastered the one you’re in or have decided to\u00a0abandon it.<\/p>\n

As Jim Collins noted in his book Great by Choice: Uncertainty, Chaos, and Luck — Why Some Thrive Despite Them All<\/a><\/em>\"\", when entering a new niche, you should “shoot bullets, not cannon balls.” In other words, move slowly and carefully into a new niche.<\/p>\n

My dad started by placing an ad in the local paper saying “Save the Commission.” As he puts it, “The first deal I got from that ad will pay for that classified ad\u00a0for the rest of time.” The house was a campus rental around the University of Oregon, where my dad worked as a campus pastor at the time.<\/p>\n

From there, he became an expert in student\u00a0housing<\/a> and focused almost exclusively on mastering that niche. He\u00a0approached it by drawing concentric circles around the campus and labeling them A, B, C, D and F. Here’s how he describes the strategy,<\/p>\n

“A is… in walking distance of campus.\u00a0B is like a half a mile walking [or]\u00a0biking distance. C is maybe a mile to two miles, say biking, driving distance. D is driving distance, and F would be in another area of town, which I\u2019ve even tried and once in while got away with renting to students in a whole different area of town. Those make a difference in terms of how much you can charge for rent obviously and how good your occupancy is going to be, but what I\u2019ve tended to do is not buy in A areas because they\u2019re so expensive, but look for the C and B areas that are a little farther away from campus and to focus on those where you have home owners who aren\u2019t thinking about campus rentals, but their house would make a perfect campus rental. It\u2019s a little farther away, but if you made it attractive to students by thinking with them in mind as you rehabbed… if that would make a great student rental, and so you\u2019ve saved by not spending so much in the purchase price, but you still get the advantage of having higher rents than you would normally get.”<\/p>\n

This model allowed him to add value by transitioning non-campus housing into campus housing and thereby charging more rent for them.<\/p>\n

In addition, while\u00a0student housing is usually rented by the unit, students typically think in terms of rent per bedroom\u00a0(i.e.\u00a0a 4-bedroom house would be listed as $600\/bedroom, not $2,400\/month). There’s a huge opportunity in adding bedrooms. And\u00a0my dad is basically the Houdini of bedrooms, making new rooms appear out of thin air!<\/p>\n

Thoroughly understanding a niche allows you to take advantage of such opportunities, whereas a broad understanding would not. Remember, a jack of all trades is a master of none.<\/p>\n

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Stick With Your Principles<\/h2>\n

In my last article, I mentioned that Eugene’s biggest property management company recently collapsed in what turned out to be a massive Ponzi scheme<\/a>, losing owners $4M.\u00a0When diagnosing what happened,\u00a0a friend of mine\u00a0astutely noted that “it all started with the willingness to lie.”<\/p>\n

There are and will always be temptations to make the quick buck by taking\u00a0ethical shortcuts. Indeed, we’ve all heard of investors who flipped houses that weren’t really done, turnkey operators who sold junk to out-of-state investors at\u00a0overvalued prices, or gurus who used sleazy sales tactics to up-sell novices on multi-thousand dollar boot camps and the like that they didn’t really need.
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\nRelated:<\/strong> The Must-See Financial Movie of the Year (& What We Can Learn From It)<\/a><\/em><\/p>\n

My dad named his company after the Biblical concept of\u00a0\u00a0being a “good steward of what we have been entrusted with.” For us, it’s a very good reminder of the importance of being honest and fair in all our dealings. And this is not just important with regard to being ethical, it also makes for good business. In the long run, reaching for the quick buck will cost you, particularly as your reputation falls apart.<\/p>\n

The concept of being a “good steward” has been a great reminder to us\u00a0brings us back to a mission that goes beyond just making money. I think it was Jim Collins who said, \u201cMoney is like air and blood are to the body. We need it as a business or we will die. But do we live for the air we breathe or the blood that flows through our veins?\u201d The larger mission for us is to provide our staff\/partners with increased opportunities and to serve our residents in their housing needs.<\/p>\n

In the end, my father has been a great mentor and\u00a0inspiration to me, and in my opinion, his story provides a solid\u00a0model for how other real estate investors can succeed: Treat real estate investment as a business, stick to your principles, pick a niche, and play the long game.<\/p>\n

Do you know anyone who’s built a real estate business from the ground up who inspires you to be a better investor?<\/em><\/p>\n

Let me know your story with a comment!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

We all love to hear about businesses that explode overnight — but most great investors build up their units over the long-term. Here’s what we can learn.<\/p>\n","protected":false},"author":1689,"featured_media":78211,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4241],"tags":[],"class_list":["post-79431","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-business-management"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/79431","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/1689"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=79431"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/79431\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/78211"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=79431"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=79431"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=79431"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}