Top 10 Takeaways - Podcast 8 with Al Williamson

Top 10 Takeaways - BiggerPockets Podcast 008: Learning to Be a Profitable but Ethical Landlord with Al Williamson

Edited by Brandon Accomando

1. How Al used a 1031-Exchange to “Trade-Up” to a larger property.
• That’s how you can move your equity without having to pay taxes. You have to take out a little bit more debt and you can exchange your property for something that’s larger, has more debt associated with it without having to pay that 25 long term for capital gain. Of course, anybody who’s hearing this and wondering about 1031 exchanges, please seek the advice of a professional before trying to go ahead and do one of these things and there’s plenty of information about 1031s on BiggerPockets.

1. Tips for living in a small multifamily and living with tenants.

• It really depends on your personality and how you’re going about it. Because I know how you feel about it, but for us, I was learning the business, I fixed everything myself at the time and I liked it. I enjoy fixing things so that they don’t break again. So, if I touch it and I do it once and it’s going to last me for 10 years. I ended up working all the problems out and there was no issue with my neighbors, my tenants. I don’t know how it turned about but I realized I was able to kind of create a little community there where everyone was taking care of each other. And when we moved out we were able to bring someone to replace us into our unit. And also fit into that little community that we had. And it was great, they ended up not even wanting us to, they just sent the rent. They really wanted to take care of the place themselves, they wanted to take care of each other. So they had a big stakeholder type of mindset. But in my case that’s what happened in my case here in Sacramento. So I don’t have any cons at all.

1. How to avoid being a slumlord in rough areas.

• I think generally all landlords are taking care of their tenants and they’re fixing things at times, it’s very few that are slumlords. I’m talking about talking to the landlord that owns the property right next to you; making sure that you guys are watching out for each other. Making sure that litter doesn’t stay on the ground for prolonged times. Often times, and I’m talking about inner city, things go unresolved because no one steps up as a leader and things languish because no one’s operating as a leader.

1. The power of “Patient Equity.”

• Well lessons learned there was it really pays off to know everything about your property knowing all the components; that was helpful. I ended up having pipe leaks and I learned about the restoration process from a flood restoration company coming in. So that was good, it was good also that I spent some time on the first one to do some learning instead of running out and grabbing me three properties because I could. And that was great about that. Also I let the equity build up on this first one. So that was really nice. It was just building up so I was able to exchange into an even nicer property than if I tried to skim off the top right away. So patient equity is I learned the power of that for the first one for sure.

1. Al’s goal of not being dependent on the tenants’ rent to pay the bills.

• That’s kind of shaped my philosophy in general. I started looking for other sources of income. Getting me to thinking, “Hey I shouldn’t be fully dependent on rent,” so even though that’s what landlords do, but there’s so much more that you can do; we think laundry and then okay great we can do laundry, but what else could I do to make some income working with the tenants? So that really opened my eyes to that opportunity, mother of necessity right? I started collecting ideas to see which ones I could use. And you’re right; garage, storage just parking spots you can rent them out during the day to local businesses things like that. There’s also working with your neighbor if you guys both need your lawns mowed then go for certain group discount on your landscaper so lowering your expenses.

1. Ideas for both increasing income and cutting expenses.

• I’m just starting this challenge but yeah I’m going to look through every piece of my expenses and try to brainstorm ways that I can reduce them. And basically the goal is to find $100 of savings. This is the flipside I did $100 Income Challenge for alternative income now I’m doing the expense reduction to see what comes out of it. I don’t know, it’s like the beginning of a math problem I don’t know what’s going to fall out but I’m putting myself out there and having my people hold me accountable, it puts the pressure on and that’s when I’m the most creative, when I’m under the gun. So that’s you will know, I’m going to keep it up on my BiggerPockets blog what comes out of it.

1. Al’s plan to revolutionize income for multifamily properties.

• I was working through with my blog and I saw opportunities for Wi-Fi because people were paying like $50-70 and everyone works in their silos with Wi-Fi. So I started to try to crack that code of how could we work together save each other $50 per person? And so I tried an experiment which failed, I couldn’t get my Wi-Fi signal out far enough to a premium or a collection of customers. I was using a coffee shop model where you can give your Wi-Fi complimentary in exchange if someone comes to buy a cup of coffee they can use the Wi-Fi right? So that’s how that works. So I was actually giving them a newsletter and providing complimentary Wi-Fi. So that’s how that all worked and I was going to grab a bunch of customers and I was going to cover my mortgage for my rental. So it had a lot of potential it just didn’t work. So I ended up going the haul just about three, almost $4000 but I’m still going to do them again, I’m going to keep doing the experiments until I figure out how to pay for my mortgage for eightplex without relying on the rents that come from it.

1. The biggest challenges for an up-and-coming landlord.

• It was learning to be tough but fair. I’m pretty a nice guy but you got to kick people out at times. And I ended up, I hate the eviction processes, it’s just painful for me to have to take off work and to go to court and all that. And I didn’t want to hire anyone so I’ve come to now just buying people out. Cash for keys; I want you out of my place I also have some pretty strict lease clauses about hey if you got anything shady going on and if you’re disturbing the other tenants that’s breaking our lease. And here’s some money, I bring them boxes, I rent U-Hauls for them.

1. What the “Landlord Lid” is – and how to overcome it.

• Other landlords kind of keep your property values down. That’s the lid they place but working with other landlords and working with my neighbors and doing the community building things like National Night Out and always being the Crosswalk monitor. Telling people, “Hey you really got to clean up.” Or, “I need to talk to your landlord about what’s going on here.” I don’t have a problem putting myself in that position - it has made our neighborhood better. And it’s nicer and more people are attracted to it. It’s also become a political football where they’re trying to redistrict my neighborhood into another person’s district.

1. How to Invest in Real Estate when you have a full-time job AND a busy family life at home.

• Listen, kids will make for a challenge that’s for sure and anyone who’s got kids knows that there is work and then there’s kids and then there is the grey in between and you do what you can. I mean I think that’s kind of the bottom line is when you got to get to work you got to get to work. But for me, my family is number one. And Brandon certainly knows that, we work every day very closely. And when my kids need something at least for me, work stops. Everything stops, work stops and I go and I take care of my kids. That’s my philosophy. I will give up being uber successful to have a better family life and to make sure my kids are taken care of. And I think anyone listening probably would agree that you got to put those kids first, period.