BP Podcast 121: Creating the IDEAL Real Estate Investing Business with Andrew and Phillip Syrios

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In this episode of the BiggerPockets Podcast, learn how to build an incredibly successful real estate business using the “IDEAL” system. Andrew and Phillip Syrios have built an incredible rental property business in just a few short years and today they’ll share all their best tips so you can do the same. Discover the truth about property management, getting dirty, working with family, rentals, flips, and more! This episode is destined to become one of the most talked-about (and fun) episodes in BiggerPockets Podcast history!

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This Show Sponsored By:

b2rfinance-logoWe just wanted to give a shout out to our podcast sponsor on today’s show: B2R Finance. A new commercial lender offering loans specifically for rental investors. B2R Finance could help you unlock equity from existing properties so you can get cash out now.

Learn more by visiting: B2RFinance.com

In This Episode We Cover:

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  • How Andrew and Phillip “get things done.”
  • How the brothers started in REI
  • Flipping 200 houses… impossible?
  • How discipline has helped them buy properties
  • What “IDEAL” real estate investing is… and why it matters
  • The truth about depreciation
  • How to find the true value of properties
  • Tips for newbies on getting started
  • Working with private lenders to fund deals
  • The 4 pieces that need to work in order to have a good buy and hold investment
  • The most important things to know as a property manager
  • Running a family business
  • And SO much more.

Links from the Show:

Books Mentioned in this Show

Tweetable Topics:

  • “The number of houses you flip is not that much important, the main thing is how much money you made.” (Tweet This!)
  • “Grow in a sustainable consistent manner than trying to get from here to there in a snap of a finger.” (Tweet This!)
  • “Deferring gratification and being able to see the long run is what buy and hold is.” (Tweet This!)
  • “Every property has some sort of value.” (Tweet This!)
  • “If you hate working, then nothing’s going to work.” (Tweet This!)
  • “You’re only as good as your management.” (Tweet This!)
  • “If you’re the property manager, then you should be the good guy and always on their team.” (Tweet This!)
  • “Success builds on itself.” (Tweet This!)

Connect with Andrew

Connect with Phillip

About Author

Thanks for checking out the BiggerPockets Real Estate Investing & Wealth Building Podcast. Our show, with hosts Joshua Dorkin & Brandon Turner, was designed as a tool to help both novice and experienced real estate investors. Our goal is to bring top notch educational content and interviews to our listeners, without subjecting you to the non-stop pitch that is prevalent around the industry. With over 75,000 listeners per show, the BiggerPockets Podcast has become the most listened to real estate podcast in the world. But don’t take our word for it. We’re the top rated and reviewed real estate show on iTunes — Check it out, read the reviews on iTunes, and get busy listening and learning!

26 Comments

  1. Abbott Mary

    Nice show guys! The mentality Phillip has for PM is excellent and very useful. Andrew I was wondering if you would share some of your rules for acquisition, specific ROI or cash flow numbers that a property has to meet during analysis before you will move forward with the purchase?

    • Andrew Syrios

      Thank you. I focus on four primary calculations:

      1. Rent/Cost (It depends on the area, we have a different target for each. Our average is about 1.5%)
      2. Comparative market analysis: (Based off comps from the MLS. We are looking to be all in for no more than 75% ARV)
      3. Cap Rate: These are tough for houses, but I usually assume between $3000 to $4000/house per year. It depends on the size and area. We are aiming for 10 or better
      4. Cash Flow: Assumptions are the same as for the cap rate. I’m looking for $100/month or better on houses, $75/month or better on apartment units, fully financed at 9% interest only.

      I talk more about this in a presentation I gave here: https://www.youtube.com/watch?v=0AKaYfhQZ-g. I hope that helps.

  2. Jacob Stark

    Great info guys. When you look to refi your rentals after they are seasoned, are you going to traditional big banks? Also, do you approach them with one property at a time or will the banks allow you to group them together?

    • Andrew Syrios

      Thank you Jacob. We have had the best luck with local banks. Big banks tend to be too conservative from our experience. They do allow us to bundle a group together, although make sure to ask for separate releases so you can sell or refinance one at a time down the line instead of having to do the whole group.

  3. Brian Larson

    Andrew, Philip, wow, what a podcast. I love the IDEAL acronym. I am going to totally point people at your description when they ask me why I invest in Real Estate. You just saved me an hour per coworker…thanks!

    Next, I have 1 simple question that took me a full page to ask…sorry about that….

    Question: One thing that I am not sure I am clear on with your HML to 30yr Refi model is the cashflow on the properties. Can you clarify what you usually get monthly cashflow in this first year? I am having trouble seeing the numbers work out…or maybe that’s the point, you really need to get a good deal in order to leverage your model.

    You gave 2 examples in the podcast. #1 was the epic deal that you both had at the top of your brain, those numbers are amazing, I see the model there…so lets skip that and get to the more ‘real world’ example #2. Correct me if I am wrong, I listened to that section a few times and wrote down the following:

    – Purchase price plus renovation $50k (it actually came in at $55k but lets keep it at $50k for example)
    – You used one of your 9% loans for the full amount (interest only loan)
    – You had enough equity (over $66k) in order to refi to long term 30yr FRM
    – Rent was $775/mo

    So firs,t if I missed something, my apologies. Correct away, but if not, I am having trouble with the cashflow here because it is so slim and could be an issue if the market turned and you could not refi (bad rates, global collapse, outbreak monkey infects us all 🙂

    Here is my math:
    – NOI is $387.50 (I am cheating and using 50% rule to make it easy)
    – Debt Service per month is $375/mo
    – Cashflow is $12.50

    See my dilemma? That is a tight cashflow if I calculated correctly. Now with that said, I am hypothesizing on how you can do this. Do I hit the mark?
    – You have your own prop mgmt. shop so you can save 8-10% off expenses
    – You are not putting capex reserves away for this 1st year with assumption that this property was just rehabbed/inspected
    – You are minimizing the percentage for maintenance for same reason above
    – you are not paying your taxes….kidding.

    Sorry again for the long comment, I just wanted to be clear on this as I love the model but really want to understand how you are able to work the model here.

    Thanks!
    brian

    • Andrew Syrios

      Thank you Brian! Just a note, we had just given a presentation on buy and hold to the local REIA group and gave the same two examples group is why both of us were thinking of the same two properties.

      I think the 50% rule is steep with houses. Generally we spend $3000 to $4000 a year in operating expenses for a house that we manage well. So let’s do the math on the example you gave:

      Rent: $9300 ($775/month)
      Vacancy: $930 (10%)
      Expenses: $3000
      Debt Service: $4500 ($375/month)
      Net Operating Income: $870 ($72.50/month)

      We do have our own management. We also always challenge our taxes when we buy and since we get these at a discount, we usually get them reduced (for two years). Since we rehab the properties up front, we rarely have major CAPEX problems in the first year or two (although we often have to fix a few things after a tenant moves in, but that’s normal after a rehab).

      But maybe you spend $3500 in operating expenses and you only make $370. Remember, buy and hold is a get rick slow scheme. You’re not going to kill it in year one. But even if you can just break even, you should be just fine when you refinance out of it. And every year, you should be able to increase the rent too.

      • Brian Larson

        Thanks so much for the response Andrew. I totally get where you were at now on the numbers and love it. Again, even if I use 50% rule it is spinning off some cashflow (minimal) and in year 1 that seems to be ok because it really hums once refi’d

        thanks again, great stuff!
        Brian

        • Phillip Syrios

          I might be mistaken on this Brian but I think we missed our original rent price on this house too. I think we were hoping to get $795 on that house but dropped it to get it rented during the winter. We have some houses that are exactly the same as this one rented for $795, and although $20 a month doesn’t seem like a lot when all the expenses are already covered it can change a lot to the overall cash flow and profit of a property significantly.

  4. Thank you for one great podcast ! As a 40 year buy and hold investor, I really liked this podcast. It also helps that I live in Oregon where The Brothers started their business. Thanks for the excellent content in this podcast!!

  5. Erik Hopperstad

    Around 21:30 they talk about depreciation and how after 27 1/2 years the asset is fully depreciated. I understand that but then they go on to say that their Dad hasn’t paid income tax in years because the assets are fully depreciated. If they assets were fully depreciated wouldn’t he be responsible for income tax on any rental income per that asset? Or, is his overall depreciation expense (all assets) larger than his overall rental income (all assets)? Or, am I missing something? Please help! Thanks!

  6. Carrie Hallensleben

    Hello,

    It was great to hear from you two! I also live in KC. I am wondering if you would be willing to share your rental lease which you expressed was inline with MO law. We are getting ready to lease a 1/2 duplex which is our second investment property. The lease we used for the first I got online and it is the Missouri Residential Lease Agreement Form.

    Thanks again for sharing so much great information!!
    Carrie

  7. Brian Larson

    Alright, I am back! 🙂 Again, great show and wow, you guys really have a cool family thing happening. I hope I can do this with my 2 boys when they get older (not handing any keys over at 4 & 7)

    I watched the youtube video, checked out your site, etc. Great model and marketing.

    So quick Q, when you do a 9% Trust Deed Loan you mention that you have a $10k minimum. I am wondering, how do you structure that?

    Example, Lets assume you need $50k total to carry purchase+rehab while you wait for seasoning and then refinance into 30yr. If you were to take 5, $10k loans isn’t that a nightmare to A. manage and B. setup? How do you tie the 5 parties to a single asset? I can see a PPM working in general but then it really is different than a trust deed loan, no? sorry if I am confused.

    OK, it was a series of questions….apologies. 😉

    Thanks
    Brian

    • Andrew Syrios

      That’s one way to do it, and is really more of a crowdfunding method which I know can be done, but haven’t done it myself. I would highly recommend you try to stick to one person per property. It’s just a nightmare otherwise.

  8. Darren Sager

    Great Podcast guys! Good to hear you have a great lease in effect. Love the “outhouse” management vs. “in house” management. There was a ton of great information here. Really great to hear that the both of you wound up have the same passion as your dad with real estate investing. So many times the next generation doesn’t keep that going.

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