The Real Estate Investors Guide to: The Alchemist by Paulo Coelho


International best-selling book, The Alchemist by Paulo Coelho, details the story of a shepherd boy, Santiago, on his journey to uncover the treasure of his personal legend, or true purpose. The story serves as an inspirational guide to inspire readers to follow their dreams, and to serve others by identifying and carrying out their purpose. Santiago learns important life lessons along the way; his story serves as a testament to the power in following our hearts and pursuing our dreams with purpose.

In the novel, Santiago learns the importance of overcoming fear. One passage on this topic reads, “Tell your heart that the fear of suffering is worse than the suffering itself.” There are inherently risks in any decisions we make. But if we find the will to overcome fears and follow our dreams, we will encounter experiences that help us grow.

In order to succeed as a real estate investor, you must understand the importance of relinquishing fear in order to overcome obstacles. When we first started buying real estate, we were so afraid! We are familiar with the idea of being held back by fear, instead of motivated by love. We’ve certainly made some mistakes along the way on our real estate journey, but those circumstances serve as lessons.

The book also focuses on the idea that our actions and successes affect others—what we do has a ripple effect. In real estate, we’ve found this principle to ring true. We strive to be very intentional in our business decisions, and contemplate how our decisions affect others. 

When we purchase and renovate a home, we view it as a benefit for the collective good. By improving a neighborhood, we help a community. By rehabbing a house, we make a home for our tenant. And by establishing our business, we've created jobs for contractors, property managers, and more. When you think about the ripple effect of rental real estate, it can inspire you!

For more book reviews, check out our list of the 5 Must-Read Books for Real Estate Investors! 

Investor Case Study: How a Husband and Wife Bought Four Properties in Less Than a Year


Recently I received an email from a new investor, and I found his story so inspiring. Jahbari’s email read, “My wife and I started purchasing real estate in the summer of 2017. This year, we’re set to have a minimum of 12 properties. My wife and I have been married for six years, we really look forward to starting a family and I wanted to make sure I’m not away working to provide for them. Currently, we have four rental houses, I’d love to talk about our fears and the things we’ve had to overcome.”

I sat down with Jahbari and Shania McClennon on the podcast to talk about their journey.

Has anything changed since that email?
Jahbari: The fear is still there, but I’ve realized in light of that, you have to take action and realize you’re making good decisions—not only for yourself now, but also later on in the future.


Whose idea was it to start investing in real estate?
It was my idea. Jahbari was a little bit more slow to pick up, he wasn’t sure about it. I’m the type of person that wants to figure it out as we go, and he wants to know everything before we start. He’s more of an analysis paralysis kind of guy.


How did you come to the decision to take action, and how did you know that real estate was the answer for you?
I listen to several podcasts; I started listening to your podcast. I told Jahbari about it, and he actually listens to it more than I do now! Every book I’ve read says that the best way to accumulate wealth is through real estate, and most millionaires made their wealth through real estate.


Jahbari, do you see a light at the end of the tunnel now that you have this plan in place?
Yes, absolutely. At the end of last year, I looked back and reflected. I’m so glad we actually did go for it and purchased these properties. Now I can see the results, and know the reward that’s going to come down the line.


What were the fears you had, and how did you overcome them?
My wife and I are both former college athletes; we came out of college not having any debt. We picked up on a principle from Dave Ramsey, “all debt is bad.” That’s the mindset we moved forward with. When my mentor in real estate gave me a book by Robert Kiyosaki, I thought everything went against the core values I was instilled with. There was never a time when I was 100% ready and fear was gone, but I realized after reading Cashflow Quadrant, people who are really successful in life take risks; that’s a reality I had to come to grips with.


How do you plan to reach your goal of 12 properties in the next year?
Part of it is going to be us structuring each loan that we have, and use the BRRRR Method to roll it into the next property that we purchase. We set aside a little funds to make sure we can cover a down payment, and making sure that we always have a game plan for the next property.


What does your debt structure look like?
On our first property, we got a construction loan and the cash flow wasn’t great. I look back now and think we could have done something different, but it was our first one. By our third house, we finally got it. I was reading one of Robert Kiyosaki books and he said to use other people’s money. We used a line of credit that we had and put 10% down on a house. After we got that house, we create $22k in equity. That is the one we are the most proud of. Now we use that method to continue to roll into the next one. The first two properties were building blocks, but now we’ve learned to look at the numbers and make sure we have the equity to buy the next one.


What is next for you?
Right now we are speaking with Fund&Grow and talking to your team. We have been doing a lot of hands-on work with our properties here in town, which is fine, but as we are learning we understand there’s a way to buy into another system that works. We don’t have to do as much work, so we’re learning more about that to make sure we are not constantly overworking ourselves. We continue to educate ourselves; every Friday I play the Cashflow Quadrant game with a group of friends. I constantly have fears, but now I either read or play the game to remind myself why I’m doing this. I’ve seen how it’s been rewarding. I want to remind myself why we’re doing this—so we can move forward and build legacy, make time for each other, and help others who want to learn. 

Accounting for Expenses on a Rental Property


Expenses are part of running any business, and real estate is no exception. We get an influx of questions about paying for insurance, taxes, and other expenses. It’s a smart idea to prepare for the different kinds of expenses that might occur, and set aside funds accordingly.

In my ROI formula, I take out 40% initially. Those funds go toward a wide variety of expenses, including vacancy, repairs, and expenses. In the markets where I purchase my rental properties, I figure in a 5% vacancy rate. This gives my team a minimal amount of time, two to three weeks, to account for tenant turnover.

You should also be prepared to pay a management fee. Many new investors try to dodge the bullet and self-manage their properties, but paying for a dependable, on-site management team is worth every penny! You can expect to pay roughly 10% of your rental income on property management. Typically, the property manager subtracts their fee directly from the monthly rent. 

Insurance is another factor to consider when investing in real estate. You’ll want to set aside around $500 per year for a single-family home. This covers liability, as well as the building, should anything unfortunate happen.

Annual property taxes are another cost you'll want to account for. Where we invest, the property taxes are just a few hundred dollars per year—$500 at most. I don’t purchase properties in high tax states like New Jersey, New, York, California, or Texas. You can expect to pay slightly more if your property is a duplex or has a higher square footage, buy we try to keep it as low as possible! You can visit the county assessor’s office where your property is located to determine an estimate of taxes. 

Because of the extensive manner in which we renovate our properties, we have very few repairs to worry about. I don’t anticipate major repairs. I might have to replace a furnace in ten years, or the roof in 20 years, but I’ll pay for it when the time comes as opposed to setting aside extra money every month.

I don’t buy condos with HOA fees. I don’t want to be nickeled-and-dimed. I don’t work with property management companies that charge tons of petty fees. Remember, every expense comes out of your bottom line. 

 Expenses are part of running any business, and real estate is no exception. It’s a smart idea to prepare for the different kinds of expenses that might occur, and set aside funds accordingly.

Estate Planning for Real Estate Investors


In our family business, our main goal and purpose in purchasing buy and hold properties is to build legacy wealth. We strive to own cash-flowing properties that we can pass to our children when they become adults. We recently read a book that got us thinking about not only building a financial legacy, but also measuring our wealth in terms of family values.

The book Entrusted: Building a Legacy That Lasts outlines seven proven principles that allow families to build wealth, and a family legacy that transcends generations. Because our family has made it our purpose to accumulate properties that cash flow, we want to ensure that we teach our children how to properly manage that cash flow, as well as what we see as the appropriate way to run a business.

The book describes an inheritance as a flame, a result of all of your work. However, there’s a difference between simply handing your heirs the flame, and teaching them how to build a fire. It’s crucial to consider involving your heirs in the entire process, and we found that idea motivating. The thesis is, investors should be involving their heirs in the process of wealth building, so they can learn the lesson of how the wealth was earned, and so they understand who they are as a family.

One discipline in the book is “entrusted families know who they are and what they believe.” For us, this means we teach our children not only what it means to build wealth, but also how we go about running a business. We want to teach our family values such as treating others well, and considering how our decisions affect others. As you build wealth, you want to make sure your practices are in alignment with your family values.

In our turnkey company, our children have observed me speaking with investors, and making sure they are taken care of. I make a point to be fair to contractors, and ensure that my tenants are satisfied with the houses. If an issue or misunderstanding arises, I’m on the phone taking care of it. My kids know that I am hands-on, and that I care about what happens in the business. They see that I’m helping others, and to me, that’s important.

If you want to learn more about estate planning, check out my two-part interview with Entrusted author Andrew Howell! Listen to part 1, and part 2

 In our family business, our main goal and purpose in purchasing buy and hold properties is to build legacy wealth. That means making sure to handle all aspects of estate planning as a real estate investor, including some things you may not have thought of.

How to Balance Assets vs. Liabilities

Leverage means taking what you own, and using it as collateral to make further purchases. In real estate, leveraging is how successful investors are able to quickly and effectively grow massive portfolios.

In order to leverage well, it’s imperative that you know where you stand. The first thing you should do is assess all of your liabilities. This includes all of your debts. Include the remaining balance on your mortgage and car loans, any credit card debt, a HELOC, etc.

Then determine what your assets are, and how much they are worth. Include your real estate investments, cash accounts, stocks, and 401k. Other assets could be college savings accounts, vehicles you own, and art. Include anything that is cash, or could be sold for cash.

The next step is to subtract your total assets from your total liabilities to calculate your total net worth. We follow the advice of Natali’s dad, who recommends that you should own up to 30% of your portfolio, and be no more leveraged than 60-70%.

Are you ready to create passive income through rental real estate? Book a FREE call with our team today. We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family.

 In real estate, leveraging is how successful investors are able to quickly and effectively grow massive portfolios. In order to use leverage, it’s imperative that you know where you stand so you can balance assets and liabilities.

Dealing with Difficulties in Real Estate Investing


Have you ever allowed a setback to get you down? We all deal with adversity, but in order to succeed, it’s important to not give up. As real estate investors, hardships are inevitable, so we have to commit to not quitting when things don’t go exactly as planned.

Recently, a friend recommended I read the book, The Subtle Art of Not Giving a F*ck by Mark Manson. Yes, it’s vulgar, but the overarching theme has been invaluable to me! If you can look past the language, this book is filled with incredible pearls of wisdom about facing adversity.

To me, one of the key takeaways from the book was that for many of us, unhappiness stems from the pursuit of happiness. This idea blew me away—what a paradigm shift! We hold these ideas that we’ll be happy when we meet a certain goal, but that’s just not true. You have to dissolve that idea in order to succeed! It’s about changing your mindset.

For example, I once worked with an investor who had a goal of acquiring 100 properties. That was his main purpose, and it seemed that nothing else could bother him. When he had a bad experience with one property, he didn’t let it completely derail him. He continued ahead, focusing on his goal.

That’s exactly what you have to do—accept disappointment as part of the process. When you understand that things aren’t always going to go according to plan, you’ll be happier. And when you get in that mindset, you’ll be more successful.

 in order to succeed, it’s important to not give up. As real estate investors, hardships are inevitable, so we have to commit to not quitting when things don’t go exactly as planned.

Two Quick Ways to Evaluate an Investment


The ability to decide whether or not a real estate deal is profitable is crucial to your success as a real estate investor. If your investment breaks even (or worse, loses money) then you're not moving closer to your goal of financial freedom. There are a few different methods you can use to evaluate whether or not a deal makes sense financially. 

One commonly used method is the 1% Rule. The 1% Rule helps investors determine if a rental property will produce cash flow. Basically, when you purchase a piece of real estate, it should cash flow up to 1% of the purchase price every single month. 

To use round numbers, let’s say you purchased a real estate investment for $100k. Following the 1% Rule, that property would need to produce $1000 in rental income every month. This is a simple tactic used to ensure that your expenses will be covered.

Personally, my main focus is cash flow, so 1% isn't as sturdy as I'd like. That's why I use an incredibly conservative ROI formula. ROI is a formula used to evaluate the performance of an investment. ROI is the way you can measure how much profit a property is accumulating. Typically, ROI is calculated by dividing the net profit of investment by the amount of money invested.

But I like to take it one step further. I always subtract 40% of my annual rental income to account for vacancies, repairs, or expenses that could occur throughout the year. You might think that sounds like too large of a portion, but it gives me peace of mind. I don’t have to worry if something goes wrong at my properties. If a furnace goes out, I want to know that the money is there to replace it. Expenses are inevitable, so I like to prepared. 

Regardless of what method you choose to evaluate your real estate deal, make sure your focus remains on the end goal: financial freedom. 

 The ability to decide whether or not a real estate deal is profitable is crucial to your success as a real estate investor. Here are two quick methods you can use to evaluate whether or not a deal makes sense financially.