Listen / Share / Download
Rob leads property acquisitions for Holdfolio, a real estate crowdfunding company headquartered in Indianapolis. Under the name Buy To Renew, Rob leads a team focused on purchasing properties and gentrifying neighborhoods. Since relocating to Indiana in 2015, Rob and his partners have purchased over 100 properties for crowdfunding and wholesale opportunities. For fun, Rob and his wife enjoy traveling, soccer, and recently took up competing in triathlons.
His real estate investing business has done lots of different types of marketing methods. Driving for dollars, direct mail, online lead generation, etc. But Rob has also gotten into using his memo app for when he drives around, that way he keeps track of the addresses that he then puts into a spread sheet and sends off for research. Generally, he typically gets 100 addresses an hour when he does this kind of driving for dollars. That’s amazing!
Let’s settle this argument. Melissa used to look for more specific things, like broken windows and peeling paint, where Danny would look more at the lawn. So what does Rob look for when he’s driving for dollars? The typical signs of vacancy are long unkept lawns, messed up roofs, features that aren’t taken care of, and things like that. Every 6 months Rob refreshes his driving for dollars list.
The process for Rob is standard when it comes to price negotiations. Using a CCR calculation, Rob can see the taxes, rent, expenses, and things like that. Cash on Cash Return calculating has helped him determine the value of properties so that the offers made can benefit both his business and the seller.
Set For Life by Scott Trench
Relentless by Tim Grover
Please Rate and Review
This is my simple request: If you enjoy the podcast and look forward to hearing a lot more episodes, I would be very grateful, happy, beholden and otherwise indebted to you to rate and review the podcast on iTunes.
It’s your choice and I do not want you to feel at all obligated. But I’d love it if you would subscribe and leave a rating and review.
Ratings and reviews allow the podcast to be seen by more people, which will help me achieve my goal of helping as many others as we can to get started in the house flipping business and change their lives.
Not sure how to leave a rating and review? Click here to view the instructions (it only takes 2 minutes)
How to Subscribe to the Podcast
There will be a brand new episode every single week, so be sure to subscribe and receive each episode as it’s released.
Danny Johnson: This is Flipping Junkie podcast episode 79. [music] Welcome to the Flipping Junkie podcast, the podcast for flip pilots everywhere. Flip pilots are the house flippers that work more on our business instead of in our business by keeping a 30,000-flip view. You’re now part of a small group of house flippers that considers themselves flip pilots that strive to build the life of financial freedom and time freedom so that we can spend more time doing what we love with who we love. In this podcast, I give you a glimpse of the daily life of a flip pilot so let’s gets started.
Hey, everybody. Welcome back to the Flipping Junkie podcast. You may have noticed that I’ve changed the intro to the podcast. I talked a little bit about being a flip pilot. And if you’re curious as to what all of that is about, you can go to flippilot.com and find out more. Basically, get an invitation to our closed Facebook group where people that are interested in learning how to work more on their flipping business than in it can communicate with other investors that are doing the same thing. So I think a lot of investors get into this business wanting the freedom that it provides, and it does but we tend to build a job for ourselves and trying to do everything ourselves. We’re just trying to help each other kind of build these true businesses where we have help and other people helping us build a team to run our flipping businesses. Go to flippilot.com to find out more and get your invitation to that Facebook group.
I’m super excited today about the podcast. I’ve got Rob LaRovere here, and I said that right, right? Because I’m thinking Paul Revere now because we talked about it right before.
Rob LaRovere: Yeah. That works.
Danny Johnson: All right. Cool. So Rob is in Indianapolis. And you said Dayton, Ohio as well, right? It’s where you guys are investing.
Rob LaRovere: That’s correct.
Danny Johnson: All right. Cool. And Rob leads property acquisitions for Holdfolio—and I love that name. It’s cool, Holdfolio. A real estate crowdfunding company headquartered in Indianapolis under the name Buy To Renew. Rob leads a team focused on purchasing properties and gentrifying neighborhoods. And since relocating to Indiana in 2015, Rob and his partners have purchased over a hundred properties for crowdfunding and wholesale opportunities. And for fun, Rob and his wife enjoy traveling, soccer, and recently competing triathlons which is super cool. Have you guys done one yet?
Rob LaRovere: Yeah, just did one in Tampa actually last month.
Danny Johnson: How was it?
Rob LaRovere: Pretty wild, man. I’m hooked. I want to do one in one next month. So it’s pretty sweet.
Danny Johnson: I need to do the same. I had something where they put me under. I don’t know if it was a tooth thing or something. But whenever I came to after the procedure, my wife came to pick me up or whatever and she said the first thing I said was, “I want to do a triathlon.”
Rob LaRovere: Nice.
Danny Johnson: And I don’t know. It’s just like a drug-induced thing.
Rob LaRovere: You got to do it at least once even if it’s a sprint. What’s cool about it is you get to check off each activity as you go through it, so I like that a lot.
Danny Johnson: Cool. Josh who is my brother-in-law but also works with us at LeadPropeller. We went hiking in the Guadalupe Mountains in Texas. It’s the highest peak in Texas. And I was worried about being able to keep up with him because he’s a younger guy, but we hiked. I think we did 24.2 miles of hiking over two days.
Rob LaRovere: Wow.
Danny Johnson: That was kind of painful.
Rob LaRovere: You have to work out.
Danny Johnson: But I survived. I was happy about that. What we wanted to talk about today was wholesaling. You guys do a lot of wholesaling, and that’s primarily all you guys do, right? Is wholesaling.
Rob LaRovere: Actually, primarily what we do is mostly crowdfunding for our portfolios and we do some wholesaling on the side. In Indiana and Ohio where it’s very cash flow positive. We have a lot of opportunities to get runners in there because probably the taxes are so low. We’re able to get decent returns. So we mostly focus on single family properties in these two states. We’re looking to expand elsewhere. But for now, it’s right here in Indiana and Ohio. And then if we get properties that don’t work with our portfolio numbers, we go ahead and wholesale those off.
Danny Johnson: I see. Cool. And therefore, the name Holdfolio.
Rob LaRovere: Exactly.
Danny Johnson: I guess that doesn’t make sense if you’re primary wholesaling, so I don’t know where I got that. So I had talked to Sterling and Rob the other, a couple of weeks ago, on the phone. They’re customers at LeadPropeller, and I was talking about strategy with them. These guys really know what they’re doing. And they—would you say 60 or something properties last year, right?
Rob LaRovere: Yeah, I think 68 was the final number.
Danny Johnson: So really doing a crazy amount of deals. I wanted to find out how you personally got into the business and then we’ll get into how you guys operate. And so if you wouldn’t mind sharing just real quick what got you interested in real estate and kind of the story behind all of it.
Rob LaRovere: Yeah. Absolutely. So it was probably March of 2015. And my wife and I had always wanted to be in real estate, wanted to flip houses and then we got the HGTV bug and I had an opportunity. One of my childhood friends was in Indianapolis actually in real estate. He was working for a big turnkey provider here in the city, and we went up to visit him for March Madness one year. I saw all these flips he was doing in Fountain Square area which is a pretty hot neighborhood here in Indianapolis. We kind of got the bug. And then a couple of weeks later, there was an IVJ article which is the business journal here in Indianapolis. There’s an IVJ article about the company, and I was pretty amped. I was like, “Man, I got to meet up with you and see if there’s any value I can add.” And from there, I just kind of went up to Indiana for a week to kind of spend some time to learn what the intricacies of it. I wanted to jump into real estate. And at that point, I decided to make a move.
Danny Johnson: Nice.
Rob LaRovere: So from there, I found a mentor, figured out if I can bring value, and thankfully I was able to bring enough value that I was able to find a spot in the team.
Danny Johnson: Cool. So can we elaborate on that? Because I think a lot of people are struggling with that part of it. It’s finding the mentor, and everybody talks about bringing them value and they’re going to want to work with you. Do you mind sharing what you did to bring value or what kind of angle you took to try to get your foot in the door?
Rob LaRovere: Yeah. So Holdfolio was a startup. It’d been around for a few months at that point. It’s much smaller than it is now. We’ll just put it that way. But when I first started, I was assisting in leasing properties. I was helping out with doing scopes of work and on the construction side making sure the contractors are on schedule. I was starting to dive in just a little bit in the property acquisitions and also trying to reach out to investors, people that might be interested in partnering with us. I know when we first started crowdfunding for our first offering, it took us over three months. And if you look back now, some of the offerings are putting up with the pre-reserved months in advance to even getting out there when the reservations hit. Typically, it’s a pretty quick turnaround for their funding actually coming through. So starting out, I just try to fit in. I looked to myself like a utility tool. If there’s anything I could do, I try to do it. And I wasn’t making any money. I was just trying to see if there was an opportunity.
And I know you mentioned we talked about a book later on, but just real quick. I’m currently reading a book called Set for Life by Scott Trench. It’s a BiggerPockets book. And he talks about in the first part of the book about getting up your financial runaway, saving like 25 grand to make sure that if an opportunity comes up you can jump on it and you don’t have to worry about your finances hopefully and you’re not worrying about anything going on. So thankfully, I was in a position where I put some money aside. I was able to make this leap of faith with no money coming in. As we got rolling, things are getting better. I found that niche in acquisitions where money was more prevalent.
Danny Johnson: Nice. That’s awesome. It’s because you were able to put in the work for not much pay, and that kind of got in. Because if you went in and say, “Hey, I need to make this much money. Pay them all those stuff and then I’ll prove myself,” it may not have worked out the same way, huh?
Rob LaRovere: Yeah. Absolutely.
Danny Johnson: Well, that’s awesome. What is the process? How are you guys generating leads? And what’s the process for you guys going out and taking look at the houses and determining whether you want to keep in the portfolio and then use the crowdfunding? Because I don’t know anything about all that crowdfunding stuff. It’s alien to me. So if you wouldn’t mind sharing all the details.
Rob LaRovere: Sure. Well, first off, we have this great website called LeadPropeller. It was able to generate some leads for us.
Danny Johnson: I heard that it was awesome.
Rob LaRovere: Besides that, we’re doing a lot of direct mail. And for the direct mail, we’re targeting absentee owners, code violation lists, and expired listings. We also do drive for dollars. The way we do that is kind of interesting. I don’t know how many are actually doing that. But for us, I like to process a lot than we use because some people use pen and pad paper, write only the address that they’re going on the street. But little tip that we do is I have an iPhone app, just the memo. I go down the street, keep on my memo. And I’m recording all the addresses as I go down. Then after I’m done driving, I send the file to someone on Fiverr. They transcribe it in a Google doc. And then, I have another VA go and track all the tax records. My total output for time is probably the drive plus maybe 10 or 15 minutes in organizing all the stuff. And then, we have a list of a couple hundred names.
Danny Johnson: Yes, it’s smarter because that’s the painful time-consuming part. Well, it takes a lot to drive around because that’s not as painful as looking up every address and writing down the owner information. So, when you talked about the memo, you’re talking about voice recording of the address?
Rob LaRovere: Yeah. Just let it record as we’re going through. Typically recording between five to 10 minutes so I’m making sure I’m not doing too much time in the car. A five- to 10-minute recording is equivalent to about an hour or an hour and a half driving.
Danny Johnson: And so, what is the typical number of properties that you find when you drive around? So like say what do you expect to get? Maybe something like 30 addresses per hour. Do you have a number like that that you shoot for?
Rob LaRovere: Yeah. Typically, it’s about 100 an hour or so.
Danny Johnson: A hundred an hour. Wow.
Rob LaRovere: It’s pretty high. A lot of these neighborhoods that we look at they’re urban so they’re older homes. We can tell that they need some work. So we have a pretty high success rate with our driving for dollars. It’s more targeted for our direct mail.
Danny Johnson: So the lower end properties? Because you can get them cheaper and get high rents and just get a better cash flow out of them.
Rob LaRovere: Yeah, exactly.
Danny Johnson: Nice. What do you look for? This is an argument that Melissa and I have all the time when we were driving for dollars together. It’s because I would say, “Write that one down.” And it’s like a house that just had overgrown grass or something. And then she would say, “What about this one?” And it’s like peeling paint and then maybe like broken windows. I’m like, “Nah, I don’t think it’s vacant.” She’d get mad because it’s like I just said, “Write down the one that’s got the high grass,” but wouldn’t write down this other one. Do you shoot for something that you feel like it’s definitely vacant? Or you just look to see if it needs a ton of repairs. You don’t care if someone is living there or not.
Rob LaRovere: I just see if it needs a ton of repairs mostly even if it looks like it hasn’t been maintained recently whether the grass is long. We live here in Indiana though high weeds and grass grow pretty quickly, and you can actually get fined for that if you’re not taking care of it. Yeah, pretty much anything. The more addresses I put down, the better. If it looks like it’s been recently rehabbed or in okay shape, I kind of avoid putting that down because I know it’s not going to be a hot lead. But the way I looked at it, direct mail is pretty inexpensive. And if you’re doing it repetitively on a regular basis as long as you getting your face in front of these sellers and when it’s time for them to sell, they’re going to be thinking of you.
Danny Johnson: How many times do you try to hit the drive for dollars leads with your direct mail campaign?
Rob LaRovere: We try to get something out every three to four weeks.
Danny Johnson: And you mail until they say to stop? Or do you guys do like six or seven? Or do you know how much?
Rob LaRovere: Yeah. So every six months, we refresh our driving for dollars list. If they call and say, “Knock it off.” We agree with that list. But for the most part, we’re getting that same list. And oftentimes, they’re the same people that fall on our absentee owner list or code and violation list. So we make sure that when we’re filtering out these lists that we’re selling to our postcard company that we use, they’re not just getting spammed for the ton of different types of mail.
Danny Johnson: And are you guys using a local printing company or a mailing company for that? Or are you using a national website to send the postcards?
Rob LaRovere: Yeah. We’re currently using PostcardMania in addition to GoBig Printing. We have subscribers to invest reviews and they in a great way would go big. We had a couple of startup issues when we first started with GoBig. It was supposed to automatically remove all the addresses for our mailings, but that wasn’t working for us. So we ended up having to switch back to PostcardMania which we found to be a pretty good option as well.
Danny Johnson: Cool. And so, whenever you have calls come in—are you taking calls? Or are you strictly acquisitions where you’re going out and making offers on properties?
Rob LaRovere: No. So we use PATLive to take our calls, and then they just submit everything through a web form and it automatically populates an investor piece for me.
Danny Johnson: And how many calls would you guys say you guys are getting a day?
Rob LaRovere: Right after mailing, probably like 10 calls of that in like a couple visits, three or four visits. Two weeks after mailing, it’s a little bit slower. One call a day or one call every two days.
Danny Johnson: And what’s the reason behind using PATLive versus have somebody in your office taking the calls?
Rob LaRovere: Actually, it’s funny you asked that. We’re in the process of debating if you bring it in house and just have—
Danny Johnson: I think you should. That’s my recommendation, is that you should. It just kind of hard to have somebody build that rapport for you through PATLive. We were handling the calls and we had an acquisitions guy we brought on. He was handling the calls. He was getting too busy and we hired a lead intake where it was her sole job to answer the phone and talk. And with that being their sole job, they also do a lot of follow-up and everything because we’re not getting calls all day long. But then, they can spend that time to build that rapport and set them up for the appointment. So when the acquisitions goes to the house to look at it, a lot of times they’re saying, “Hey, we really loved the guy that we talked to. We really like you guys.” They build that. And I don’t think that you—I’d be surprised if someone has ever told you guys that about PATLive. It’s like, “We love the guy at PATLive. He was awesome.” Not that they knew it was PATLive.
Rob LaRovere: So initially, I was the one taking all the calls. But when we really started ramping up and try do volume, it was just kind of overwhelming especially since I was actually also doing leasing calls at the same time. So I just get slammed all the time. When we outsourced it to PATLive, that really simplified it. And one of the reason we want them is just because it is all English speakers and has a native language. So they also pick up the call 24/7. If it someone that is pretty motivated, I think we set a limit of like $25,000 or less. They do take information and they forward it to me. And then from there, I’ll hopefully close it out. But what you’re saying about bringing it in the house totally makes sense and something that I’ll bring to the table with my partners.
Danny Johnson: Well, you said you guys were already talking about doing that maybe. I just think you’ll have better luck with it because you work so hard to get those calls come if you don’t maximize what you’re doing with each one of them. So people call in, you get the information. How are you determining which ones you’re going to look at?
Rob LaRovere: Typically, a lot of it comes down to what the seller’s motivation is. A lot of people are tired and they just want to know what they’re paying. They don’t have any incentive to move. At that point, we keep them on a follow-up list. If they seem like they could be interested in maybe relocating at the end of the year, we’ll typically meet on them and check it out. Ideally, just about building rapport and trying to figure out what the problem is. And if I can just check out every property, that’d be ideal. Between checking it out myself, I also have an assistant. So one of us is known to these properties. So it’s not all me or all him. So we’re splitting up the duties.
Danny Johnson: With the properties that you guys are targeting, do you find that it’s home owners living at the properties? Or is it tenants and the landlords or the owners calling you if they’re vacant? Do you have a majority of houses fit one of those?
Rob LaRovere: I’d say three out of four times it’s an absentee owner that’s calling us. The landlord the one time. It’s typically the homeowner.
Danny Johnson: Do you guys have better luck with one over the other?
Rob LaRovere: No, it’s kind of hit and miss. I guess just by volume I feel like we have more absentee owners close out.
Danny Johnson: Typically people that didn’t want to be landlords or they went into it wanting to be landlords.
Rob LaRovere: Typically people that are just looking to downsize. So they have maybe a package deal, maybe 10 or more properties and then just looking to offload a couple of them that need a little bit more work, maybe the tenant just moved out. And those situations are always great because you get that one property. You build that tracker through them and hopefully be that first call and they get to sell it next time.
Danny Johnson: Nice. And so, what is the process? How do you determine what you want to pay for it? And then how do you present the offers and go through that process?
Rob LaRovere: So based on the neighborhoods, I have a pretty good idea of what our all end cost is going to be. So we start out talking to the seller, explaining to them what we think that their house might be worth but we really need to get through there to check out the rehab. And then from there, I can see if it needs new roof, furnace, what kind of big ticket items it hits. And then, we just have basically a formula in our Google Excel sheet that we plug in our numbers and see what we can offer. They might start a little bit lower than what we can pay obviously just to relieve them from negotiation but that’s pretty much the process.
Danny Johnson: With those type of properties, you’re not using like a 70% of ARV-type calculation, right? What kind of calculation do you guys use?
Rob LaRovere: We use CCR. So we’ll plug in pretty much all information. We have an assess value tab that helps us calculate what our taxes are going to be along with what our insurance rate is. Others are column for rent, what the purchase price is going to be and then also what the rehab is. As long as it fits up a favorable CCR, we know what we can pay.
Danny Johnson: Cool. And what does CCR stand for?
Rob LaRovere: CCR stands for cash-on-cash return.
Danny Johnson: Cool. All right. What kinds of cash-on-cash returns are you guys looking for?
Rob LaRovere: Well, that’s a trade secret.
Danny Johnson: Well, you don’t have to share if you don’t want to. And so when you make those offers, how are you guys doing that? Are you guys preferring to be in person and him fill out that contract and give it to them? What is your process for doing that?
Rob LaRovere: So I guess I’ll walk you through the entire process. Seller calls up on the phone with them and set up an appointment. I know I’m going to this appointment so I make it sure the property is in our Google sheet. I can play it around while I anticipate the rehab numbers to be. Then I take a contract with me. As long the numbers the rehab is what I expect, I basically try to get it under contract immediately upon meeting the seller after we check it out together. I have the app on my phone, so I can go back and I can change the numbers a little bit if I think the rent is going to be a little bit lower or higher or if the rehab actually comes in the same, lower, or higher. I can mess around with the numbers from this spot. I do get it wrapped up after the first meeting. Sometimes, it takes a little bit persistence.
Danny Johnson: So you have most of the calculation done. And the only thing that you might change is your estimate or your guess of how much repair it’s going to need. And in that way, the number is very simple to calculate while you’re there and then you can present that offer to the seller. And do you write out a contract? Do you fill out a contract when you make the offer? Or do you verbally just tell them what you would pay?
Rob LaRovere: I fill out a contract form. One of my strategies I tell them, “Based on this rehab, I think this is what we’ll be able to pay. Will this number for you?” And then kind of wait for that pause and see what the reaction is. And then if it’s positive, then I say, “Well, I have a contract right here if you want to get it taken care of. We can close within five to seven days as soon as the title work is ready.”
Danny Johnson: Nice.
Rob LaRovere: We talked a little bit about wholesaling. So we’ll close them on every property first unless it’s just a tiny deal that just needs a simple assignment. We’ll close on all the properties ourselves so we don’t have to wait for anyone else to come through and wait that 30-day lag time for a seller to actually get what they want.
Danny Johnson: Nice. And what’s the decision then on doing the hold versus wholesaling? How are you guys determining what you’re going to do with it?
Rob LaRovere: It depends on a lot of it where the property is located. So I mentioned Fountain Square earlier today. Ideally, we have some properties in that pocket but that’s such a flipper’s haven right now that we can pick up a property for 30 grand and then flip it to someone for 50 or 60 and that would give them still plenty of room to hit their ARVs. That’s a huge wholesale. That’s one way. Other ways, if it works with the CCR and it’s a neighborhood that we like as far as a rental community, we’ll hold on to it.
Danny Johnson: Cool. If you can wholesale a property and make 20,000 plus on an assignment or a wholesale—well, not an assignment because you guys have closed on them. Wholesale, it’s just a no-brainer, right? You can dump that money back into marketing and generate more.
Rob LaRovere: Absolutely.
Danny Johnson: That’s nice. So whenever you guys do that though, what is your preferred method of doing the wholesaling? So you put it under contract. You actually close on it. So you own the house. How are you guys marketing that deal?
Rob LaRovere: Right now, a lot of it has been popping on the MLS because the market is, I guess, so saturated with buyers out there that a lot of times these properties will just fly off the market. We cleaned it up. If there’s a bunch of junk inside, we’ll trash all of it. We don’t really make any repairs if we know that the intention is to wholesale it. But as far as the buyers or let’s say a few people that we send out the deals to, some investors that we worked with in the past want to know what are—I don’t want to call it junk—but what are properties that don’t work with the Holdfolio system’s numbers are. If we could send it to them, then they might be interested on it. Because wholesaling isn’t our primary business, we just try to do it the easiest way and that’s popped there on the market.
Danny Johnson: So whenever you put it on the market, so are you guys listing that yourselves and so you’re really just dealing with the 3% commission for the buyer’s agent?
Rob LaRovere: Yeah.
Danny Johnson: All right. Nice. And then how long do those typically stay on the market?
Rob LaRovere: I’d say within three weeks if we have—well, we have offers on there immediately. But within three weeks, we have a pretty good idea of when it will be closing.
Danny Johnson: Cool. So I just want to know because you can maximize how much profit you make. If it always flies off the market like that first couple of minutes of putting it on, it’s like, “Man, we can last for more or something.” Do you guys have people bid up on some of them to where you have sort of bidding wars on them?
Rob LaRovere: Yeah, we’ve had a few situations where we had a request, highest and best.
Danny Johnson: That’s always fun when you’re on that side of it, right?
Rob LaRovere: Yeah, no kidding.
Danny Johnson: Have you considered auctions?
Rob LaRovere: You mean as a way of selling the property ourselves? That’s not an option we’ve looked into. Would you recommend it?
Danny Johnson: Well, I have never done it either. I used to hear people doing that all the time and it always seem like kind of a lot of work to me. It’s just kind of weird too like auctioning the house. I don’t know why I thought of it just now. But maybe that is something somebody is doing and making a ton of money. I think that was happening a lot back in 2006 when it was really hot before the market tanked. A lot of investors were auctioning properties to investors. So I wonder if that’s died for some reason of if people are still doing that. But it seems like it’s even hotter than it was in 2006, so you would think it would make sense to do it.
Rob LaRovere: I know as far as the buyer’s side. Last year, we picked up—I think at one auction we walked away with like 10 properties. And then this year, we’ve gone to probably twice as many auctions. But the market has been so much higher this year that people are bidding up their properties that in our opinion aren’t worth what they’re paying for.
Danny Johnson: So that would make sense for you guys to do the auction and be the one benefiting for people paying too much, right?
Rob LaRovere: You don’t need to look into that.
Danny Johnson: Yeah. I’m going to edit that whole part out so we don’t have everybody else to know. No, we don’t really edit the podcast guys. Let’s see. So, that’s how you guys wholesale those wholesale ones. Now, I’m really interested to find out the Holdfolio ones, the ones that you guys are keeping in this crowdfunding business. Do you mind going into detail about how all of that works?
Rob LaRovere: Yeah. Absolutely. So we basically take 10 rental properties that are already cash flowing properties we already own and we put them on our website. And investors can register, become users, and build a relationship with our company and may have the opportunity to basically buy ownership in these properties. We bundle the properties into operating to 10. So we basically have 10 income producing assets there. And so all our calculations—the last I checked, we were based on eight out of 10 properties being vacant. Annual return is typically between 8% to 12%.
Danny Johnson: Wait. You said eight out of 10 being occupied.
Rob LaRovere: Yeah. Excuse me. We calculate all our returns based on eight properties being occupied to being vacant so that worst case scenario if we have those 10 properties and two are vacant, our numbers aren’t affected. When we work with these investors, they’re buying ownership in this company. So we organize the properties into an LLC. From there, they’re able to buy the ownership and they’re entitled to basically a direct proportional rent or percentage of the rent and the income that these properties produce. That’s not my specialty. We have a girl on board that specializes in talking with investors and giving you all the nitty-gritty. But as far as a brief overview, we basically take 10 income producing assets, we crowdfund the equity out and then investors basically have a seat at the table.
Danny Johnson: Cool. How is that so much more beneficial than just getting loans and just owning and controlling all of the equity? What’s the reason behind doing that that way? It seems like a lot of work, right?
Rob LaRovere: So for an investor, it’s completely passive. On a quarterly basis, we send out an ACH automatic deposit. At the end of the year, we send out a K-1 statement so the investors are able to get the tax benefits of owning real estate. We have an in-house property management company that takes care of all the day-to-day issues and is responsible for leasing out the properties. Our properties, our portfolios are all 100% occupied right now. We avoid any vacancies by doing a 30-day premarketing for a property. So if we know that a property is going to become vacant in the next 30 days, we’re able to grow our lease agreement and start marketing up properties so that the turn time is much smaller than what it might be if we had to wait.
Danny Johnson: That’s smart. All right. So are you guys making money on the property management? How are you guys making a profit to make it worthwhile to do the crowdfunding and do it that way?
Rob LaRovere: Yeah. So Holdfolio keeps a 20% to 30% ownership in each of the companies, so that means we’re selling 70% to 80% ownership to investors. So we keep our interest aligned. We’re motivated to make sure that the portfolio is performing. If the rent is coming in, we get a percentage of that rent. So we’re looking on it. We could go and wholesale all these deals and making a profit on all of them, but we’re allowing investors to come in at a price basically where we’re at are all in cost of purchase plus rehab and get a property that’s significantly under market and so by keeping our interests aligned and basically by making a passive income opportunity for an investor that’s why it’s more beneficial.
Danny Johnson: It’s nice. So you’re making some profit on them buying the equity, right? And then you’re getting also the cash flow for your percentage of equity that you still control.
Rob LaRovere: So we’re focused mostly on the rental income. We don’t look at the portfolio raise as necessarily a profit opportunity. There is some overhead built-in that account for legal fees, everything else that goes into putting a portfolio together. But we’re basically mostly looking at putting the property out there and then using the cash that we’re able to basically pull back out to scale into another offering. So we’re looking at it more into what we can do by holding to scale than what we can do just by doing the one-offs.
Danny Johnson: But what I meant by that, I guess, was that—I forgot when you said the numbers were on these typical deals, but let’s say you’ve got maybe a total of $50,000 into property and it rents for enough to where people—you’re selling the equity. Do you ever sell more equity than the $50,000 that you have into it? Because the value of the property is probably a lot more than $50,000. Do you see what I’m saying? Or are you guys just pulling your money back out of what you had in it and then maintaining the—?
Rob LaRovere: Yes. We’re mostly just looking at pulling the money back out and then moving it into another opportunity.
Danny Johnson: All right. That’s cool. It makes my brain start spinning on all of this. I need to read more and learn more about all of this. I don’t know. It also kind of seems like a little bit of work too, but you said you guys have somebody running that whole side of things for you guys, right?
Rob LaRovere: Yeah. We have an investor relationships woman named Kristen that is phenomenal.
Danny Johnson: And you guys typically sell these packages to the same—you have repeat buyers for these different properties.
Rob LaRovere: Yeah. Absolutely. I forgot to mention but the minimum investment for the single family homes is a $10,000 investment. So someone could basically get $10,000 worth of ownership in a property package. Let’s say it raises $350,000 and they decided they want to put 10 grand in here. They might decide to do this for one portfolio and then a month from now we’re offering another one at another 10 grand. So now we have $20,000 invested among 24 properties. It further diversifies their risk and it allows them to continue to make good stable returns. Like I said, we’re still doing all the hard work, sending the returns to K-1 at the end of the year and the property management.
Danny Johnson: So what are you guys on the hook for though with when you do this? Let’s say for some reason something horrible happened to the market and you’re not able to keep them all rented. And then the risk at that point is basically spread among all the people that had bought into it, right? It’s not like you guys are guaranteeing anything, right?
Rob LaRovere: Right. So we do have an opportunity. I think it’s for our apartment that it’s a guaranteed 8% return because we also do multi-families. So we have a 146-unit apartment and then we’re closing another one in the next month.
Danny Johnson: Nice.
Rob LaRovere: But back to what we’re liable for, the risk is spread among all the investors. We buy these properties at such a low price that if the market were to tank, the investors aren’t really going to be that affected because they’re in at the same level as an investor would be. We’re focused on the cash flow. We’re buying in these cities like Indianapolis and Dayton that have pretty strong economics overall where there is a demand for jobs and for a healthier environment.
Danny Johnson: Nice. All right. Cool. Well, you guys have goals to do, almost double what you did last year, right? You told me earlier that you guys are looking to expand and grow like crazy. So you started in Indianapolis and then moved to Dayton after—?
Rob LaRovere: Yes.
Danny Johnson: What is the size of those markets?
Rob LaRovere: Indianapolis is about a million people or so covering around there. I’m not sure what Dayton is off the top of my head but—
Danny Johnson: Similar size or a little bit smaller maybe?
Rob LaRovere: It’s a little bit smaller. But overall, we found it to be—it’s very similar as far as the properties are involved. Just a little bit higher taxes in Ohio. Well, we normally go to get for rent for $700. In Indianapolis, we’re looking at maybe $675 and $685 in Dayton. Higher taxes a little bit. Lower rents. As long as we can afford on the funding, we’re good.
Danny Johnson: So there are state income taxes in those two states?
Rob LaRovere: Another is in Indiana. I’m not sure off the top of my head about Ohio.
Danny Johnson: Yeah because I think that’s the reason why Texas property taxes are so high because we don’t have that state income tax. This has been great, and it’s really opened up some things I didn’t know anything about. And I’m going to read up a lot more on that. Do you guys have any information that you guys provide? Like even something that explains it to the investors that look into working with you guys.
Rob LaRovere: Yeah. Holdfolio. If you guys go to our website, holdfolio.com. They can register and start a relationship with us. It requires a phone call to figure out if the interests are aligned. If we see eye to eye on what we’re looking to do and if the investor has any questions, they can certainly ask Kristen. I know I gave a pretty brief overview, but she can definitely fill in any missing gaps and answer any questions.
Danny Johnson: Awesome. And then for wholesaling properties, if anybody is in those markets and wants to get on your buyer’s list, is there a way that they can do that?
Rob LaRovere: Yeah. So for all acquisitions, I’d recommend reaching out to me on website, buytorenewindianapolis.com or I’m also on BiggerPockets and you can find me on there.
Danny Johnson: buytorenewindianapolis.com. And I’ll put these on the show notes page. The links to Holdfolio and then buytorenewindianapolis.com on show notes page which is going to be at flippingjunkie.com/79. And I really appreciate you being on and sharing all that information with us. I talked about a book that you would recommend and you recommended the one earlier. Do you have any other books that you recommend?
Rob LaRovere: I recommend Relentless by Tim Grover. I listen to it on Audible. The narrator is phenomenal and really going to get you amped to take on the day.
Danny Johnson: Relentless by who was it?
Rob LaRovere: Tim Grover.
Danny Johnson: Tim Grover? I have to check that out. I haven’t heard that one. And what was the first one that you mentioned?
Rob LaRovere: The first book was called Set for Life by Scott Trench.
Danny Johnson: All right. Cool. All right, Rob. I really appreciate it. It was a great show. Is this the first time you’re interviewed because you were pretty calm about it all? Usually, people are a little bit more nervous.
Rob LaRovere: Well, thanks for saying that, yeah. This was my first podcast interview.
Danny Johnson: Cool. You did great.
Rob LaRovere: Thank you.
Danny Johnson: I really do appreciate it. So that’s about it. So take care, and we’ll be in touch.
Rob LaRovere: All right. Sounds good. Thank you, Danny.
Danny Johnson: Bye. All right. Another great episode. Thank you, Rob, for being on the show. That was great. I really do appreciate it. And like I said at the beginning of the show, if you guys are interested in joining that closed Facebook group with likeminded investors wanting to work more on their business and not so much in the business, head over to flippilot.com and get your invite to join that group. It’s grown like crazy over the last couple of months, and everybody is super interactive and helping each other out. And it’s just been great to see. So thank you so much if you’re already part of that group for posting and sharing. It’s great to meet a lot of [music] you guys out there. So flippilot.com. You can get an invite to join that group. And we’ll see you next week.