{"version":1,"type":"rich","provider_name":"Libsyn","provider_url":"https:\/\/www.libsyn.com","height":90,"width":600,"title":"Ep 110 Pharmacist Real Estate Investing II","description":"In this two-part series, I talk about the real estate market and the value of an MBA. I was a real estate agent for almost 7 years and talk about how I feel a real estate license trumps an MBA for return on investment in episode I. In this episode, I'll talk about how to evaluate a real estate investment using two homes that are on the market today that I'm looking to possibly invest in.  Full Transcript: welcome to the pharmacy leaders podcast with your host Tony Guerra the pharmacy leaders podcast is a member of the pharmacy podcast network with interviews and advice on building your professional network brand and a purposeful second income from students residents and innovative professionals hey welcome back this is pharmacists real estate investing part two and what I wanted to take you through is kind of how I look at a property and how I look at things and and we'll talk in general about the market and some emails I get so I go on Zillow listen and I look at some of the zip codes and what I've done is I'm looking back over the last twenty years is that I find that I only invest in places that have actually lived so it may be a little bit tougher if you've never lived in a place to know you know how things are but the rule of thumb is to rent for a year before you ever even think about buying a home in an area that you've never been in it just it's just so much easier and then you know I'm telling you that you should probably be a real estate agent first learn what all that is understand the contract understand every single paragraph of that contract understand what you're looking for in terms of you know what are the deficiencies that you're looking for what are the things that you can take what are the things that you can what kind of what what age of a roof are you looking for what are you looking for when a term comes to you know the HVAC how much longer is that gonna last and immediately you know without even thinking I'm going to the two most expensive when you know you're probably looking at well that that was a really nice kitchen and they had really great baths which are the things that you know buyers really look at but in terms of things that are kind of hidden you want to go in there and go look and see when was that HVAC put in and you want to know when was that roof put in and things like that so let's take a little bit of a tour what we're gonna do this week is we'll go to Baltimore Maryland where I went to graduate school in the in the 90s in 1997 and I graduated from there and a place that I lived for two years I feel like was originally delight it's a neighborhood just south of campus it's walking distance to the medical campus there are 5,000 students there I think well there or when I was there and there's the hospital and I want to talk a little bit about this neighborhood because it was someplace that I lived and and yeah anyway let me it'll it'll give me an ability to to project not project it'll give me an ability to talk competently about the current offerings that are out there and I'm going to talk about - just so we don't make it kind of crazy in terms of all the houses because if you just pull up - one two three oh I think it pulls up five hundred and forty listings and - one two three Oh expands all the way from Locust Point up through Federal Hill including the really expensive area of Federal Hill up through Ridge Lee's delight and then across Martin Luther King Boulevard and so it's a giant area so when Zillow sends me hey - one two three Oh as a zip code I'm like that is absolutely ridiculous because the difference in that zip code is enormous like if you go to you know Beverly Hills 9:02 and Oh as a zip code the average price of a home is five million dollars but there are houses that are way above that and there are houses below it but in Baltimore City the spread is enormous in terms of you know the eight million dollar home that's available from Tom Clancy and it's really cool one and I'll talk about that in a minute but anyway so let's let's let's first talk a little bit about kind of how I got to this decision to even record these two podcast episodes on real estate so I'm listening to revisionist history and this is Malcolm Gladwell it's a podcast that he does and it's extremely popular he's the guy that wrote I think it's like David and Goliath and talked about 10,000 hour rule and it's this famous guy in a great voice great really smart smart person and for this revisionist history third season there was actually a trailer so my first two things I was listening to were these two one-hour long podcasts on bigger pockets bigger pockets money and then I'm finishing up with revisionist history as I'm finishing out the three-hour run and so Adam grants there with Malcolm Gladwell and these guys are both heavy hitters and they're both very smart and they're both on opposite sides of a lot of things in terms of social science and so it's a great you know kind of a meeting of the minds it's really really a fun episode but in it Malcolm Gladwell talks about the ridiculousness of you know the test drive and how you could how can you possibly know if this is the car for you an X amount of time and then they always make it seem like all right let's go for the test drive like in some way you could sit down and Intuit that yeah this is the car for me you know what we don't even need to drive it don't wanna waste your time and so that's the thing I feel like with real estate is that so much we're like well I don't really want to bother the agent I don't want to have to go to this many properties and and then you're taking your time and a very efficient way to do it is to be the real estate agent yourself so that you can go to as many houses as you want and you introduce yourself but the other thing is that you get to talk to the owners and that's really where the the magic win-wins happen when my wife and I came to Iowa and I want to say it was 2009 so it's just post-crash we're looking for a house and we literally could not buy houses because the people were upside down on the houses so much that that six percent that the real estate agent was charging was making the house so expensive we couldn't buy it so we in this middle of the night 2:30 in the morning I'm actually living at my mother-in-law's house and I find out what's going to end up being our future house and I went and I talked to them and I said no no no agent we don't we don't have an agent but you know my father-in-law's an attorney and maybe he could help us with it or certainly someone in his office could help us with the deal and they're like oh you know are our daughters an attorney great you know we could do that no cost there and then we you know we looked at the house loved the house and ended up buying it but if you are people II as someone that I know that the real estate agent in town says if you are a people person people will want you to have their home so people have people never talked about this with investing I don't know why they don't talk about it but in many ways people want to know that the home that they lived in that they've worked so hard to make as beautiful it is today because there is no more beautiful day than you know people getting ready to sell a home and they really want someone that's gonna care for it and if you're that person you present yourself with is that person like man you know I really wish I could buy this home but you know as I look at it I just feel like you know what the other things that we're gonna have to do to you know the repairs we're gonna have to make I think it just falls out of our our reach and then all of a sudden they call you back like you know we really want you to have it what if we dropped the price $20,000 would that be okay like what what is going on does that really happen and in our case what happened was we went to because I was on it we we went to the Fizbo on the very first day that it was open like oh we priced it too low somebody's here on the first day and wants it no no I I was looking I was you know this is what we wanted we knew we wanted you can the one thing that I won't forget is that like I think my wife could literally fit on the kitchen island like head to toe like it's five feet long or some just massive sized island and that was just something that she had just really wanted so anyway but but talking to the person is one of the huge advantages of being able to be a real estate agent so if you are people II if you are somebody who is really good with people then you may also be able to talk your way into it in a multiple offer situation where like we really like that person because the person that is selling it just has to you know take the offers but they can pick someone with a lesser offer because they like them better so there's nothing against that like nothing says that you well you know my offer was on paper the best yeah but I feel like you're gonna be a pain in the butt to work with and I don't want your money as much as I want this person who I think is going to love my home that I've worked so hard on I lived in my whole life or maybe it's a you know parent or somebody's selling a parents home and it's like you know I really want to know that the person that I'm giving my parents home to is going to take care of it so such an important part of it it's such an important advantage of being the real estate agent yourself when you're looking for a home okay so this was the weird email or I felt it was weird is that you know so I'm looking at two one two three oh maybe I'm gonna invest in and I like Wrigley's delight and I know Ridley's delight so it's a place that I'm confident I'm also competent in two one two two four which is Canton to some extent Federal Hill but I never really lived there and I never really lived in Locust Point so I wouldn't feel as competent in those areas but I know two one two two four and I know Ridge Lee's delight so if I'm going to invest in Baltimore I know that you know I know what to watch out for and this is and so what Dillo says is that it's a buyers market the market temperature is cold and I don't exactly understand what that means I think it means maybe there aren't a lot of transactions happening I don't exactly know what that means but you want to think also well if I'm Zillow do I want to tell the person that it's a seller's market and that you know you should stop looking or should I tell them it's a buyers market so I wonder if there are algorithms favor the buyers market I just don't know and what you're really looking for is so it says that there was a seven point seven percent one-year change from May 2017 to April 2018 and then from April 20 1889 teen they're projecting a four point nine percent one year for cat that forecast is a complete that that is completely dependent on so many different factors and to say that a whole zip code will go up is completely irrelevant to your situation because you only want one home in that zip code so what I'm really looking at as soon as I see that or as a past real estate agent of saying huh the increases are going down or that we're seeing a leveling so I'm saying alright well I wonder if we're starting to approach a top of market here and I don't know I have no idea I'm not telling you it's top market I don't know if it is or not so seven point seven to four point nine percent and so the two homes the first thing you know if you look at two one two three oh you see there's 549 homes for sale and you got to be careful because it's totally addicting to start clicking on these places because you'll you'll see like you know you'll you'll you'll see like these awesome homes if you click instead of clicking cheapest you click like most expensive or something like that and so you know one of the top ones is uh let's see it's seven million nine hundred thousand dollars Zillow estimates it worth nine million so you're supposed to get a million you know you think oh wow you know I make a million dollars as soon as I buy that place but then you look at and you say alright well how long has it been on the market it has been on the market for four hundred I saw it somewhere four hundred fifty three days well that's the estimate doesn't look like it's right then if it takes four hundred and fifty three days to move something that's seven million nine hundred thousand dollar that's supposed to be nine million dollars well if it's a million less than it should have sold all right so there's some things here that you want to start intuiting and really use your your pharmacist brain and really use your you know like okay what am I really seeing okay is a twelve thousand square foot home twelve thousand that just boggles my mind the pictures are phenomenal there's four bedrooms 7 baths it's very I don't know the views are spectacular and it just looks like boy that would be a really nice nice home to own but be careful because Baltimore City taxes are brutal in terms of their comparison to the county right next to it so Baltimore City is usually double what the county is for the exact same priced home so that mortgage is thirty two thousand dollars a month looks like I can press a button and get pre-qualified for that so that's cool and that's Cummings & Co those guys are good guys so I that's that's just a really phenomenal home alright so let's go to the two homes that I'm gonna talk about and let's see let me close this one and then so what I do is so we got that five hundred and forty nine homes so I go in and I start on Zillow and I start pushing in and then what I do is I use the little circle tool and Ridge Lee's delight is so it's on the east side Green Street turns into Russell Street then you go back up MLK and then you go back east on Lombard oops I actually don't like cut part of it so let's cancel it do it again okay so I lost I lost part of PACA Street there because I know that's a big part of it okay so let's go back do it again oh I'm not far enough inland so apparently okay so now I can do it so I'm cutting all the way across Camden Yards is to the east where the Orioles play and then come back up Martin Luther King okay so now I can apply it and now I go from 540 homes to nine okay and that's a very manageable number and so I'm looking at these homes and I see one that's at 640 Dover Street and that's the first one I'm gonna look at and it's a hundred and eighty five thousand so well within you know pharmacist salary I mean you're talking about maybe being one point two five of yourself if your year at the average although I'm hearing the averages are closer to a hundred now with offers I don't know if that's true or not or I've heard as low as 90 up to a hundred I'm completely out of that group I'm in the bottom 10% in terms of my actual salary but I don't use my license at all really and then six twelve South PACA Street which is three hundred and forty thousand dollars and you know on the surface you'd say re well Wow once twice what the other is you know it's it's a no-brainer you know let's get the cheaper one you want to get the cheapest one in the in the best neighborhood but the first thing that and you'll you'll hear this on bigger pockets is you want to look at square foot or price per square foot and so if you Zillah will do this for you if it picks it up right and you want to be careful with some of these houses because a lot of them have additions that aren't included in in it so you want to look at it and say okay well let's let's see so 640 Dover I'm looking at two hundred and ninety-six price per square foot that is right above the entry into Los Angeles prices so Los Angeles is somewhere between 250 and 750 per square foot so extremely extremely expensive price per square foot so I mean you'd say oh my gosh that's not a deal that's not worth it but I actually know these houses and they're all set up in such a way that there's a bedroom upstairs and a bedroom downstairs so although that's 624 square feet it may be 624 above ground square feet and that really matters because if the lower level is furnished in such a way as to make another bedroom that means that you're probably actually looking at 900 square feet and so the place to find what the actual square footage is is you go to s I think it's s dat assessment and that's Maryland and then you can see the real property search so you go into the county and this is Baltimore City not Baltimore County and you look at a street address and then I'll use this I'm going to use this three times actually today for the two properties going to talk about and then one I need the property that I lived in to compare it so that I know what I'm doing so I look at 640 Dover and I see that it's somebody out of town that owns it but I see that they're 624 square feet and 312 square feet in a finished basement okay so what Zillah is not doing is it's not counting that 312 square feet so if you add 624 to 312 you get 936 so 936 so then it's 180 thousand divided by 936 if you want to do it price per square foot price per squit finished square foot which is 192 dollars so all of a sudden that changes things quite a bit I have no idea if this is one of those one-way streets where you have parking on only one side that would be kind of a concern but I feel like you know and then you look at the price that they paid for it it was about a 150 to 5 in 2012 so five years ago so significant appreciation on it from what they paid for it but this is a this would be someone that if the price continues to push down it's only been on the market for two weeks they would probably have give or there would probably be some room in there to offer something lower if if again this that there are just so few that open up in Ridge lease but it might be something but anyway the first point is is that when you look at Zillow that's just a starting place and that you see that the Zillow made a calculation on above-ground square feet and then you say okay well are there finished square feet then of course you want to know does it flood and I don't know if those Dover Street houses flood or not so you would want to find that out but those are the kinds of things that I'm looking at and I even even looked at the inside of it I haven't looked at a single picture and I know that that mortgage is probably gonna be what like 800 a month and then you've got taxes though but taxes there are really expensive so you would want to really be careful with those taxes and I want to say let's see so let's see on on that much do they have the taxes in there they should I don't see it and then you have to deal with ground rent so you also want to find out if there's ground rent and that's something that's intrinsic to Baltimore City where somebody might own the ground and it's a little bit weird but that would be an extra cost for you to buy the ground back and there are reasons to do that and there are reasons to just leave it alone but you would you can check out the ground rent regen redemption in the ground rent registration but you can hear that I know a lot about this area and it's not the person's principal residence so it was maybe an investment property for them okay so the other one I'm going to look at is if you're going in why do I keep clicking these shut 612 South PACA Street it's four bedrooms three baths and on Zillow and the reason I picked is because it doesn't have the square footage on Zillow so you go to the assessor and you go to the street address and you see it's 612 PACA and any time you don't see information on there somebody might just overlook it because the information isn't there and somebody might say oh well I don't know how much that you know that would be worth so I look at it and I see you know what what it says and it says it's 2040 square feet now from my living there I remember that most of the ones on PACA don't have finished basements and I think it's moist in the basement if I remember right they those were where the coal chutes were so that you would put the you would bring the coal in to the basement so they wouldn't finish something like that that I just don't know they my understanding was that most people just push the house back and added something to the back rather than that the other thing that I would want to know and let me see if I can see it from the pictures is what the alley behind it looks like so do they have parking pad and it looks like they actually have a garage and what I think they did with the space would they put a garage on the end of their land and if it was me personally I would probably I would probably rip the deck off and I would rip and I would tear down the garage if it was if it was if I was going to invest in this as a rental property I would rip that out because I would want parking for all of my tenants and that's something that they would definitely look for but right now they've got it set up that it's got a deck on the back it looks like they've got some kind of table and chairs underneath it and so maybe one or two people can park and the rest have to do street parking but I would price set it up to do off street parking and that stained glass is really cool it looks original anyway it's so addicting from real estate so addicting anyway so I would look at that and I say okay well 2,000 square feet how big is that and then I go alright well I don't really know but I do know that I lived at 607 South PACA Street and I know that I could look that up on the SD 80 and say all right well let me see how many square feet I was living in then and that was 2700 square feet so now in my head I'm like alright well I've kind of got an idea of how much it is how big it is but I also see that okay well in the 607 one there's two finished bathrooms and they were kind of back-to-back I would really look at that one and a half bathrooms that that other one has and say okay well is there a way I can create another full because I don't want four people sharing a single full bathroom or do they have to do it am I gonna be able to at the plumbing on the back so that I could add a third or make it two and a half bathrooms if that's the case so a lot of things that I would look at but anyway all this came from you know doing it and and being part of the real estate community in Baltimore and and I think I was a real estate agent for I would say five or six years maybe it was seven I don't think it was that long but I arrived real understanding of what it's worth and then you know I would do that I you know price per square foot there and so I say okay well we've got two thousand I've got three hundred and thirty nine thousand dollars three thirty-nine one two three divided by two thousand square feet and so it's 169 per square foot so per square foot this is cheaper although it's a more expensive property I could get four people in there I could probably create off street parking making it much more attractive so there's some level of improvement though you know tearing down a garage some people would say that's crazy and then I could you know that deck is that really serving anything do they really use it because it's off of is it off of one rumor is it off of a hallway like this is there like this master suite for this one person in the back and then I would look at the windows because original ease delight I think the rules are still there that you have to replace them with these expensive wood windows rather than the energy-efficient ones and then you know are there stars in the front of it or do I see buckling from the the bricks like these these houses are so old so it's about 117 years old although the inside isn't that sometimes the weight of the house itself pushes it out and you'll see stars on the front where they literally jammed a screw through the entire house and put stars on it and then they push the house back together to make sure that doesn't buckle anymore so a lot of things to look at but what I want to kind of impress in you is that look you just spent how many years in pharmacy school how many years getting to pharmacy school and now you're gonna drop you know two three four hundred thousand dollars with no education and that you know at a minimum go get a real estate license go look at at least you know 50 homes in the area to understand you know what what's going on with the the real estate there what makes something valuable what are some of the things that are happening and then if you want to go away Ziglar on it which is you know if you help enough people get what they want you can get whatever you want if you in a median home if you if you look at the median price of a home and if you make you know 3% per transaction we're just saying let's say two and a half percent per transaction of the value of that median then you have to help 40 people to you can have a home so what I mean by that is if you help 40 people find a home at two and a half percent per then you have grossed the median price of that area so if you help 40 people find a home in Beverly Hills you have probably helped 5 million you know prior earned 5 million dollars towards the home that you want and obviously there's taxes involved and costs involved and all that stuff but I'm just saying that you're now educated you're now able to do it and the last point I want to make is the FOMO ok fear of missing out okay so in 2004 the people at 611 South PACA I think it was let me make sure so 611 try not to click this off and break it off so 611 South packet bought their home for three hundred and thirty thousand dollars here it is 2017 and they're selling it for three hundred and thirty nine thousand dollars so it is appreciated nine thousand dollars in 13 years so the information that yfp always says is that you know you need to save 20% and all you're thinking is oh my gosh if I wait that long I'm gonna totally miss out on an upmarket but you have no idea if it's an upmarket or if it's going to be a down market and in this case if you had bought in 2004 you would have had no appreciation you actually don't haven't gotten enough appreciation to even sell the thing because to sell a home it costs about 10 percent of the value of the home so you're talking about 6% of the realtor and I know that there's different amounts that you can spend on a real estate agent but let's just for easy sake to get into a home you know you might need 5% 20% whatever it is but then to get out of it you need 10% of the value of the home that it's going so we're not even talking about if it depreciates so of this home so you know if you're in it for thirty three thousand and ten percent of that is thirty three thousand to get rid of it so if you talk about that you're looking at 363 and then so if they're selling at 339 they're already probably looking at you know right off the bat you're looking at a loss of what 121 geez why can't I do that math okay so let's try again 33 plus 330 thousand you're selling it for 10,000 more subtract 12 so $23,000 so you losing 23 dollars when you sell it on the appreciation side because it didn't appreciate but they've made paid into it and then this all may have been renters and they may have paid down the the mortgage a ton I just don't know but anyway I hope this was helpful I know I went long on this second one but I try to I'm just trying to give you some tips on the things that you're going to be facing as we're kind of going into this very very strange time when student loans are higher than they've ever been jobs are uncertain the real estate market may be reaching some kind of tipping point we don't know we have no idea and interest rates are way up or they're going back up again so again you know if this is valuable please let me know but anyway have a good holiday weekend and I will talk to you next week support for this episode comes from the audiobook memorizing pharmacology a relaxed approach with over 9,000 sales in the United States United Kingdom and Australia it's the go-to resource to ease the Pharmacology challenge available on audible iTunes and amazon.com in print ebook and audiobook thank you for listening to the pharmacy leaders podcast with your host Tony Guerra be sure to share the show with the hash tag hash pharmacy leaders [Music] ","author_name":"Pharmacy Residency Podcast","author_url":"http:\/\/pharmacy.libsyn.com\/","html":"