1. Importance of Small Steps: Taylor Loht highlights the importance of taking consistent, small steps in real estate investing. Instead of focusing on making a big leap, he recommends setting aside small chunks of time each day to work towards your investment goals. This consistent action can result in substantial growth and success over time.

2. Opportunities Amid Market Volatility: The podcast episode delves into the current real estate market and uncovers the opportunities available for investors despite the volatility. This includes identifying distressed deals and understanding the impact of factors like the Fed's interest rate hikes. The discussion underscores the importance of patience and strategic decision-making in this market.

3. Exploring Distressed Deals and Investment Strategies: The episode discusses the dynamics of distressed deals and capital bailouts, weighing the pros and cons of rescuing a distressed operator versus waiting for a foreclosure or buyout scenario. Loht shares his strategies for enhancing value in real estate and discusses the different asset classes he is currently invested in, providing valuable insights for listeners to consider in their own property investments.

0:00:00 - Vikas Gupta

This is the Hacking Real Estate podcast, episode 23.

0:00:04 - Taylor Loht

You can get a lot done by taking little bitty baby steps every single day, and those baby steps can be 10 minutes a day. I have, for example, a few blog posts that I've written on my website that are number one ranks on very important keywords in Google searches. Now I wanted to get there. I wanted to have that result, but I didn't know how to get there. And the way I got there is I wear a Fitbit, I set a timer for 10 minutes and I would write for 10 minutes and then, when it's over, I can walk away, maybe wait another 10 minutes, go back, or maybe I'll go back tomorrow and continue working on it. But without putting those little bitty 10 minute chunks in, I wouldn't have achieved that particular goal that was so important to me and that just one mechanic of setting a 10 minute timer and working on it for 10 minutes.

It does so many things. It gets you those baby steps, gets you working on it, but it also gets you started, oftentimes working on a big goal that we have. We don't do it because we just can't quite get ourselves started that one day and start working on it, but once we get started, we get so much done. So those little bitty baby steps, done consistently, can really make a big difference in your life and in your investments. And if you can find a way, a method that works for you, that gets you to take those baby steps my method might not work for you, that's okay. Find one that works for you that can get you working on your goal every single day You'll be surprised what you can get done.

0:01:39 - Brandon Hall

Welcome to the Hacking Real Estate Podcast, where we dive into the stories of seasoned, hands-on and tech savvy real estate investors. We'll learn the strategies and tools they use to maximize returns and minimize hassle, all while navigating the rapidly changing real estate market. I'm your co-host, Brandon Hall, and managing partner of Hall CPA, and I'm sitting alongside my co-host, Vikas Gupta, ceo of Azibo. With our combined 15 years of experience in real estate investing and entrepreneurship, we're here to help you up your real estate game. Let's get hacking.

0:02:10 - Vikas Gupta

Hi everyone, welcome to today's episode of the Hacking Real Estate Podcast, where our guest is Taylor Loht. Taylor is the brain behind the passive wealth strategy show and the driving force of NT Capital. Taylor grew frustrated with Wall Street and thus turned to real estate. Since then, he's had a hand in over $150 million worth of multifamily real estate projects and he's turned his insights into tools to help others. Taylor, welcome to the show.

0:02:42 - Taylor Loht

Thanks so much for having me.

0:02:43 - Vikas Gupta

In your own words. Can you tell us about your real estate journey?

0:02:47 - Taylor Loht

Yeah, absolutely so. Like you said, I got frustrated with Wall Street investing right around 2015. I'd initially gotten started because my goal was to build wealth, to turn my money into more money, and was successful at that with Wall Street type of investments. But looking forward, at that time I was seeing that it wasn't going to put me in a position where I wanted to be, specifically, that my investments were not naturally creating cash flow. Now there are ways to build cash flow with Wall Street investments but, honestly, it's generally kind of paltry, so I was looking for other options. How can I grow my wealth? How can I grow my passive cash flow?

It just so happened to, as many others have before me, stumble upon one of these books behind me Rich Dad, poor Dad it's over my shoulder, behind my mic here and Robert, like he has done for so many others, really opened my eyes to how real estate investors create cash flow, because prior to reading that book, I didn't understand all of the tools that real estate investors have available to us. I thought real estate investing was limited to buying the crappiest house you can in the nicest neighborhood and fixing it up and just holding onto it for 30 years Not that that's a bad idea. That can certainly play out, but it's a very limited picture as to the tools that are actually available to create wealth and passive cash flow in real estate. So he got me started on the path. Moving from there, I dug into learning more about how real estate investing works, about how real estate investors think about money. That ultimately led me to multifamily and multifamily syndication investing, which is what I invest in today Cool.

0:04:41 - Vikas Gupta

I'm curious as to why or what led you to the focus on cash flow over sort of like general wealth creation through appreciation of year over year returns to the stock market.

0:04:55 - Taylor Loht

Well, wealth creation through accumulation. The main problem that I had with it is that how slow it is, honestly, and patience is good. Patience is a virtue, but ultimately, when you're investing in a stock, you're not actively creating value in any way. You're buying something at market price and hoping that the market price will be higher in a year, five years, 10 years, 20 years. Now, if you buy most index funds, the odds are pretty good and that's what my strategy was focused around at the time, largely driven by the first book that I read on investing my copy is over my right shoulder here the Intelligent Investor by Benjamin Graham, which really inspired Warren Buffett's investing methodology. Now he evolved once he met Charlie Munger and everything, but he really set me down the path, but ultimately, my ability to create wealth and grow wealth was just limited to my ability to buy things at market price and wait for the market price to change.

Once I started learning about the true way that real estate investors create value in their portfolios, rather than just again buying the cheapest house in the nicest neighborhood and waiting for appreciation to happen, then I saw how real estate investors create wealth rather than just buy things and wait for them to appreciate and, of course, goal is to cash flow along the way. So it really boiled down to seeing that there are options to take action that can create wealth and create value, as opposed to the stock market investing method that I was using previously, where you're limited to the whims of the market. Now, that's not to say real estate investors are immune to ups and downs in the market. Of course we're not. We're dependent on market forces, but we have significantly more options to buy undervalued assets, force appreciation, utilize debt, utilize investor capital, partner with others. There's so many options, whereas when you're buying and investing in things that are publicly traded, you're just more limited.

0:07:07 - Vikas Gupta

So it sounds like, to make sure I understand, you wanted to be able to more actively have a hand in shaping how you generated wealth, versus just sitting and waiting and seeing what the market does.

0:07:19 - Taylor Loht

Yeah, absolutely. At the time I was, I suppose, in my mid-20s, when I first got started and I'd already started getting to that point where I was bored with video games. I wanted a better way to not just spend and waste my free time, but invest my free time into my own future, and real estate proved to be a great way to invest my time and energy into creating and morphing a vision for the future and really living more of a purpose and a goal all the time, rather than when sitting behind a desk.

0:08:00 - Brandon Hall

What drove you to syndications? And when we are talking about syndications, are we talking about you're investing as an LP or are you sponsoring the deals?

0:08:10 - Taylor Loht

So I've done both. I originally started out as a passive investor but, stepping back to what drove me into syndications, it's a few things. There's the mathematical side of things and just the numbers basis, and then there's the I hesitate to call it purely emotional side, but it's pretty cool to be an owner in these large assets. So, on the mathematical side, I saw, you know, learned about the ability to create value by raising an OI, by holding onto deals and, to you know, focus our efforts and hire people with you know, when we buy larger properties that have scale, rather than being forced to self-manage and work with you know, our tenants, you know we hire property managers, managers, property manager. To me, the getting into real estate investing one of my big resistance points or excuses, if you will, before I got educated about real estate investing was I never want to deal with a tenant. Ever Like that wasn't. That excuse was enough to keep me out of real estate investing. Well, I've come to learn that there are an awful lot of ways to invest in real estate where you'll never have to deal with a tenant. Syndications are one of them. Some folks like note investing. Some people get into lending and just work with other investors and lend them capital. There are a lot of options, but syndication to me represented a way to leverage others experience, leverage others time, leverage others capital and grow along with them. And also to place my capital, my investment dollars and say, my IRA, with operators who had significantly more experience than I did and ride these waves along with them On the, you know, emotional or like the soft feelings side of things. You know, I remember.

Remember back, the first time I had a realization that investors own large properties was probably about four years before I ever considered becoming a real estate investor myself. I was in my car, living in a at the time, living in a nicer townhome complex, not super nice, but at the time I lived in Lancaster, Pennsylvania, driving my car to my job at the time and drove past the office of the townhome complex and sitting outside the office of the townhome complex was a brand new now at the time this is quite a while ago now, but brand new at the time Audi A8 and I love cars. I love you know it's particularly outies, they're just beautiful machines and an A8 at the time not a cheap car and certainly not a car that anybody living in my townhome complex could afford. It was a decent place, but nobody was driving luxury outies. And it just hit me that I bet whoever owns that car owns this complex, and that was the first spark, I think, to me.

That helped set me down the path that you can create wealth through multifamily investing and through owning real estate. And you know that just again. That just stuck with me. I think we all have our, you know, kind of logical brain reasons why we invest in real estate. And then we have the softer like more again, to use the word that kind of stinks, but it's true emotional touchy-feely Is this taking us where we want to go? Reasons why we invest in real estate? So, yeah, I think there's a lot of great reasons too, though.

0:11:53 - Brandon Hall

I love it. I'm a car guy too. I actually have an Audi Q7 that I bought brand new as a celebration of my business growth a couple years back in man, I agree, audis make nice cars. It's going to be hard to not drive an Audi after that.

0:12:12 - Taylor Loht

They're gorgeous. They're gorgeous vehicles. Now the good news is that there are a lot of great brands out there today, so hard to go wrong. But yeah, still a fan, even of those older, you know, audis. I still think they look awesome. They have a little dated by now but yeah, still great cars. Still love them.

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0:13:08 - Brandon Hall

In terms of investing in syndications or sponsoring syndications and then investing in multifamily properties. How are you feeling about the market today? What are you seeing?

0:13:20 - Taylor Loht

Yeah, that's a great question and I saw a figure the other day. Now I'll confess that I read the headline and I'm still holding off on reading the article, but the headline being that multifamily sales commercial multifamily sales are down about 76% year over year versus last year, and I think that's indicative of the fact that buyers and sellers are pretty far apart. Generally speaking, folks who are selling today kind of need to sell their properties. If you don't need to sell, then you're probably going to hold on until you're probably hoping for interest rates to fall or something to change like that. And again, I think that's just indicative of there being some level of distress in the market. If you're engaged in the market and networking with other multifamily investors and having private, off-the-record conversations, then you're definitely getting a more accurate, if you will, or up-to-date, feel of who's in trouble, who is having issues with making their debt service because their interest rate cap ran out. I've been hearing others who are in distress situations talk about it for a few months now really most of 2023, and we're starting to see deals hitting the market that the owner is in distress and is going to be taking a hit, if not losing all of their equity by selling. There have, of course, been a few notable foreclosures. If you will that, if you're so motivated, you can find relatively easily by Googling.

So I think there are kind of two sides to this coin. Right, it's not a great time to sell for all the reasons we discussed related to interest rates. Ltvs are low, it's down to debt service coverage ratios, everything that you can get into the numbers about and then, on the other side of that, folks have generally disengaged from the market. So Warren Buffett says be greedy when others are fearful, and fearful when others are greedy. Well, personally, right now, I don't see a lot of people being greedy Now. Does that mean it's a great time to buy? Possibly not. That's up to your own interpretation. But when I hear a lot of people saying they've just completely disengaged from the market, that makes me wonder like, well, what's really happening out there? That makes me want to engage more and see where the deal flow is. So right now, I think, if you're talking about where opportunities may lie, the key is looking for folks who are in distress and need a way out of their deal. Some folks are having conversations about starting rescue capital funds to bail operators out of their deals and get a chunk of the equity for that some kind of prep equity situation. Those deals, I'm sure, are happening behind closed doors. I haven't been involved in any of those but on the other side of that we're definitely seeing foreclosures happen. We're seeing operators sell at a loss and again lose all of their equity. So it's certainly an interesting time.

I was on a webinar call just last night with a very prominent operator who has owned 4,000 doors over time and has been selling for a few years now. Really throughout most of the pandemic he was selling and hasn't been accumulating and his position is that we're not going to see most likely we're not going to see one day an enormous crash in price and oh, it happened. There it is. His perspective is that these things take months and months and months to materialize and it requires patience to see what's ultimately going to happen. Now this gentleman who shared that has been in the business for 30 years.

Now I'm 34, he's been in the business almost as long as I've been alive, so it'd be kind of a fool not to listen to him. So that's the perspective that I'm taking. We are seeing distress in the market. We are seeing deals happen due to that distress, but we may not be out of the woods and we need to continue paying attention. I think the odds are not low that the Fed will continue to hike rates. They we need to listen to their signaling, but also try to avoid being armchair economists. Ultimately, that can prove to be a waste of our time and distract us from things that we really have control over.

0:18:10 - Brandon Hall

So you mentioned a few things that maybe less experienced real estate investors might not fully understand, so I'd like to spend a little bit of time touching on them. You mentioned rate caps. I'd love for you to explain what those are, but then you also mentioned DSCR, which I interpret as being related to DSCR loans, and then you mentioned rescue capital funds. So if we could spend a little bit of time talking about how what are rate caps? How did operators get into the position that they're in today, and why do they need to be rescued?

0:18:43 - Taylor Loht

Yeah, so rate caps are essentially an insurance policy for a variable rate loan against the rate of your loan going up. So if the rate of your loan goes up, that insurance policy pays out back to the operator and normally that's, you know, in a rear 30 or 60 days, something like that. And I've really been dying to get somebody on my podcast who is a market expert specifically in those rate cap insurance contracts. I've spoken with lenders who know about them, but they're not the rate cap guy, if you will. And from an operator standpoint, we, an investor standpoint we generally all have an academic or kind of operational understanding of how they work. You pay a premium upfront when you buy.

A lot of rate cap providers severely underestimated the risk of interest rates going up as quickly as they have Now. They're not alone in that. A lot of operators did the same thing. So the premiums on rate cap contracts have gone up considerably. Of course you know when the risk actually happens the insurers raise their premiums. But really my one of my goals here has been to find somebody who is a rate cap insurance contract expert and dig into them, because I find that most operators and investors again, we have kind of an academic and operational understanding of how they work.

But you know rate caps have a finite period. You purchase a rate cap when you closed on a property and lenders, at least before rates started going up, would require a certain period. Some lenders were requiring one year. I heard some lenders requiring two years and operators could choose to purchase longer term rate caps if they wanted to do so, and many operators out there before rates started rising this is, you know, back in 2021 or maybe early 2022, when folks were closing on deals at incredibly historically low interest rates, they were buying with a one year rate cap. So with a variable interest rate loan, the interest rate goes up, so your debt service costs go up, but the insurance contract starts paying out once you hit that cap. But once your insurance contract is over, you still need to pay out your debt. You still need to pay that debt service cost. And when your rate goes up from, say, 3% to 5% to 7% I've heard some folks, you know, getting even higher than that it completely annihilates all of your cash flow and more so, general partners having to come to the table with capital, do capital calls, but ultimately, once you've dug that deep of a hole. You urgently need your own kapdeurum. You know, kind of out of luck, right. So some folks are having to exit deals that can't make their debt service payment and they're losing all of their equity. We're seeing that happen.

So debt service coverage ratio DSCR it's a ratio of cash flow to your debt service cost, at least at a high level. Generally speaking, most lenders look for at least 1.25 as your Ratio. But when your debt service costs go up, then your DSCR goes down and you can get below Heck. You can get even below 1.0. So your debt service costs are higher than your cash flow, which is a big problem, right. And lenders have certain things that they can do to, you know, for clothes on properties, or take certain actions, put properties in essentially lockbox where they take control over the financials of the property if the Property gets it in such bad Financial condition.

Now I'm sure you could talk to Underwriting or banking experts out there. That would add additional nuance to what I'm saying about what DSCR is. I'll happily admit that I'm not the number one underwriter out there. My job is working with the investors and raising investor capital, but generally that's the role that DSCR plays in here. It's it's looking at. Can the property pay its debt with a bit left over right in there Ratios that lenders look for there now, what was your other question? You had another question there, but it's about rescue capital.

0:23:10 - Brandon Hall

Before we jump into the rescue capital funds, my understanding is that over the past couple years, effectively to remain competitive, sponsors would have to get DSCR loans that were on projected financials, where I believe Fannie Freddie or Linda we're lending on current financials. You couldn't make a competitive offer because you'd have to go and raise all all this additional equity Banks or funds or whatever started lending on projected financials. So what's happening was sponsors and I'd be curious to take on this the sponsors are basically going to the loan, going to the lender and saying, all right, I'm going to buy a $20 million property. Fannie Freddie is doing it based on current P&L and it's valuing my property at I don't know. They'll give me $10 million basically. But this other bank is going to give me a DSCR loan based on projected rents and they're they're going to give me $15 million. So I've got to buy the property for 20.

So if I go with this other loan, I'll have to raise five versus having to raise 10 with Fannie Freddie. So they go with the DSCR loans. But but because it's based on projected rents, and then all of a sudden, because you got this huge interest rate spike Even when you hit. The projected rents you. Your DSCR is still out of whack. You can't you can't cash flow, so it's leading to a lot of sponsors being put in bad positions where they might have to give the the property back. Is that what you're seeing too?

0:24:37 - Taylor Loht

so we are seeing sponsors having to give properties back to the bank or Having to sell before our foreclosure Comes into play, because operators in that case Ultimately have to make a call if they'd rather have a foreclosure on their hands or if they'd rather have a loss of investor equity without a foreclosure on their hands, and Investors lose out either way in those scenarios, and some operators are choosing to sell Before they go into foreclosure.

I would say that there has been Over Even before COVID, there's a lot of buying based on projected financials because there was so much money out there looking to be invested in the multifamily space and you know we've had a great economy for a while now that, depending on your perspective, that may be turning around, but it's been a bull run in real estate since, basically, the great recession and folks have generally been able to make the rent payments and you know everything along those lines.

So, yeah, we have been seeing operators get over leveraged. I would say that most of the distress that I'm Seeing now at least you know behind closed doors, having conversations with people they're attributing to their Raid caps running out and their debt service costs going way up. But Incorporated into that could certainly be an aspect of Over-exuberant, if you will, financial projections and having bought at a loss in the first place. I'm sure that's happening. But again, at least for now, the interest rates have been the main Scapegoat that the industry is using. But folks may just be willing unwilling to Admit that they were over leveraged in the first place.

0:26:39 - Brandon Hall

Yeah, yeah, it's very interesting to watch it all play out. So this is my last question to this, and then I'll stop talking for a bit and let Let my co-host join in. My last question to this was the rescue capital. So you mentioned there's rescue capital funds, or rescue funds that are raising capital. What do you mean and what do they see it?

0:26:59 - Taylor Loht

Yeah, so Unfortunate in the sense that I haven't had any, you know, one-on-one dealings with these folks in any of our deals and they haven't had to step in any of our deals. But there were some conversations, especially earlier this year I don't know if you guys attend the best-ever conference, but I attend every year and there was a presentation on putting together potentially you know, putting together rescue capital funds to step into deals and take a pref equity position before the deals go to foreclosure. Now my exposure to that so far has only been in that academic sense that people were talking about it. I think in practice it's Hard to get to those deals before they either go to market through a broker or Go to foreclosure. So I've been seeing those distress deals that Maybe could have benefited from a rescue capital bailout. You'd have to get into the weeds and what it would take to really make a rescue capital type deal Work. I think they're just kind of missing out because the time frame that you need to get in there and have a capital place it's got to be so short and you need to know who the distressed operators are In the first place before they lose the deal. That's a very tight time frame.

So so far I've been hearing in. In an academic sense I would bet that it's happening and people are doing deals this way, but I haven't been seeing them happen personally. But you know as if the distress continues to get worse and if investors have an appetite for buying out Distress deals, then we may see that happen a bit more. But when you have a Distress deal and you need capital to come in and bail out that distress deal, what you need Investors with a pretty healthy risk appetite, because you've kind of got two options in that regard you could Buy out the distressed operator or provide them some capital with preferable terms, whatever you need to do to structure the deal, to get it to make sense, or those same investors could, at least in theory, reduce their risk, if you will, and in a qualitative sense, by just waiting for deals like that to go to court, just waiting for deals like that to go to foreclosure and Buy them at a lower basis in the first place, and now you don't have this pesky operator who was underperforming Still in the deal.

So I think when you think about it in that sense of Okay, we have the opportunity to get into a deal where it's distressed, the operator still going to be involved. We're bailing them out. We're getting interesting terms, terms, or, or we could buy deals that were distressed. We're taken back by the bank and now we can do a full reset and look to get them At a basis that makes more sense to us. With new debt and all these other factors, I suspect that people that want to invest in deals like that would rather go for the foreclosed or total buyout situation rather than trying to bail out an Operator and having to deal with their investors and existing contracts and the debt and everything that's involved with it. It's kind of might make more sense to hit the reset button, if you will you. That's the way I would go personally. So a bit cleaner.

0:30:34 - Vikas Gupta

Yeah, got it. So a bit cleaner, a bit less hair on the deal. If you get it out of foreclosure, then if you're trying to get in and bail out an existing situation, hey, every time I have a computer problem, turn it off, turn it back on again.

0:30:47 - Taylor Loht

Maybe it's the same with multi-family deals.

0:30:50 - Vikas Gupta

I want to switch gears a little bit away, a little bit from financing and deal structure to actual operations, but picking up on a few threads that we've touched on. So I think in this most recent thread we were on, we talked about underwriting existing performance against future performance, future performance. Obviously he assumes that improvement in future performance. At the top of the episode, taylor, you talked about discovering the opportunity in multi-family to improve NOI. You also talked about how you could add value in real estate. So, from an operations perspective, can you tell us a little bit more about what are you doing? How have you learned to increase value in real estate and what asset classes are you investing in in order to do that?

0:31:41 - Taylor Loht

Sure. So when I got started investing in multi-family, I really heavily focused on C-class, older properties because, at least at the time this is several years before COVID happened prices hadn't appreciated to the point where, in my opinion, is a little overly risky to buy those older, cheaper properties, because they're not so much cheaper properties anymore, but they are still old. So at that time we were investing in older properties built in 60s, 70s. I think we may have even done one that had some 50s built, but you'll learn some tough lessons in that regard, because when you buy older properties like that, you wind up having a lot of skeletons in the closet, if you will, things that you have to repair. That can be enormous repair bills that do not add to your NOI. So, specifically, we had some big issues in older properties with plumbing leaks and sewage failures. Sometimes that gets to the point where if you have a building on a slab, you have to basically bust up the slab and dig it up and replace the pipe and reform the slab, and if that's in an occupied unit, well then you also have to find your tenants somewhere else to live. And this actually happened to us and the deal ultimately worked out and we had bought at those pre-COVID prices, we were still able to add value through other methods. Well, repairs like that, or say, roof replacements, can be incredibly expensive, although those are much easier to see. You can kind of look at a roof and see its condition. Now, when you get into the weeds you can't see all the issues with the roof, but it's a lot harder to see plumbing issues even if you scope the lines. In my experience. So I've shifted from C-class investing 60, 70s build properties to B2B plus class investing these built in the 80s or, more preferably, built in the 90s that generally just have less stuff wrong with them. They're in less disrepair, they have less deferred maintenance. And fewer of our dollars that are meant for things like replacing countertops with granite or stainless steel appliances or LVP floors or improving the exterior. A few of those dollars are going to go to repairs that don't add to the value of the property, like fixing plumbing leaks or other things that aren't either raising your income, raising your rents or cutting your expenses. So focusing on things that are relevant to the tenant experience, improving the interiors of the properties, making kitchens nicer a lot of very important things like that.

I think when folks get into the space. Particularly pre-COVID, there was a lot of focus on trying to add value by cutting expenses. There were a lot of people talking about rubs, ratio, utility billing service or system and people abbreviate that different ways where you can basically bill utilities back to tenants, and this was kind of touted as oh, this is a great way to add a lot of value to your properties. But the devil is always in the details, because if your competitors aren't billing utilities back to their tenants, then you're ultimately not really going to get away with that, because then your rents are correspondingly going to go down. Tenants are going to figure that out. It's not to say rubs is a bad thing or not achievable, but things like that, where we could look at ways to cut our expenses More often times, I think, over touted as a way to create value, when ultimately the best way to create value in my experience in the multifamily space and in self-storage, or to invest in as well, is through raising the income improve the property, raise the rents, all the things that you need to do because your top-line revenue can go much higher than your expenses can go down, because ultimately you're going to get a lot of value.

You know you repair bills. Ac units only get so cheap when you need to replace them and the guy that comes to replace them only has one cost. Right, you need to have those guys there. Yeah, you can skimp out and have them repair something to get it limping rather than replacing it, but ultimately I think focusing on increasing income has been a big shift.

Not only that I've made, but I think I've seen others make in the space as well. At least I think the more you know, the wiser folks tend to do that. Now there are ways that you can cut expenses that can make a lot of sense, but oftentimes they are like a one-time thing that you might get away with. Say, if you buy a property and the current owner is spending way too much on lawn care and you know a guy, or you happen to own properties in the area, or you're getting an awful lot better rates on lawn care, great, buy it and bring your guy in. But you don't if you say, reduce that expense by $30,000 a year, you don't get another $30,000 a year reduction the next year. You get that once, and I think that's just important to bear in mind.

0:37:10 - Vikas Gupta

So focus on the income side, take the low-hanging fruit on the expense side, but the real value creation is gonna come from the income side. So do you have a standard playbook when you buy a property in terms of these are the investments we make to increase income, or is it property specific and you're sort of looking at certain items? How do you think about that?

0:37:29 - Taylor Loht

These things always depend, but I would say, generally speaking, common themes are buying properties with what you typically call classic units, units that haven't been updated in maybe a couple of decades and are just generally out of date. So getting in there and refacing cabinets, replacing old whatever Firmica countertops with granite, replacing old appliances with newer stainless steel options, replacing old carpets with LVP I like LVP. I'm about to put LVP in my own house later this year that's how big of a fan that I am in it and we put it in our old house as well prior to moving. So doing things like that that improve the aesthetic and functional quality of the inside of the property and also you're just replacing carpets after basically every tenant or every other tenant gets really expensive and LVP is significantly more durable, so puts you in a better position there.

Exterior improvements generally always depend on the property as well. Some properties are better taken care of on the exterior, some are not. Oftentimes look to do a facelift by repainting the outside of the building and replacing the signage that's out front at the main drag Things along those lines but generally want to look for properties that aren't as nice as their competitors in the market and fix them up and get them to that position like the competitors in the area.

0:38:59 - Vikas Gupta

All right. Well, we're almost at time, taylor, so if you're ready, we'll go into our three standard closing questions. Let's go All right. Question number one what is your favorite book, and it doesn't have to be real estate related.

0:39:13 - Taylor Loht

This is a tough question. I like books and as I've gotten older I've driven myself back into reading. If you will, took a break there, in my 20s at least, of reading nonfiction. But one here that was very important to me. I don't know if you can see it in the frame, but crucial conversations about it's about having difficult conversations with people, whether it's significant others, friends, relatives or people in business. Difficult conversations that, if handled improperly, could change the nature of your relationship with the person that you're having a conversation with. I read that book when, at the time, I was probably 25 or so, and I would say not bad with other people, but we could all improve, and at that time I certainly needed some improvement, and the tools in that book have helped me navigate conversations with people in business or my now wife, so that's been very helpful to me.

0:40:18 - Vikas Gupta

I like it. I have not read that one, but I have read a book called Difficult Conversations that sounds very similar and it was incredibly helpful.

0:40:25 - Taylor Loht

Probably similar tools. I also love Lord of the Rings, but that's not what we're talking about here.

0:40:31 - Vikas Gupta

Our second question is in real estate investing, what is more important to you, cash flow or appreciation?

0:40:39 - Taylor Loht

It's a tough question, but for me, cash flow has to be number one. Now, that doesn't necessarily mean we need to be knocking it out of the park from a cash flow standpoint. Day one right, we can buy with existing cash flow, improve the property and look to grow cash flows generated by the properties. But ultimately I got into real estate investing because I wanted cash flow for my investments and the cash flow in your life that you generate. It's kind of like a snowball right, and the goal is to grow that over time. You grow cash flow by growing cash flow, but also through appreciation of your properties, cashing them out or by selling or by refying and acquiring other properties. So I don't want to have one without the other, but if you make me pick one, I'll choose cash flow Great.

0:41:32 - Vikas Gupta

Well, I appreciate you picking one, and our final question is any other pieces of advice or insight that you would like to leave our audience with?

0:41:39 - Taylor Loht

You can get a lot done by taking little bitty baby steps every single day, and those baby steps can be 10 minutes a day. I have, for example, a few blog posts that I've written on my website that are number one ranks on very important keywords in Google searches. Now I wanted to get there. I wanted to have that result, but I didn't know how to get there. And the way I got there is I wear a Fitbit, I set a timer for 10 minutes and I would write for 10 minutes and then, when it's over, I can walk away, maybe wait another 10 minutes, go back, or maybe I'll go back tomorrow and continue working on it. But without putting those little bitty 10 minute chunks in, I wouldn't have achieved that particular goal that was so important to me and that just one mechanic of setting a 10 minute timer and working on it for 10 minutes.

It does so many things. It gets you those baby steps, gets you working on it, but it also gets you started, oftentimes working on a big goal that we have. We don't do it because we just can't quite get ourselves started that one day and start working on it, but once we get started, we get so much done. So those little bitty baby steps, done consistently, can really make a big difference in your life and in your investments. And if you can find a way, a method that works for you, that gets you to take those baby steps my method might not work for you, that's okay. Find one that works for you that can get you working on your goal every single day You'll be surprised what you can get done.

0:43:14 - Vikas Gupta

Great. Well, thank you so much, Taylor. This has been a fantastic episode. Before we let you go, where can our audience find you?

0:43:22 - Taylor Loht

You can check on my podcast, the Passive Wealth Strategy Show. Wherever find podcasts or listen to or I also, if I can give a little plug, I have a free seven day video course on red flags in passive real estate investing, which you can get by going to passiverealestatecoursecom. Thanks, Taylor, Thank you.

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