This episode of the Business and BBQ Podcast is inspired by one of the exercises in the Mastermind course that Tim has been taking. In an effort to increase self-reflection and prioritize the things that are really “moving the needle” in your business or personal endeavors, you could follow along with Tim’s process outlined in this episode. Tim focused on his rental portfolio while walking through the Needle Movers exercise, and he found it very effective and impactful on his future wellbeing. Any real estate investor knows that a rental portfolio is a long-term investment that will continue to gain in value the longer you hold on to the properties, but since Tim’s rental properties are meant to provide his retirement down the road, he often didn’t put much thought into them before now.
What has changed in the last 180 days?
- He made his rental portfolio a focus
- He and his wife made the decision to buy some of their wholesale or flip houses to add to their rental properties
- He spent the time to break down the financing and bump up his initial investment
How has focusing on these needle movers changed Tim’s daily life?
- By creating more time for himself
- By providing more certainty in his investments
- By making him more excited about his rental portfolio and making him want to be more strategic with it
How is he adding fuel to make it better?
- By planning to buy more wholesale houses for his rental portfolio
- By looking into flipping houses faster
- By making it more of a consistent focus through weekly meetings with his wife
What could this do for Tim and his business in the next 12 months?
- Creating a path forward of stopping wholesaling in the next 12-18 months and beginning to purchase 8-10 rental properties per year
What can Tim pass on to others?
- At the first ever REI Masterminds event in Rockwall, Texas, on August 17th, Tim will be sharing his relevant financials and property checklists
- Focus on what make a positive impact and do more of it
Tim’s Real Estate Investor Mastermind https://www.reimasterminds.com/
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You are listening to the Business And BBQ podcast, hosted by Tim Herriage. Tim Herriage is an active entrepreneur who built and sold six companies by the age of 40. And enjoys sharing the ups and downs of business and entrepreneur life. As for the barbecue, that’s just something he has a passion for and likes to share as well. Here’s your host, Tim Herriage.
All right. All right. What’s cooking everybody? Tim Herriage here. Welcome back to another episode of the Business and BBQ podcast. Today we’re going to talk about one of my favorite topics of late. We’re going to discuss the things you’ve done in your business, or your personal life recently that have moved the needle.
We’re going to talk about ways to prioritize. We’re just going to talk about a little self reflection. The conversation I had with another investor last week, and a whole lot more on today’s episode of the Business and BBQ podcast. I can’t wait to dive into it. I’ll be right back.
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All right everyone, welcome back. Again, this episode is called, Needle Movers. And the reason I want to talk about needle movers, as most of you know, I’m getting ready to host the first REI Mastermind. The REI Masterminds is a concept I have actually had in my mind for probably four years now.
It really goes back to the whole reason I kind of give credit to my own success is, the people I’ve met throughout my life that were willing to give to me. And I found a lot of success in my business by going to meetings, going to groups, being involved in organizations that had conferences, and conventions.
It’s no hidden secret that I was a member of the HomeVestors, we buy ugly houses franchise for a while. And one of the things I loved the most about that organization was the annual convention and the midyear summit. And not as much from the point of view of the things that were taught.
It was more the conversations you have with people in between sessions. The group breakout sessions I found a tremendous amount of value in. And then the networking, and the after hours in the bar, because when you come together with this like, kind group of people I think it just creates an atmosphere where growth happens.
As I said in the previous podcast, I recently bought a Dean Graziosi and Tony Robbins Mastermind training because I do want to do a mastermind. And I’m going to host the first mastermind of August 17th. But I believe in education. I believe in self education. I believe in research.
I wanted to do this, and it just so happened that I listen to Entrepreneurs On Fire podcast with John Lee Dumas. He had Tony Robbins on. Then he had Dean Graziosi on. I went to the live cast where they had a quarter million people there. And I paid a couple thousand dollars for this course.
It’s really been a good course. And I’ve gained a lot of it not only for the mastermind business that I’ve started, but also for just kind of running my daily life. There’s a lot of different tools, and tricks and things that they talk about that we should doing the masterminds. And one of them was needle movers.
It’s just one of those things I first did this part of the training on a plane flight down to Jamaica. And I was pretty sure that I had really exhausted the topic. But after returning from Jamaica, when you spend a week on the beach it’s kind of hard to snap back in.
So I pulled this little tool out, and I said, “Okay, let’s talk about the biggest needle movers in my rental portfolio in the last 90 days, this year so far is kind of the way I looked at it. Because more and more when I look at my businesses, probably the one I work the least on every month is my actual rental portfolio. And it is probably the most performing asset I have.
I mean every month the houses go up in value. And that’s not an every month thing. I get it for the skeptics out there but by and large every month over a period of at least three years, you’ve got increase. There may be some down periods, not really in the type of houses I personally buy.
But the way I look at a rental property it’s an inflation indexed annuity with an underlying asset base. And it’s really the perfect retirement. The houses go up in value. They may not this month. There may be a down year or two.
Typically, when there’s a down year or two, then you have a really up year or two that basically knocks it off. So it’s defintely a long game investment. As Michael Placke said on our recent episode, there is really only types of investments right? You either or own businesses, or you own real estate.
Now simple can say you own commodities, or gold, or something. But you know, that’s an asset. I don’t look at that as an investment. Some people do but owning gold is not going to produce income for you right? It’s an asset that you have to sell for the most part, or take a loan out against in order to drive income.
The thing I love about real estate, is it goes up in value. And your rental income is set by the market that goes up with inflation. People say, “Well your property taxes go up.” Yes they do. But they also when property taxes go up, your rents go up. People say, “Well your insurance goes up.” Yes. But when your insurance goes up, your rents go up.
I love that the income is typically tied kind of the cost of living. Anyway I’m way off track here. What I did is I went back in my needle movers, and I said, “Okay Tim, this is one of those exercises we’re going to do in the mastermind together and share, and have everybody talk about. But I just wanted to kind of share this little part of it right?
I just kind of asked myself, I said, “what was the biggest needle mover in my rental business in the last 180 days?” It was kind of funny what I came up with was actually that I made it a focus right? So that was number one. I started to focus on it.
Number two, I had a talk with my wife, and we discussed taking the better houses that my wholesaling and flipping business found, and selling them from the wholesaling flipping business to the rental portfolio for a mark up. Which is kind of necessary because we don’t live off our rental property. Our rental property are our investments right?
When you’re looking at my wholesaling, fix and flip business, the money made there is money that’s used to pay our living expenses, you know our cars, and our groceries, and our kids colleges, and all that. It’s been kind of the internal conflict for the last 15 years when we got a really good house in the wholesale business, we would sell it to another landlord so that I could $30,000, $40,000, $50,000.
Well now, kind of talking to my wife it’s like we came up with a formula that we’ll just buy that house from that entity for kind of the same that we could sell it to anyone else for. Because it actually only makes sense. And so we were able to do that. And that was good. Number one I focused on.
Number two, I found a way to kind of pull the better houses out of my one business, into my long term business. And then number three, was really just me spending the time to break down the financing of the houses. I switched everything to 30 year financing. I switched everything to 75 percent loan to values.
We’re paying four to five percentage points on the front end to buy down the interest rate because we planned to have these loans at least 10 years. And just when you do the financial math, which is impossible to do over a podcast, the paying an extra three points to save half a percentage in APR after three to four years you’re at break even. After five to seven years, you’re way ahead. After 10 years, I mean, it was a home run right?
Also, the way these cashflow based mortgages work … I don’t want to turn this into a financing lecture is, the lower your interest rate, the higher your cashflow, which then typically means you can borrow more because the loans are actually kind of limited based off of the debt service coverage ratio. Kind of the money that the property makes.
So it’s actually kind of interesting. I pay the five points out of the loan that I’m actually able to borrow more on because I pay the five points. So it’s been a huge needle mover because it has reduced our effective cash in the deal by five to seven percent, which then again leaves equity in the company, which means we can buy more.
So we’ve added three or four just really good rental properties to the portfolio. Every one of them has $60,000, $70,000 in equity. They all have cashflow $500, $600, net, net. I mean it’s been fun.
I was looking, and I said, it was important to ask that though because what takes up my time all too often is my postcards, or my Google pay per click for my wholesaling business. What takes up my time are things that don’t move the needle for me personally. You know, this needle mover thing you can all sorts.
You can do one of these for every part of your life right? My marriage. What in the last 60 to 90 days has helped it? So the next question is what are three positive impacts that have been made right? When I look at what I’ve done in my rental portfolio I feel like I’m creating more time for myself because these properties are just so much better. I can’t tell you.
I mean, the cashflow is higher. The equity is higher. And I can see a point in the future where these houses are worth so much money that, that’s my retirement. It’s always been my retirement. Certainty. I feel like these houses that we’re targeting now based off of some of these new strategies I’ve worked on, will provide a more consistent cashflow.
I feel like they’re in better neighborhoods. I feel like they’ll provide more consistent appreciation. I just fell all in all, it’s just better investing. I feel like the three positive impacts, I feel like I’m going to have more time. I feel like I have more certainty. And then the last, I’m excited about my rental portfolio.
I mean, a lot of times it gets in the way. It doesn’t really make me money right now, so I don’t really care about it. But it’s like, once you actually start getting excited about it, I mean then you want to work more on it. I’ve found myself really happy with the rental portfolio. And it’s led me to creating new lines of credit. It’s led me to exploring some new financial arrangements.
Then the next question on this thing is, how can you add fuel to make it even better? It’s like, oh wow. Because then it’s fun because I’m already excited about it. So then I start thinking what can I do to do more of it?
My wife and I we’ve spent hours talking about buying more houses from ourselves. We’ve talked about decreasing the make it ready speed because we can refinance things kind of as fast as we can get them fixed up and rented out. It’s one of things, I’ve been thinking, how can I get them rehabbed faster? We’re working on that with our property manager.
I’ve been looking at ways, my primary refinance needs me to own it for 90 days. There’s a couple out there that are a little bit higher in interest rate that we’ll do it in 30 days. The little bit lower loan to value. But I’m kind of weighing that.
Then I told her another way we can add fuel was to make it more of a focus to have weekly meetings on it with me and her, and talking about our net worth. And talking about what we can do to make it bigger because I’m just telling you that the net worth part of this is the thing that gets really exciting really quickly. And it’s fun.
Then the next question is, what’s the number one thing it can do for you, and your business in the next 12 months? You know, in life and in business you get stuck in kind of the work loop right? The make more money, buy bigger house, make more money, buy nicer car, start new business, spend more money. It’s this kind of addiction to work. I think we as Americans almost like we feel like we have to work.
So the number one thing that this part of my business could do for me that I was thinking about was, I really see a path forward now of how I can stop my wholesale business altogether in the next 12 to 18 months, and only buy eight to 10 rent houses a year.
And to kind of fan that fire we’ve actually made decisions personally to limit our needs for personal income so that we can actually plow more of our cash into buying more houses, and really just taking advantage of what are low rates, and really high demand? And frankly, everybody talks about how expensive the Dallas Metroplex has gotten.
And it’s not all that expensive. I mean, you still can’t build a house for what we’re buying these houses for. So as long as that remains the case, I feel like it’s a great investment. You know replacement costs is one of those things that I look at a lot. And what are three steps you could share with the group, so they can model it?
What I would do if we were in the mastermind setting, which is going to be August 17th in Rockwall, Texas, which is my hometown, is I’m going to share the financial model that I use for my rental properties right? I’m going to share the kind of checklist, and the criteria that I’ve set up for my rentals right? Is it a three bedroom? Is it a brick? Is it a frame? That kind of thing.
We’re kind of buying the houses differently now. We’re buying based off of gross yield instead of like a discount to market. We’re buying looking at LTV and modeling the financing into the assumptions to where we really know we’re kind of looking for any house that we can get in and out of for like 25 grand out of pocket. And that’s just different than the way we used to look at it. And it’s working.
What I’ve found is that the houses it’s putting me in are just so much better than the houses I used to get put in. It’s called the needle movers exercise. It’s one of the things we’re going to spend some time on. And at the REI Mastermind in Dallas, it’s not Dallas. It’s Rockwall, which is next to Dallas, August 17th.
If you’d like more information go to reimasterminds.com. Again, that’s reimasterminds.com. The first in person meeting is on August 17th in Rockwall, Texas. Information about how to apply is on the website.
If you’re accepted, and you decide to join the mastermind program, we have an online community that we’re spurring up where everybody can kind of get to know each other, and communicate in advance.
You know I was talking to this investor earlier last week. We were on the phone, and I just said, “Hey man, what’s your biggest needle mover in the last 90 days? For your rental properties, for the whole reason this long term wealth, this high net worth that we all say we do in this business, what’s your biggest needle mover?” He was like, “Man that’s a good question. I don’t know.”
I just say, no matter what business you’re in, I don’t think it really matters if you’re a real estate investor. If you’re a landlord. I don’t think it matters if you are an entrepreneur that scalps tickets. I think any business you can be a hairdresser. You can be a landscaper. You can really be in any profession. I think the point is, you have to figure out, what is making positive impacts? And then focus in on that, hone that, and do more of it.
I think there’s a lot of busy work in our lives. And there’s a lot of things that we’re doing that may even make us money. But they don’t make us happy. And they don’t lead to our end goal. So the way I look at it is, do this little needle mover test.
Go through, figure out what’s working. Figure out what has made a big impact in the last 90 to 180 days. Quantify what those positive impacts are. Figure out what you could do more of it. What more you could do to even improve those impacts.
And then figure out the number one thing that doing this could do for you, or your business in the next 12 months. And I’m just telling you, it makes it more exciting. It makes you want to do it. It makes it become a priority. And it makes it fun.
That’s really all I have to say about needle movers. We’re going to take a quick break, and we’re going to come back, talk about my upcoming trip to San Antonio. A little bit of barbecue. And what’s coming up the rest of this summer on the Business and BBQ podcast. Stick around. I’ll be right back.
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All right. All right. Welcome back everybody. Tim Herriage here again. It’s been an interesting summer so far. It’s been a little bit difficult for me to focus. A lot of activities going on at the house with my oldest son getting ready to head to college. My youngest son with his athletic camps. It’s just the struggles of an entrepreneur.
I share this needle mover exercise with you today because it has helped me kind of focus the time that I do work on things that are really important. And also, there’s going to be these times where these little tasks or ideas come into your mind. And we’ll go into this in the mastermind a lot.
If it’s not a needle mover, it could be something that belongs on your not to do list. And if it’s on your not to do list, it may sound attractive, it may sound fun, it may sound profitable, but if it doesn’t move the needle, what I’m finding is sometimes there’s just not a whole lot of reason to bother with it.
So this week I’m off to San Antonio. I’m becoming a certified food judge. I’ll be judging in the World Food Championships in Dallas this fall. I figure if I’m going to be giving my opinion about all of these barbecue restaurants, I might as well have some sort of certification to back it up.
This week the Business and BBQ Facebook page is hosting a Let’s Talk Business And BBQ little lunch at Pecan Lodge in Dallas. If you’re not a member just check out the show notes. Join the Facebook group.
If you have any recommendations on good barbecue to eat between Dallas and San Antonio, Texas drop me an email. Stop by timherriage.com, look at our recommended books. Catch up on the most recent podcast episodes. Check out our barbecue reviews. Submit a question, or a topic that you would like to hear us talk about.
Coming up in the next couple of episodes we have the CEO of Imaginuity, a large marketing firm based here in Dallas. As well as the CEO of Renters Warehouse, the largest national property company today.
I hope you’re enjoying your summer. If there’s ever anything I can do for you just email firstname.lastname@example.org. If you have barbecue questions, tips, advice or recommendations, email email@example.com. Stop by the website. Check me out on Instagram, and Facebook. And until next time, keep cooking.
Thanks for listening to the Business And BBQ podcast. Make sure you check out our other episodes. And stop by timherriage.com to say Hi. We want to hear from you. Until next time, keep cooking.