The best investors to learn from right now are those who’ve gone through at least one downturn because they’re the ones who are prepared for the next one. When the country slid into the Great Recession, Michael Jake owned 78 houses, and he was sure he was recession-proof in a military town.
Almost overnight in 2008, Michael’s houses dropped 20% in equity. And that’s when he started to get worried. He tried to keep tenant buyers in the house and hold on tight. He bought credit repair kits for his tenants and his wife taught finance classes all in an effort to get the tenant buyers over the finish line.
Gradually, Michael and his wife started to change their management style, moving from rent-to-own to a more traditional property management. They started charging less money, but went to a much more rigorous application process. Tenants, Michael says, are like employees. They’re just another point of leverage in your business. If you want to bring in rockstar tenants, then you need to learn how to attract them to your properties. Today, Michael’s tenants stay on average for 4 ½ years, and they have less wear and tear on their homes.
Knowing now what he does about real estate, there are a lot of things Michael would’ve done differently to make it through the crash. He was so focused on the drop in house prices that he forgot to factor in how depreciation and a buy-and-hold strategy far outweigh a temporary price drop. Pay attention to how his real estate philosophy has changed as he’s matured. And don’t forget to tune in for part 2 of our conversation.
Watch and Learn:
Listen and learn:
- Credit repair kits, classes, and mentoring are just a few of the ways that Michael tried to help his tenants qualify and purchase the homes they were living in.
- Michael’s partnership with his wife means all of his ideas are grounded in reality.
- Why Michael completely changed the kind of tenant buyer he put in his houses, and how that’s helped slow down his turnover rate.
- Dealing in a market saturated with VA loans and transient military families, Michael has extensive experience with sellers who have no equity, but who must sell.
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