7 questions with real estate investor and podcast host Robert Leonard
Robert Leonard got an early start as a real estate investor. At age 21, he bought a house in Leominster, Massachusetts, using money he saved from working full time through college and a seller credit that reduced the amount of cash he needed to close. Leonard decided to rent out a spare room, and the rent payments nearly covered the mortgage. He’s been investing in rental properties ever since.
It was an unexpected path for Leonard, who says he grew up thinking “only millionaires and billionaires could invest in real estate.”
Leonard, now 27, lives in Manchester, New Hampshire, and owns 10 rental units in his home state and Texas. He also hosts the Real Estate 101 and Millennial Investing podcasts and is the author of “The Everything Guide to House Hacking.”
Leonard spoke with Story about hands-on house hacking, investing out of state, building a trusted team and lessons he’s learned from interviewing other investors on his podcasts.
Story: You wrote a book on house hacking. What is that?
RL: House hacking is where you take extra space you have in the property where you live and rent it out to earn some income and reduce your living costs. It can be a room in a single-family home or a small multifamily building where you live in one unit and rent the others. It’s how I started investing. The biggest advantage is that investors who are eligible for Federal Housing Administration loans can get started with very little money down.
Story: When you started investing outside your local market, how did you decide where to buy properties?
RL: The market where I live, just north of Boston, is very expensive, so I realized I could go long-distance, where the properties are cheaper. I now own eight units in Wichita Falls, Texas.
My approach was inspired by a gentleman I had on the podcast, Neal Bawa, a data scientist and real estate investor. I put together a set of demographic data points that would indicate whether a city is a good market to invest in, like population, income and property value growth, as well as trends in crime.
I hired a software programmer to scrape online data for 7,000 cities and put it into a spreadsheet. I was a financial analyst before I started investing in real estate, so I know my way around a spreadsheet. I ranked the cities based on my metrics, took the top 25, and checked whether they had the type of inventory I was interested in. At first, that was small multifamily properties, but I’m now buying single-family homes. Then I looked at whether local properties were in my budget.
That left me with about 10 cities in Texas, Florida, North Carolina, Idaho and Arkansas. I made offers across all 10 and said whichever I got a deal in first, I’d continue investing there. I got a deal in Wichita Falls, Texas, and built a team there that I trust and who understands the market.
Story: What tips do you have for building a team like that?
RL: Start by finding a real estate agent because they can connect you with the people you need. I compiled a list of agents to call based on reviews and sales volume, and asked some technical questions to get a sense of their understanding of the market and what I’m trying to do. For instance, I ask about vacancy rates in the area or what cash-on-cash returns they’ve seen investors in the area get.
But even more than the technical questions, I’m paying attention to how the conversation feels. Is this someone who seems ethical, that I’d want to scale and work with over time? Do they seem like someone who’s willing to go above and beyond for clients? From there, you can use the same process to find property managers and contractors.
Story: You’ve talked to a lot of successful investors on your podcasts. What have you learned from those conversations?
RL: I’ve learned real estate is a relationship game. You can’t do anything without relationships — whether it’s finding properties or financing options, raising money or connecting with an agent or contractor, you need good partners to work with.
A second thing I’ve learned is that if you have the desire to invest in real estate, you can do it. You don’t need millions and millions of dollars to start. It’s helpful, but it’s not required. And there are so many different approaches that work. One guest will say you should be buying 100-unit buildings for your first deal rather than waste time with small stuff. Another says starting small and building up is the best approach. And both are really successful. There are a lot of ways to succeed in real estate.
Story: What’s one of your must-haves when deciding to invest in a property?
RL: This isn’t a feature of the property, but you need to have enough reserves going into it to cover anything that could go wrong. If you have $101,000 set aside, you don’t want a property that requires $100,000 to close.
Story: Where do you go for real estate news and advice?
RL: I’m on Twitter and use the hashtag “#retwit,” for real estate Twitter. Some of the investors I follow are Nick Huber, an investor in self-storage; Chris Powers, founder of real estate firm Fort Capital; and Keith Wasserman, founder of multifamily investment firm Gelt.
Story: Who’s your sounding board? Is there anyone in your life you make big decisions with?
RL: If I make a decision, I think it’s important to be able to take the credit — or the blame. If you’re getting advice or feedback and make a decision based on what people say, if it does work out, a lot of people are more than happy to take the credit, but if doesn’t work out, they blame others. I talk to people and get advice, but I like to make decisions independently.
By Lauren Zumbach from Story by J.P. Morgan