Today we are joined by Dan Handford, co-founder of passiveinvesting.com and founder of the Multifamily Investor Nation. In this episode, we will discuss how Dan’s business background translates to multifamily investing, what it takes to run a business, and the current market.
Dan began in the business world as an entrepreneur. After building several businesses to the point where they generated passive income, Dan became interested in how to best reduce his taxable liability. This sparked his entering into the multifamily real estate market, using the investing strategy as a way to store capital and lower his taxable liability.
Running a Business
When you’re buying a single family home, you’re buying an asset. When investing in multifamily properties, you’re buying a business. Managing people and implementing systems and processes is very important for success at the multifamily level. Delegation and hiring great people who don’t need to be micromanaged is important to grow and achieve scalability.
Accountability and Communication
It is important to be direct and present as a manager of people. Being present includes following up, giving your opinion on issues, and ensuring the most important issues get resolved, but it does not involve micromanagement. To achieve this, you need to establish KPIs and targets, holding people accountable to results, not inputs.
When managing new property managers, for example, Dan holds a weekly phone call and follows and agenda for meetings, tracking responsibilities with a spreadsheet. Once the first stage of value-add and renovation is complete, and an understanding has been established with the property manager, these meetings can be made less frequent.
For CPAs and attorneys, accountability is a bit different. For these professionals, Dan views accountability through the lens of communication. The main problem in these fields is a lack of consistent and clear communication. Even if a CPA or attorney doesn't know the answer to a question right away, it's still reasonable to expect a response that acknowledges they see the message and understand the issue, have set a time to review the question, and have provided a time to expect a response.
Though we are at the top of the market right now, Dan notes that an impending market correction, or downturn, has been a common subject since 2015. Sitting on the sidelines and waiting for a market correction can mean sacrificing solid investment opportunities in the interim. An investor who has been sitting out since 2015 has been missing out on a great market for real estate investing.
Dan also explains that he and his company do not invest on speculation, they invest with the current market. You need to begin expecting lower returns with an impending market correction. However, if you can produce positive returns, preserve capital, and take advantage of tax side of things all during a downturn, many investors agree this is a good investment.
At the end of the segment with Dan, he speaks about about the tax side of multifamily investing and touches on the importance of qualifying as a real estate professional.
Dan's favorite tech:
Calendly eliminates the back and forth of scheduling and allows people to select an ideal time for them from times that you have already listed as available.
Check out Dan's podcasts: "Tough Decisions for Entrepreneurs" and the "Multifamily Investor Nation Podcast"
Contact Dan via: www.passiveinvesting.com
At the end of the show, stick around to hear Brandon and Thomas discuss the podcast during the debrief segment and answer a listener question about the 20% pass-through deduction.