How Collegiate Football Success Affects Real Estate Appreciation [case study]

“Blue 42…Hot Route – RED 7 RED 7…settttt HUT!”

In 2008 I fell in love with who is now my patient & caring wife and awesome mother to our children. She grew up (in-laws still reside) not far from Clemson, SC, so naturally she is a Tigers fan. Myself, I was blessed to be born into the Auburn tribe. Being born and raised in Alabama, you are sworn to an allegiance before your first breath of oxygen. Luckily, a Go Tigers! keeps me out of the dog house and still in the Will. Happy Wife, Happy Parents…how does that saying go?

Back to my point. Since 2008 we have attended and tailgated several football games in Clemson. Great times, joyful memories and truly exciting time to be a Tiger as they have been on a hot streak the last several years. It has been amazing to see how that city has and continues to BOOM since our first football game there together just 9 years ago. New developments, shopping, housing, restaurants, etc. With Real Estate on my mind, I can’t help but wonder if some of that booming is due to the national recognition the school has received via its football program’s success.

Side note: I met Dabo Sweeney in the Tampa airport a while back. One of the coolest individuals I’ve ever met. #ALLIN

Back again to the point of this post. With Clemson’s football success and booming economic development, does this mean real estate values also BOOM? And if so, where is the next sleeping giant in FBS Division I NCAA football? I WANT TO BUY THERE!! I thinks it’s Nebraska, but before I go off investing in Lincoln, let’s do some analyzing to see if my theory holds water.

THE THEORY:  The theory I’m trying to prove is when a school places more frequently in the Top 10 year end BCS/CFP rankings, the more appreciation yields for real estate holdings in that college city.

Another Side Note: Our current investment strategy is primarily focused on cash flow, appreciation is icing on the cake. So while I’m using appreciation for this exercise, it is not a leading factor on whether or not we will invest in a market. 

THE DATA: Before I go and analyze the 129 FBS Division 1 Football Teams, I want to focus on just the Top 10, as they fall at year end rankings. For the sake of the graphic below, which looks like a grandmother’s hand knit quilt, I used the end of regular season BCS Rankings from 2000-2013 and the CFP Rankings from 2014-2017 found on Wikipedia.

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The city and state appreciation values noted below were sourced from NeighborhoodScout.com and this list is sorted by Highest College City Real Estate Appreciation since 2000.

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MY CONCLUSION: Fifty one (51) different teams have placed in the Top 10 BCS/CFP rankings from 2000-2017.  Twenty three of the 51 college city’s listed above, experienced greater real estate appreciation vs the state in which they are located.  Twenty eight did not. So, my conclusion is…the data is inconclusive. Take for example Ohio State. Ohio State has the most Top 10 finishes since 2000 than any other school, but almost the worst appreciation during the same time period. Ruling out an anomaly, look at Hawaii. Only 1 Top 10 finish from 2000-2017 and extremely high appreciation, but let’s face it, where would you rather be?

If anything this exercise proves that collegiate football success over time does not solely yield a higher appreciation for real estate in that college city over the same period of time – an economic boom, certainly.  It’s obvious to me other factors are involved to produce the higher appreciations. Take for example, Washington State. The Cougars are located in Pullman, WA (approx. 30k residents) and with only one Top 10 finish during the review period, experienced 85% real estate appreciation. Compare Pullman, WA, to Auburn, AL (#GoTigers!). Auburn, AL, approx. 54k residents, experienced only 39% appreciation while the school made the Top 10 six times. This play is under further review…

Agree/Disagree?  Let me know why by leaving your comments below.

 And how did your school do? Are they winning at the Game of Appreciation?#GoTIGERS!!

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Time to Reflect, Time to Set 2018 Goals and Begin Pursuit

I love this time of year. Time to reflect and time to focus on setting goals for the New Year. I took the above photo at my parents’ over Christmas. Don’t recall ever experiencing a sunset quite like this growing up there but then again I probably wasn’t looking as a teenager. Wish the camera did it justice; “That’s beautiful Clark.”

2018 Goals

The last couple of years I have accomplished my REI goals early. Maybe the process I follow is just that good or maybe I’m not shooting high enough. This year I’ve decided to test that theory and shoot for some lofty goals. They are:

  1. Increase Annual Passive Rental Income by $2,000/month
  2. Increase Social Media Following: 10k IG Followers, 1k FB Likes, 1k Blog Subscribershelp me reach my goal! Follow, Like, Subscribe!
  3. Graduate Cardone University
  4. Knock The Dust Off The Gray Matter

A sneak peek into the process I follow, with my goals set, I now create a 2018 Playbook of drills and tactics to help accomplish them. This process takes a while as I really dive in but typically yields 3-4 pages of waterfall steps, with each step gaining granularity in detail toward a daily or weekly activity to help accomplish my goals. This year I started this process in November and used most of December to fine tune the super simple spreadsheet I create for tracking (keeping myself accountable) those daily activities. Call it batting practice or daily workouts but I’ve followed this process the last couple years and I’m extremely happy with the results. I may write a more detailed post on the process I follow soon (still refining), but for now, email me [ jay@helmsREI.com] to learn more.


Last item on the 2018 list is expand the knowledge base. Knock the dust off the gray matter. Following the lead of the most successful CEOs who read 60+ books/year, I’ve identified 8 Must Reads for 2018. I’ll consume an additional 50+ hours of real estate related podcasts over the coming year, but these books keep popping up on my radar.

8 Must Read in 2018

Ok, there’s 9 in this screenshot but Grant Cardone’s Millionaire Booklet isn’t new and is one I’ll listen to 3-4 times throughout the year. Such a simple, quick & easy read. And if the below looks like a screenshot from iBooks, it is! I hardly have time to sit down and turn a page but I make the most of the windshield time the day job brings me.

2017 Review

2017 Goals (accomplished all by September 2017):


Most Popular Blog:


Most Engaged Instagram (photo credit: Mrs. HelmsREI):


And, I wrote an impromptu Christmas poem during the first trek of our Christmas vacation:

 

Happy New Year!

Does Your Realtor Analyze Deals Before Bringing Them to You?

I hear this question a lot. The quick answer is No.

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Since the World Series (Congrats to the World Champion Houston Astros!) just wrapped up, I’ll use some baseball analogies to help answer this question. Long has been the day since this 5’8, 120 lbs high school junior kept the pine warm for those starters – wow, I’ve gained 100 lbs since then…all muscle! In the real estate investing game, I’m the player and the Realtors/Brokers are my coaches. They advise me on why they like the deal, details on the neighborhood and potentially an exit strategy.  In some sense, they are also my general manager, helping to ensure a transaction or trade goes as smooth as possible. Let me explain.

Here’s why my coaches don’t analyze deals before bringing them to me:

#1 – I want the BP!  The analytical part helps me stay current on our sought after markets and helps keep my analytical skills sharp. This is me taking swings in the cage. My daily BP! That stands for Batting Practice…or Bigger Pockets! My dad’s a huge baseball fan. Huge is probably putting it lightly. Growing up, one of his many tricks to get us invested in the game involved hanging an old tire off the back fence. I remember him wanting my brother and I to throw 100 balls a day into that strike zone. I was too interested in the couch and TV (and a little fishing) at the time but I wish I would have. Learning from that, instead of throwing balls, I’m analyzing deals, daily!

#2 – I don’t want to be traded to the Detroit Tigers!  By that I mean, I have to love the deal! And for the longest I can remember the Detroit Tigers have been the worst team in  the MLB. Analyzing is only a piece of the puzzle. Love is an emotion and if you’ve been following us I suggest removing the emotion out of the deal (something I continue to work on). However in this case, loving the deal (the location, cash flow, portfolio balance, & value add) is highly motivating. Just don’t let the love emotion compromise your numbers – be willing to walk away. For example, in the last 2 months I’ve submitted four LOI’s. Two of which are still pending but the other 2 we could not come to terms.  I loved these deals but wasn’t willing to compromise on our numbers as doing so wouldn’t yield our anticipated return.

#3 – Extra Innings.  In my dad’s words, it’s “Free Baseball” but, working a full-time job, family w/2 kids, 48 units under our umbrella and currently undergoing a personal home live-in-remodel, I don’t have a lot of spare time to filter through every deal my coaches send my way. Sad to say there are probably some gems that I quickly push to the trash bin because I knew I wouldn’t have time to review and now I’ve wasted my coaches’ time to find and send it to me. The current process I like to follow is finding the opportunity and reaching out to the realtor/broker in that market and so far that has worked very well.

#4 – Pitching Change.  We started out wanting to buy single family homes that cash flowed really well, which are typically C Class properties/neighborhoods and below and we only looked in Pensacola, because it’s local for us.  While I still look at those properties our evolution of investing has progressed like this: single family in one city -> small multifamily in another county -> apartment building in another state. All within a relative easy drive, we now own assets across 3 counties in 2 states. Staying with the value add properties the size of our deals have increasingly grown in size.

#5 – I Simply Don’t Expect Them To It’s not Brent Strom’s responsibility to throw any pitches for the Astros, that’s the players job. I understand how realtors/broker get paid – when a deal closes, not when they send me a listing. I’m very conservative on what we buy and we haven’t sold anything (except our personal home) since we REALLY started investing in 2014. In my opinion, my coaches’ or realtor’s roll is to help educate & advise me, negotiate the deal and ensure a smooth-ish transaction. If they perform these things, then they’ve represented me very well.

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Results from Certified Letter to Unknown Occupant [Letter]

 

Shortly after the letter was delivered via Certified USPS mail (signature on delivery), I received a phone call. Although short-lived, I was excited to learn the current occupant was willing to sign a lease.
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Back in November I wrote a blog titled My First Tax Deed Purchase and described the situation of an unknown person living in a property I just acquired through the Escambia County Tax Deed Auction in Pensacola, FL. After consulting with my attorney, I rectified the situation by drafting the letter below. This is a copy of the actual letter I sent to the person occupying the property.

Shortly after the letter was delivered via Certified USPS mail (signature on delivery), I received a phone call. Although short-lived, I was excited to learn the current occupant was willing to sign a lease. Two months after signing the lease the eviction process began. Related Articles below go into more detail on how the evicted tenant destroyed this Pensacola property and our improvement efforts afterwards. Spoiler Alert: we rid the kid filled neighborhood of one of the most worthless human beings I’ve ever met. A drug dealer/user who allegedly was stealing his mother’s disability checks.  

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Real Estate Investing Terms: Cash On Cash Return

When performing the Cash-on-Cash Return napkin test, I won’t further analyze anything that is below 12%. The target is 15% and higher but if we can still hit our $200/month cash-flow minimum, we’ll consider it with a lower CoCR.

real estate investing cash on cash return

 

Cash-on-Cash Return or CoCR

CoCR = annual cash flow before taxes divided by total cash invested

The best way I understand CoCR is like this. … For the scenarios below, let’s pretend I have $50,000 in my Pensacola bank account.  We’re going to make a lot of assumptions here, but remember this is just a napkin test.

Scenario 1: I pay $50,000 cash for a 2 bedroom/2 bath single family house that yields $700/month in rent and Cash Flows $300/month. Over the course of the year (assuming 100% occupancy) my Cash Flow is $3,600 (i.e. $300/month x 12 months). So I take that $3,600, divide it by the $50,000 I spent on purchasing the home and that yields a 7.2% Cash-on-Cash Return for this Pensacola house. Compared to the return I receive on my savings accounts, this is an improvement, but not what we’re looking for on a Pensacola real estate investment.

Scenario 2: I pay the same $50,000 as a down payment on a $250,000 4-plex multifamily property (most Pensacola banks require 20% down on a rental property). This 4-plex is made up of 2 bedroom / 2 bath (just like our single family residence in Scenario 1). Each unit of our 4-plex brings in $150/month in cash-flow. Less cash flow than Scenario 1 to accommodate for the mortgage payment each month. Again, assuming 100% accuracy for the year, we now have $150/month x 12 months x 4 units = $7,200. Since we used the same $50,000 as a down payment, we divide $7,200 by that same $50,000, giving us a 14.4% Cash-on-Cash Return.

Actually, if this were a real world scenario, Scenario 2 is within range of passing the napkin test and would continue on through our Tripod of Investing Criteria It doesn’t hit the $200/month cash flow # just yet, but more due diligence will reveal if we can increase rents or add another source of revenue from the property to bring those #s up.

To compare, let’s say I just keep that same $50,000 in my Pensacola savings account. The current APR is <1% but sticking with easy math, let’s pretend it is 1%. My return on that “cash” is 1%, or, very horrible…only $500. Considering inflation rates, my return would actually be negative, but that topic is for another post.

Cash-on-Cash Return (used in another way):

I recently changed insurance providers because of this one property and scenario. My insurance was coming up for renewal and thought, what the heck, let’s shop. Sure enough it was worth it. Once my, now new, insurance provider reviewed my policy and last home inspection, he came back with amazing news. If I installed Hurricane Clips on my roof, my premium would go down approx. $394/year. Cost to install the Hurricane Clips = $965, yielding a Cash-on-Cash Return of 40.8%. I’ll take it! More details of this scenario coming out in a future post. Stay tuned.

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Winning: The Real Life Game of Monopoly

Primarily because no one wanted these low-end properties and all I saw was an inexpensive way for a chance to build my portfolio. 
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real estate investing pensacola fl

 

Growing up, one of the board games I played as a child was Monopoly. As we navigate deeper into our Pensacola real estate investing, I’m reminded of those days around the dining room table and think how similar the Monopoly game is to real life investing.

Due to its luxurious nature, I always wanted Boardwalk & Park Place. I knew having a hotel on either of these properties would surely increase my bank roll from any visitor. Here in Pensacola, I correlate that to the high-rise condo on the beach or historic home in East Hill.

real estate investing pensacola fl
Only a lucky roll would push you through my corner rent free!

 

I also couldn’t stay away from Mediterranean & Baltic Avenues. Primarily because no one wanted these low-end properties, but also because I thought this was an inexpensive way for a chance to build my bank from frequent visitors (plenty of places in west Pensacola fit this model).

Needless to say, I hardly won the game unless others just wanted to quit due to boredom 🙂  In the game of real life investing, I hardly see where this is the case. My strategy for the childhood game was a slow and steady approach that required a lot of luck. This strategy didn’t produce a lot of winning and comparing to investing today, I realize I learned several valuable lessons playing the game. Maybe its time to break it out again! As I thought about this correlation more, I turned once again to good ol’ Google magic. I stumbled upon a site that really geeks out over the strategy of winning @ the monopoly game. Using our current strategy for buy & hold as a comparative to the game of monopoly, I can see where we are winning @ the game of real estate investing. It is not about the luxurious condo on Pensacola Beach, nor is it about the slums in West Pensacola (done correctly, both of these have their upsides). But the best ROI, winning formula lies in the middle (reference heat map below) of three houses on St. James, Tennessee, and New York and three houses on Kentucky, Indiana, & Illinois. For most of our current positions we’re in that sweet spot. Our others, we’re not too far from it. We buy & hold strictly sticking to several criteria using conservative #s. Using these criteria and with planned exit strategy’s already in place, we’re winning.

Thanks to the creators of http://www.amnesta.net/monopoly/ for putting their site together and bringing back some fond childhood memories. The below screenshot is from their site, showing a heat map of the best investment and ROI for the monopoly game.

real estate investing pensacola fl

 

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5 Reasons to Invest Your Hard Earned Money into Real Estate

There are many ways to invest your money and make a profit, and one of the most popular investments is real estate. While it’s not for everyone, getting involved in the real estate market in Pensacola and Cantonment has the potential to provide big profits regardless of the investment strategy you choose.
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real estate investing pensacola fl

Here are five good reasons why you should be investing your hard earned money into real estate.

1). Positive Cash Flow via Passive Income

When you invest in real estate and have some rental properties, as long as you purchased the property correctly, you have positive cash coming in from those properties consistently. Naturally, you want to get as much cash coming in as possible, but it’s very important to be realistic about the value of the properties and how much you can rent them for. You’ll also need to budget for expenses like taxes, insurance, vacancy, property management and repairs. Still, you can obtain a positive cash flow with little effort, and having that money coming in can provide some peace of mind.

2). Tax Advantages

The deductions for property ownership can really add up, and that can bring you some big tax advantages when you invest in real estate. Before you make those investments, though, it’s a good idea to work with your financial advisor, CPA, or tax attorney. That way you’ll know exactly how real estate investing could benefit you, allowing you to weigh the pros and cons and make an informed decision about whether the tax advantages are enough in your particular situation.

3). Potential for Appreciation – extra icing on the cake!

Property, in general, is going to go up in value over time. If you take good care of the property and make upgrades to it, you can help increase that value faster. That appreciation will mean that the property is worth more than the money you have put into it, giving you an investment that has real value and that will continue to gain value the longer you own it. Investing in good areas and keeping the property updated can help you with appreciation.

4). Long-term Wealth

Many real estate investors are quite wealthy. They have some missteps along the way, just like anyone, but they have managed to accumulate long-term wealth that they can feel comfortable with. It takes time and effort to get to that point, but once they achieve it they have little to worry about. Their real estate investments will simply keep bringing them income, and they can invest that income to build wealth more easily over time.

5). Financial Security

Having real estate investments can help you be financially secure. Unlike a company that could close its doors tomorrow and leave you without a job, real estate investments will still be there. As long as you own the property, you can continue to collect rent. You can also buy, flip, and sell properties, and then invest the profits in ways that are best for you. There are so many options to consider when you invest in real estate that the financial security opportunities are significant.

Overall, real estate is a strong investment strategy with multiple avenues to explore, and one that can help you build wealth and feel comfortable with your financial future. For us personally, we focus on positive cash flow and strive for a return of 15% or greater. This is far better than the stock market or any IRA can consistently provide – at least in my experience. Our IRA grew a WHOPPING 1.4% in 2015 while our RE Portfolio provided 25% ROI! And if appreciation happens, which it will, it’s just extra icing on the cake.

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