Omni Casey was born and raised in Hawaii, where he launched his career as both a real estate investor and a broker. After relocating to Virginia 12 years ago, Omni and his wife transitioned from single-family homes to purchasing entire mom-and-pop portfolios. In this episode, he shares his thoughts on the benefits of buying mom-and-pop portfolios, changing his strategy based on the changing economic and political climate, and the importance of separating financial independence from building wealth.
Click here to purchase Omni’s new book, The Cash-Flow Breakfast Club: A Story and a Manual.
Omni says he loves focusing on buying portfolios because it’s hard. He and his wife typically have to make their purchases with cash since they usually only keep around 70% of the properties in the portfolio — those that fit their strategy — and sell the rest. If they took out a loan, it would make it more difficult for them to exit or reposition particular properties. “Because of that, it’s complex, and I try to chase whatever is complex because I don’t like a lot of competition,” Omni says.
When mom-and-pop property owners who have had their properties for 25 to 30 years are looking for an exit, they are typically tired. If they have been tired for a few years, the condition of the properties could be declining or the quality of tenants could be deteriorating, providing ample value-add opportunities for Omni when he takes over.
Omni tells everyone at his brokerage and the meetups he attends what he is looking for. He has yet to find someone that he competes with directly, which gives him an advantage when it comes to gathering leads. He tells other investors, “I’m not really looking for the one-off properties anymore, so I’m going to send those your way … If someone needs to sell their entire portfolio, come to me.”
Omni asks his property managers to keep an eye out for deals, and he credits a huge percentage of his recent acquisitions to them. Hiring a property manager is a good indicator that mom-and-pop property owners are thinking about selling — they want to be more passive. “So my property managers typically find out before everyone else that they’re thinking about selling, and if they sell to me, it benefits my property managers because they keep those properties in their portfolio to manage,” Omni explains.
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TRANSCRIPT
Slocomb Reed: Best Ever listeners, welcome to The Best Real Estate Investing Advice Ever Show. I'm Slocomb Reed, and I'm here with Omni Casey. Omni is joining us from Ashburn, Virginia. He runs a family-owned owner-operating investment company called New Leaf Redevelopers. He's also a managing broker at Weichert Realtors. New Leaf currently owns and controls 170 residential units and 10 commercial and mixed-use properties. Omni, can you start us off with a little more about your background or what you're currently focused on?
Omni Casey: Awesome. Yes, thank you Slocomb. A huge fan of the show, thanks for having me on. The summary of it is I'm from Hawaii originally, born and raised. Started my real estate investing career out there, my brokerage career as well. I relocated to Northern Virginia just outside of DC probably 12 years ago with my wife, her family's from there. And we've done just about everything you could think - fix and flip, the BRRRR, buy and hold... Over the last few years, we've really transitioned into buying portfolios, with mom-and-pops exiting, I'm trying to buy the entire portfolio from them. And then once we buy a portfolio that turns into a BRRRR strategy, a fix and flip strategy, small multifamily buy and hold strategy as well. We work with a lot of other investors and sometimes we wholesale some of them that we're not looking to keep. So that's been our focus, and we're always evolving strategies, we're in an evolving market, so we're always looking at what the next step is. That's the summary of my journey so far.
Slocomb Reed: Awesome. I'm an owner-operator as well, so I love this. I have some answers to some of the questions I want to ask. But the Best Ever listeners and I want to hear your answers. Why is it that you guys are currently focused on buying portfolios, you call them mom-and-pop portfolios? What is it about that that appeals to you right now?
Omni Casey: It's hard. I love it because it's hard. It's not what we've always done, and it got much more crowded in the go-look-for-a-duplex, go-look-for-a-fourplex space. We stumbled across our first portfolio, it came to us from one of our property managers. And then once we looked at the complexity of it, we realized that there's not a lot of competition. Typically, we have to buy our portfolios with cash, so we pull our equity from our properties and or whatever cash will we see when we do that, because we don't want to use a loan going in, because we usually don't keep all the properties. We keep probably 70% of the properties, and we only keep the properties that actually fit our strategy, usually the multifamily two-plus units or something in the mixed-use space. And if we wrap it in a loan in the beginning, it makes it a little bit more complex and difficult when you're trying to exit some of those properties or reposition them. So because of that, it's complex, and I try to chase whatever is complex because I don't like a lot of competition.
Slocomb Reed: Omni, I'm glad I introduced this question the way that I did, because the answers you gave were not answers that I was expecting. It sounds like you're referencing the higher barriers to entry, buying portfolios of smaller properties like this. The complexity of buying a portfolio leads to less competition, there are fewer people looking to buy entire portfolios of smaller properties. Also buying cash. There are fewer people interested in doing that, especially when you're looking at some repositioning value add cash-out refi type stuff, paying cash makes sense. So there are higher barriers to entry, less competition. What I was expecting you to say though, Omni, that you didn't, was that mom-and-pop owners often don't treat their portfolios like a business, and you get some mismanagement. Not necessarily owner-operators letting things go by the wayside, but not treating the property like a business, not tracking the market, making sure that their rents and amenities are current, that leading to value-add and appreciation-forcing opportunities. Is that also part of the play here, Omni?
Omni Casey: It is. I think one, economies of scale, being able to buy a bunch at one time, let's call it somewhere between 10 and 15 properties at one time is the average portfolio size that we take down. And it gives them simplicity being able to exit at the right time. So they see the value in them, simplifying their life on their exit. So they are happy to give some value on the side. So they do know what their properties are worth typically, because they've been doing this for a very long time.
Often, let's say they've had the property for 25-30 years, and they're beyond their depreciation levels, so they're not getting the same return or tax benefits that they were up until that point, so they're just not as good of cash flow that they were getting prior to that; or they're just tired, and they're just looking for an exit. And if you're two or three years into being tired as a mom-and-pop landlord, you're exactly right - the condition of the property start to fail, the quality of the tenant start to deteriorate, and often there's a lot of heavy upside in value-add opportunity when we take over.
Slocomb Reed: Alright, I'm in. Let's do it.
Omni Casey: Yes, absolutely.
Slocomb Reed: I love this idea. It resonates with some of the things that I'm doing myself. I have to ask though before I jumped to conclusions, what are you doing to get in front of these opportunities? A lot of off-market lead generation; I assume you're going direct to seller somehow.
Omni Casey: A lot of it is direct to seller. I do run a fairly large brokerage location, about 100 agents and most of them are investors as well, and they're trained. And I tell everyone what I'm looking for. I run a meetup here, there's about two to 300 people regularly that try to come to our meetup. And I tell everyone there as well. And I have yet to find one person in that meetup or my association that I directly compete with. So I tell everyone, "Tell everyone exactly what you're looking for. I'm not really looking for the one-off properties anymore, so I'm going to send those your way. But here's what I want you to do. If someone needs to sell their entire portfolio, come to me."
A huge percentage over the last couple of years of what we acquired came directly from our property managers. So once again, we tell our property managers, "We want you to keep an eye out." Your other mom-and-pop landlords that you're managing for, or maybe they're just starting to take over. Because a step for a mom-and-pop that has been managing it themselves for a while, before exiting, is actually finding a property manager. They're like, "Well, let me try to find a property manager," because they want to be more passive and they don't have comfort with the lack of control or whatever it may be.
And then that's usually the step before they decide to just exit. So my property managers typically find out before anyone else that they're thinking about selling. And if they sell to me, it benefits my property managers, because they keep those properties in their portfolio to manage. Versus if it went to the open market, chances are any other buyer that buys it is going to be hiring their own property manager or a different property manager. So I do get quite a bit from my property managers that manage my properties.
Slocomb Reed: Omni, is your entire portfolio in the Northern Virginia or DC area?
Omni Casey: It is not. I would say we're close to half. We had a big push last year. My goal was to buy 52 properties last year, we ended up somewhere in the 46 range. And most of those were in the Maryland, Virginia, DC Metro market. Prior to that, I started in Hawaii, and so I'm spread out all over. I will say the last few years I've been trying to consolidate and condense; rather than having one or two properties in a certain area, I do want to find rockstar property managers, and I've been investing more around those property managers. So it's been less about the market; I make sure I'm investing in markets I'm comfortable with. But there's markets I'm comfortable with that I have not bought more properties in because I just have not found that rockstar property manager that I'm comfortable really scaling my business in that area too.
So I've done a lot of growth around property managers, and I tell them that. I say, "I want to grow, I want to become your number one client. And here's what I want in return. I want you to tell me about every single one of your clients looking to sell. And I promise, I will keep it in your portfolio." I'll treat them right, but I'll help them exit.
Slocomb Reed: That's awesome. So you have a unique selling proposition in that you're specifically targeting portfolios of assets that are typically too small for institutional or syndication buyers. The deals are complex, because most of these portfolios, I imagine from my own experience, are scatterplots. It's not 10 buildings next to each other, it's 10 buildings all over town, which also leads to mom-and-pop burnout of course. That's awesome.
I have in my show notes that, Omni, that you are taking seriously the changing economic indicators right now, and they are changing your investing strategy somewhat. I will say we're recording this in mid-to-late May of 2022. There's a lot going on in the world, in the economy, in the United States right now. Just some buzzwords real quick - inflation, interest rates, expanding cap rates possibly, low unemployment, wage growth, Russia is currently in Ukraine... Talk to us about how it is that your strategy is changing based on the changing economic and global political climate.
Omni Casey: Yeah, we're in a crazy time. And you listed off a crazy list there, and the pandemic wasn't even on that list. Yeah, so we're coming out of a crazy time, and we're still in a crazy time. So I've been doing this for about 20 years now in multiple markets, and real estate has been consistent, but you're exactly right, there's so many things that are just affecting our market or our ability to invest, or maybe the strategies. And everything on that list is understanding that more than anything, it's more than understanding a market, it's more than understanding a neighborhood, it's more than understanding cash on cash ROI. Those are baseline important things to get a grasp of, but really, we do need to really understand the economic changes and predict what's going to happen out there and come up with a strategy that might make sense.
So what I've been focusing on and what I've been coaching my people at our mastermind is really to start thinking of not just real estate as an asset, but think of debt as an asset. If you think about it, the debt itself, debt is becoming hard. You got interest rates, you got a quote for a 7.25% 30-year fixed rental property loan. So that's crazy. You can't make the numbers work. I guess you could, but that's not what we've been doing. So understanding how to look at the property itself and look at if there's any debt attached to that property; is there something on the creative side that you can take over that debt? Is it assumption? Is it subject to? Is there owner financing tied to it? So I think although on the investing space, creative financing has always been part of it, especially in the bigger multifamily side of things, but in my space, at the smaller multifamily or the entry-level investor, it's not something that they're learning or thinking of.
And so we do spend a lot of time talking about debt being an asset in of itself. I can probably pay $10,000, $20,000, $30,000 over market value if it's a property I plan to keep forever, if I have the right debt attached to it. If I can take over your 2% interest rate for the next 25 years, I can pay you a little bit more, because I'm comparing that with a 7% interest rate, it's going to cash-flow. It doesn't work for every type of investment strategy. If you're looking to sell that off in six months, then it doesn't matter too much about that debt, because you're overpaying for it. But really identifying your investment strategies and putting them in different buckets. I put your financial freedom, your passive income in one bucket, and your strategy and the debt for that really should be completely separate than let's just call it your legacy or your generational wealth bucket. Those are two different strategies that you are probably thinking about. And most people that come to me for help for real estate investing are trying to do everything in one. I want to become financially free, and I want to become wealthy at the exact same time. They're just two different things. So understanding that, separating those two makes it a little bit more clear and easier to move forward.
Break: [00:13:11] - [00:14:58]
Slocomb Reed: Tell us a little bit more about that, separating financial independence from building wealth. What do you mean by that?
Omni Casey: So the building wealth, or the generational wealth bucket, I put it in there. I think most of us want to get to a level where we can give back, or we want to give back or take care of our family, and our family's family. And to do that, that's a big number typically; it's a big amount to get to, where probably it's going to take the wrong type of risks to get there just for time's sake.
So if we're talking about just financial freedom, the simplest way for financial freedom is long-term rental, passive income. There's many ways to do that; it's boring, and it's not sexy, it's not fast growth, it's passive income. But just stack that passive income, and if you know what your financial freedom number is, and you work your way backwards from there, then you can do that.
And I talk about long-term rental properties more than anything else... It's not the only thing I invest in, but it's the only thing I think new investors should probably start in if they're not financially free yet. Once you're financially free, you can shift your strategy. Because now, no matter what happens with your future investments, you take a bigger risk and you jump into the short-term rental, the co-living, the syndication, you grow outside of a space that you're an expert in. There's always risk when you jump into a different space that you're not an expert in. It may go well, it may not. But the reality is, you have your passive income, you have your financial freedom coming in no matter what, because you set that baseline.
So I say, achieve your financial freedom through passive income first, whether that takes you two years, or that takes you 15 years; get that done. And then you can shift your strategy to maybe a higher risk, higher reward strategy for growth opportunities. Appreciation in equity is beautiful, and that's where most people make their wealth, but we know that a lot of people could potentially lose money if their only strategy is based on appreciation and growth in equity, because we can't directly control that; the market controls that. So making sure you have that cash flow as your baseline before you jump to that next level is important.
Slocomb Reed: Absolutely. Omni, as you have built your portfolio, what would you say is the most important skill that you have developed along the way?
Omni Casey: I analyze and I think I overanalyze a lot. I'm an analytical person, and I have learned to... I'm not going to say trick myself, but I've learned to understand my weak point and create barriers to help me make decisions much quicker. So whether it's a spreadsheet, whether it's a calculator, whether it's a rule of thumb... Because I could be analyzing something for two days and it's already gone by the time I make a decision. But I got really good at making decisions quickly, even though I am an overthinker and over-analyzer. So setting up the parameters around how quickly I should make informed and educated decisions has been a skill set that has paid off for me.
Slocomb Reed: Awesome. Omni, are you ready for our Best Ever lightning round?
Omni Casey: Absolutely.
Slocomb Reed: Great. What is the Best Ever book you've recently read?
Omni Casey: There's a lot of great ones. Recently, probably my favorite is Brandon Turner's Multifamily Millionaire. It's the two-set volume, but really, really good for anyone looking to get into the multifamily space, the small multifamily, or even the large syndication side. There's two books there and they're just gold.
Slocomb Reed: What is your Best Ever way to give back?
Omni Casey: We take a two-part approach, or cash flow doors. We set aside a percentage of the revenue from a percentage of our doors to go into a bucket that does nothing but financial contributions for charities that my wife and I support. So there's the financial side of things, and that automates it. And then my goal over the last few years has been to set aside a... I'm up to about 50% of my time does not make me money, and that's by design. So I want to donate as much of my time as possible to things that don't make me money. And I'm in the space of coaching and education, it's all free, I don't charge for that. So that's what I came up with a book this year, and it's all about having to set that foundation of becoming financially free through real estate on multiple paths there, and trying to give that away and help people get to that level of financial freedom.
Slocomb Reed: Yeah. Omni, tell us a little bit more about your book.
Omni Casey: Yeah. It's called the Cashflow Breakfast Club. I wrote it about three years ago and never published it. It's been kind of my manual for my training and my coaching. And literally, when we're recording this is when it finally came out. I got to the point of publishing it but it was started out as my story, a kid in Hawaii growing up, a lot of failures, some successes, lucky to find a mentor or mentors in a group. I've put it into a parable format, so it's a pretty easy to read. But basic steps; basic steps on someone starting from zero or starting from one and saying, "I need to get to financial freedom, I need to buy a door a year, or two doors a year, three doors a year. How do I get to that level? What does that map look like? What are the projections look like? And the multiple paths there." And it's basically if I sit down and I coach someone for three, four, or five years, it's what I would eventually tell them. It's just easier to just give them a book and say, "Here it is. Read through this and we can talk."
Slocomb Reed: Awesome. Omni, what is the biggest mistake you've made as a real estate investor thus far, and the Best Ever lesson you've learned from that mistake?
Omni Casey: My biggest mistake - I'm always my biggest bottleneck. So not firing myself soon enough on any venture. So I set my goals and my life up in decades. Every 10 years, I need to reinvent myself; every 10 years, I need to retire and do something new... Really, because that forces me to say, "Okay, by the end of the 10 years, I need to be -- whatever I'm working on, make it profitable, make it a self-running operation, so that I can start focusing on something new." If I were to do it all over again, I would do it every three years and just reinvent myself, because that cycle has paid off for me, but it's been 10-year cycles, so now I'm trying to go through these three-year cycles of reinventing myself, firing myself from whatever I'm doing, which means it needs to be successful by the end of that three years, so that I can start working on my next thing that I want to grow.
Slocomb Reed: Yeah. As an owner-operator myself, Omni, I totally get that. I need to fire myself from a few things right now, and not wait even three years.
Omni Casey: Exactly.
Slocomb Reed: Omni, what is your Best Ever advice?
Omni Casey: We've touched about it earlier - separating your passive income from your financial freedom, your active income from your passive income as well. That's advice that was given to me, and that's what I teach out to everyone that I've talked to. So understanding that your active income and passive income are completely different, and separating your financial freedom from your generational wealth legacy goals are probably the best things you could do.
Slocomb Reed: Last thing, Omni, where can people get in touch with you?
Omni Casey: Social media, my handle @OmniTheInvestorGuy just about everywhere, and my website is omnitheinvestorguy.com. My phone number, email's on there. I'm pretty easy to get a hold of.
Slocomb Reed: And links to those social media handles and Omni's website are included in the show notes. Omni, thank you, Best Ever listeners, thank you as well. If you've gained value from this episode, please do subscribe to our show. Leave us a five-star review and share this episode with a friend you know we can add value to as well through this conversation about buying portfolios at a time instead of properties at a time, and our conversation about passive income goals and Omni's advice. Thank you and have a Best Ever day.
Omni Casey: Thanks, Slocomb.
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