Michael Albaum is living his dream: traveling full-time in a renovated van with his wife. Their nomadic lifestyle is made possible through his commercial real estate investments, allowing him to invest remotely from anywhere. He’s also able to run his company, Roofstock, while on the road, which provides single-family rental opportunities for buyers, sellers, and financial management software for real estate investors. In this episode, Michael shares how he’s scaled his business, and how he manages his investments from anywhere in the world.
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TRANSCRIPT
Ash Patel: Hello Best Ever listeners, welcome to the Best Real Estate Investing Advice Ever Show. I'm Ash Patel, I'm with today's guest, Michael Albaum. Michael is joining us from Petaluma, California. He's the program manager and head coach at Roofstock, a marketplace for buying and selling investment properties. Michael owns 45 multifamily units and two commercial units and embodies the nomadic lifestyle, living in a van while traveling full-time with his wife. Michael, thank you for joining us and how are you today?
Michael Albaum: Thanks so much, Ash, for having me. I'm doing great. How about yourself?
Ash Patel: I'm very well thank you for asking. Michael, before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?
Michael Albaum: Yeah, totally. So I started investing right around 10 years ago in single-family homes, in a market that I knew, because I read that book that I think so many of your listeners probably have, Rich Dad, Poor Dad, and I realized that my job wasn't going to get me where I wanted to go fast enough, so I said, "Let me do this thing on the side." All the while I was working a full-time job, and did that for about eight or nine years. And then, unfortunately, I lost my dad, and told my job, "Hey, I need some time off to go do a hard reset", and they said, "Sorry, we can't hold your spot for six months." And I said, "Sorry, I can't work for you anymore then."
So I took about a year off and went traveled the world with my wife, and was doing some consulting and freelance work during that time. That's really when I got connected with this company Roofstock, where I find myself now, basically doing coaching, consulting, and help them building out their real estate education program. So all the while I was working a full-time job and all the while I was traveling, I was continuing to invest in real estate remotely. I was in Panama and purchasing properties in Cincinnati, Ohio.
So when we got back, we came back during the midst of the pandemic, because the borders were closing and my wife and I decided I really didn't have our wiggles fully out, so she said, "Hey, let's do this whole van life thing." And I was like, "Ah, man, I don't know. It kind of seems crazy, kind of small..." "Let's do it. Let's do it." So we built out a van and then we were living in a van full time, traveling for about seven months, been in the Pacific Northwest, and recently bought a house-hack here in Northern California, in the Bay Area.
Ash Patel: How big was this van?
Michael Albaum: Okay, so it was a Ford E-350, which is the smallest U-Haul trucks that are out there. So it's about 17 ft. long and it's got a box on it. And it used to be a mobile golf showroom, so it's just a box on wheels.
Ash Patel: And you converted the inside.
Michael Albaum: We converted the inside, yup. It had a full-sized shower, it had a mobile toilet, queen bed, really small kitchenette, a bench seat, and two seats up front.
Ash Patel: And you're smiling, so I'm assuming your wife is still with you.
Michael Albaum: Yeah.
Ash Patel: Very cool.
Michael Albaum: Very happily married. [laughs]
Ash Patel: Good job, man. If you got through that, you can get through anything.
Michael Albaum: Big time, big time.
Ash Patel: So for people that think Roofstock is a roofing company, give us the rundown on what Roofstock does.
Michael Albaum: Roofstock is a marketplace that facilitates the transactions of buying and selling mostly of single-family homes, or some small multifamily that make it on the site occasionally as well. So it's almost like the eBay of real estate transactions. So you can go on the site today for free as a buyer and look at any of the properties that are listed on our site, and you'll see underwriting information, you might see an inspection report, you might see a title report.
And so really, we're trying to empower investors that don't necessarily have a team locally in any of these markets that they're trying to invest in, to be able to. Because we can connect you with property managers, we can connect you with real estate agents, we can connect you with folks who can handle the insurance for you. So instead of going out and building your own team, you can stand on our shoulders that we've done the work for you.
And from a seller's perspective, you could go list your property on the site, and you would be getting access to hundreds of thousands of investors that put their eyes on the website on a regular basis, that live all over the world. So we know that that property is going to be sold to an investor. So an investor is going to look at the numbers and say it either makes sense or it doesn't, as opposed to getting owner-occupants touring your home, saying, "I don't really like the color of the carpet. I'm going to pass", or "Can you paint the walls for me before I take ownership?" So it's a pure investor play.
Ash Patel: Are these properties typically priced at market, or below, or above?
Michael Albaum: Kind of all over the place. So the seller gets the opportunity to set the price for themselves. We give some pricing guidance based on comparables that we're seeing in the area. But at the end of the day, it's their home, they're going to do with it what they like. We can make suggestions, and we have really great data around, "Hey, based on properties that are priced here, in this market, they tend to move in X number of days," because we have all the insights, because we are facilitating so many those transactions. So you'll see it all over the board.
Ash Patel: Do you offer complete turnkey houses, where "I'm an investor, but I have no time, but I want to get into this game, so let me buy this house and have somebody else manage everything"?
Michael Albaum: Yeah. Some of the properties that make it onto the site would be what you consider turnkey. But as far as setting up the property management, you are still the owner. But a product that we do have that's cool is called Roofstock One, which is basically a tracking stock or a REIT where you can buy fractional ownerships into homes, and then Roofstock manages that for you. So think of it like a REIT that you're buying into, as opposed to direct ownership. But as far as you buying the home, you being on title, but having to do totally no work whatsoever, totally hands-off - no, that's not something that we offer.
Ash Patel: The fractional ownership - what are the returns to investors, typically?
Michael Albaum: They can range, and they're going to be based on whatever market that particular REIT or that tracking stock, as we call them, is investing in. So there might be rent-to-own new construction in Atlanta, Georgia that's going to have some kind of return, and you might have a Memphis, Tennessee portfolio that would probably have a slightly higher return, because Memphis tends to be more of a cash-flowing market than Atlanta. So it really varies and you can really pick and choose based on what your risk tolerance is and return profile looks like, what it is you're looking to accomplish.
Ash Patel: Does Roofstock buy homes at all?
Michael Albaum: They do. So occasionally, they will find homes that either don't fit into the marketplace, or they fell out of contract, or they want to be part of Roofstock's own portfolio. They absolutely do, but it's a really small percentage, I would say.
Ash Patel: Because there's another company that got in trouble doing that.
Michael Albaum: Oh, really?
Ash Patel: Zillow.
Michael Albaum: Oh, yeah. Of course. They were buying on huge speculation, buying thousands upon thousands of homes... It's a much, much, much smaller percentage here.
Ash Patel: Yeah. Funny, right before they ended that program, I had one single-family house left from my earlier days, and they bought it for way over market and sold it for a big loss, within a month.
Michael Albaum: Yeah. That was their whole motto, was they were flipping them. They were turning them and flipping them, which is a very different approach than what Roofstock is taking. The whole figuring out what it's going to be worth is a tough game, tough business to be involved in.
Ash Patel: Michael, what qualified you to work at Roofstock?
Michael Albaum: That's what I'm still trying to figure out, actually... [laughter] So I think it was -- basically, when I first started with them I was making PowerPoint presentations for their Roofstock Academy, which was the education program that they were looking to just get off the ground. So it was me and another guy, Tom, who doesn't work at the company anymore. Different Tom than from MySpace, but... We were just chatting, and I was like, "Look, this is the experience I have. These are the things that I've done in real estate." He goes, "This would be awesome. You've done a lot of different things. I would love for you to talk about that and teach that as part of the coaching program." I was like, "Yeah, sure. That sounds cool." I talk about real estate by choice all the time anyhow; I may as well get paid a little bit to do it now. And that just evolved over time, and we got to a point with the Academy where it just made sense to go full time with Roofstock and really head up that program.
Ash Patel: So you have to see transactions from all different sides, good and bad... What are some of the biggest mistakes that people make when investing in real estate?
Michael Albaum: Oh, I've made them, so I'll just share from personal experience. It's overestimating the positive and underestimating the negative, and also living in your spreadsheet. I think most investors out there have some form of deal analysis, how they run their numbers... And I was a reformed engineer, I used to work as a professional fire protection engineer, so spreadsheets were my jam. I'm like, "Yes, numbers, math, equations." Some of your listeners might be trying to vomit right now, but that's the world I lived in.
And so I was running my numbers like I would as an engineer, and without any real-world experience to back that up with, I thought everything is going to go perfect, nothing could possibly go wrong... And that's just not the case with real estate investing. You're dealing with real people that do all kinds of stuff. You're dealing with the weather and climate, things that we really can't predict or control. And so we have to be prepared for the worst-case scenario and hope for the best. But if we can stomach that, we're probably going to land somewhere in the middle and going to be just fine. So I think yeah, just underestimating expenses and not having enough reserves.
Ash Patel: Michael, you've got a sizable portfolio, 45 units of multifamily, two commercial units... Was that before or during your time with Rootstock?
Michael Albaum: That was mostly before. Since working with Rootstock, I've done some additional deals. I picked up my primary residence, which we're house-hacking. I picked up a couple of short-term rentals that are single-families as well... But the vast majority of my portfolio was prior to Roofstock. And it's a shame, because I started investing in single-family homes and Roofstock wasn't around. I was like, "Man, you guys were five years too late."
Ash Patel: So you've got multifamily and commercial units. What are the commercial units that you have?
Michael Albaum: They're two triple net lease properties. One, technically, is a double net lease property, and the other is a triple net lease property. And for anyone listening that might not be familiar with what that is, it's basically where the tenant pays all of the expenses. So in a traditional rental or a lease situation, you collect income, and then you pay all the expenses associated with the property from that income. Well, in a triple net lease situation, you collect income, but all of the expenses, and depending on what the lease stipulates, the tenant will often pay all or most of them.
So the property taxes, the insurance, the maintenance, the CapEx on the building - that's all stipulated to be paid by the tenant. So from a passive income standpoint or from a mailbox money standpoint, in my opinion, triple net lease is the flagship for what that truly means, other than syndication or passive investing deals, but from a direct ownership standpoint, I haven't found a more hands-off mailbox money way to make passive income.
Ash Patel: Michael, going forward, would you do commercial or residential?
Michael Albaum: Oh, that's such a good question. I think a blend of both. I'm leaning more towards the commercial side of things. I think residential is one of the best ways to grow and generate wealth. Hands down, throughout the history of time, I think it's been one of the best ways. Commercial is not as attractive of a return. They often don't appreciate as rapidly or as much as residential. But from a hands-off perspective - again, I don't think anything really touches commercial. And so build your wealth, build your nest egg in residential, transition it over to commercial and just hang out.
Ash Patel: What if you do value-add commercial? You get the best of both worlds.
Michael Albaum: Yeah, you could totally get the best of both worlds. So I did a lot of value add in commercial multifamily over the years, and there's no two ways about it, I don't want to sugarcoat it - it's hard. And doing it from remote, from a distance, adds another layer of complexity to it. So if you can stomach it, if you can do it, more power to you. I got lucky and stumbled into it semi-successfully, but I've been definitely burned and tainted by it in the past. So make sure you know what you're doing or you're working with folks that know what they're doing. But you're right, you can totally get the best of both worlds.
Ash Patel: Well, my definition of commercial is non-residential. So when I say value-add commercial, I think maybe an office building or a strip mall that's 70% occupied.
Michael Albaum: Got it. Yeah, and you're getting it fully leased up? Totally. Totally, totally. Yeah, it's an area that I just have zero experience with, so I would be super-nervous. But I think if you've got the know-how, got the wherewithal, it could be a big homerun.
Break: [00:13:30] - [00:15:17]
Ash Patel: The Best Ever listeners know that I'm always pushing people to explore commercial, versus residential, so I'm that guy. What are your two commercial properties? Are they retail? Industrial?
Michael Albaum: They're quick-service restaurants.
Ash Patel: Okay. How long is the lease on those?
Michael Albaum: The first one is a 10-year lease with four or five-year options. And the second one's a 20-year lease with four or five-year options.
Ash Patel: What kind of cash on cash returns do you get on those?
Michael Albaum: So on that first one, it's 5.5%, and the second one is 6%, and they've got built-in rental increases. And the reason that the cash on cash is fairly light is because that was a family deal that we went in basically all cash on. So we took no leverage on it. We just said, "Hey, let's take this soiree." We had a 1031 that we needed to park some money in, so we did that, and we said, "You know what? The returns aren't sexy, but we don't have to think about it. We don't have to worry about it. It's just easy."
Ash Patel: Why not do a cash-out refi?
Michael Albaum: Actually, we just did on that second property, and we're very excited about that. We got it locked in right before the rates went crazy, so we got a really attractive rate. We got it fixed for 10 years on a 27.5-year am, so we are just over the moon about it.
Ash Patel: And you could do that with the other one as well, right?
Michael Albaum: We could do with the other one, yeah. We actually syndicated that deal with some other partners and family friends. So it would be a little bit more complicated, but totally, as an option, it could be done.
Ash Patel: How long do you plan on holding these?
Michael Albaum: I think for forever, to be honest. With the rental increases that are built into the lease, the cash flow just starts to grow really, really quickly over time... And because I have so much active rental portfolio in the residential side of things, these are just so nice to not have to worry about. They just show up every month, I don't have to deal with tenant issues... It's just easy.
Ash Patel: I'm assuming these are larger national or regional companies, operators...
Michael Albaum: Yes.
Ash Patel: So again, for the Best Ever listeners, that means they cannot get out of that lease. Unless the parent company -- I'm going to use Taco Bell, for example. If it's a Taco Bell or a Dunkin Donuts corporate store, they cannot say, "Hey, Michael. We don't like this location anymore. We don't like you anymore. We're out." The parent company essentially has to file for bankruptcy in order for them to break that lease.
Michael Albaum: Yes. And that was a huge, huge reason for us ending up purchasing these two locations, was one was a parent company lease with a worldwide corporation, and the second one was a franchisee, but they had owned over 400 locations. And we were able to get the parent company to guarantee the lease, which was part of the negotiation.
So you'll see a lot of these triple net lease properties out there with a franchisee that has six locations or two locations or five locations. And there's definitely more attractive cap rates there, but there's a reason that that's there, and so you really want to evaluate, "Do I believe that this parent company is going to be able to pay their rents in three years, five years, 10 years down the road? Are they going to be around?" So that was definitely a big factor for us when evaluating these properties.
Ash Patel: That's a great point. So to equivalate this to the single-family market, imagine your tenant saying, "Hey, Michael, I'm going to rent this house for you for 10 years. I'll stick everything on it. I won't leave. There's no way I could leave. And I'm also going to fix everything that breaks. All the repairs are on me, but I'm going to pay you 20%-30% less on rent," is essentially what a triple net lease is, right?
Michael Albaum: Yep. I would jump on that all day. Having done both, I would be there in a heartbeat.
Ash Patel: Michael, what is your best real estate investing advice ever?
Michael Albaum: I think my best real estate investing advice ever is you have to get educated, and you have to understand what the pros and the cons are, and what your risk tolerance is. And I say that with an asterisk, in that it's so easy to fall into this analysis paralysis where, "Okay, I'm learning, I'm learning, I'm learning. Just one more podcast. One more book. One more seminar before I actually do anything." So you have to find this balance of where I have enough information to go execute responsibly, but not so much that I'm never going to get started.
And I think a lot of people too hear that real estate investing is this amazing thing. Everyone should own real estate, you have to do it. And at the end of the day - yes, it can be for everybody, but it doesn't have to be. So if you're someone that really wants the hands-off stuff, they don't want to own directly, well maybe you should go invest in syndication, or maybe you should go invest in the stock market.
So I think getting a clear enough picture as to what's actually involved with owning rental real estate, what does that mean for you as an owner on a daily basis is super-important to get your head wrapped around before you go and buy property.
Ash Patel: Great advice. I also want to circle back on Roofstock. I saw a lot of portfolios for sale. A portfolio of four houses in Chicago, 10 in Minneapolis. Are you geared more towards an experienced investor, or the beginning investor, or both?
Michael Albaum: From Rootstock's standpoint?
Ash Patel: Yes.
Michael Albaum: I think both. And that's the cool nature of the platform, is we have single-family homes and we have education. So we are really well geared to help beginners learn, but we also have, like you mentioned, portfolios, and we have really advanced topics within the Academy. So we also have a place for those seasoned advanced investors who are maybe looking to scale or get involved into a different asset class. So we really run the gamut, which makes my job so much fun.
Ash Patel: Is there a charge for the Academy?
Michael Albaum: There is, yeah. So it's a paid program. We have three separate tiers, depending on what makes sense for folks. But to use the platform itself, like to go on and look at properties, Roofstock is totally free. And then if you're transacting on the marketplace, there's a small marketplace fee.
Ash Patel: Alright, let's save our Best Ever listeners' collective hours. What are the tiered education programs that you have?
Michael Albaum: Yep. So we've got a Self Study tier, which is kind of go at your own pace. It gives you access to over 50 hours on-demand lectures. It's easy, self-paced, and it's $399. If you want to have actually some one-on-one coaching, access to private Slack channels, we have a Workshop program, and that's $999. And then we have our top-tier Mastermind program, which is $5,000. We're going to do 10 hours of one-on-one coaching, regular Mastermind sessions, the whole shebang and sheboodle.
And the cool thing about all of these tiers is that they come with money back on the marketplace fee. So on the Self Study, we're going to give you $250 towards transacting on the website. The Workshop, we're going to give you $1,000 back. And on the Mastermind, we're going to give you $2,500. So that middle tier essentially becomes free if you end up buying two properties through Roofstock.
Ash Patel: Yeah, I want to share a quick story. I started a commercial mastermind six months ago, and half of the class has paid money to be in there. The other class is people I've done deals with or friends, or people that I want to see get out of their nine-to-five and get ahead. And we're now six months into this. The only people doing deals are the ones that paid for it. I didn't believe it when people told me that was going to be the case...
Michael Albaum: Yeah.
Ash Patel: But all my friends, everybody in there for free - they're not even showing up when they have all this education, this network in front of them. And it's crazy, when people pay for something, they take it seriously. They're more invested in it.
Michael Albaum: Yes.
Ash Patel: It blew me a way that my friends, people that told me they're dying to get into real estate, are not doing anything with this.
Michael Albaum: You pay attention when you pay for it, and I'm right there with you. I thought there's no way we did a pilot, a beta test for the Mastermind, and found the exact same result to be true. So I wish it were different, but for those folks that are serious, come check it out. And we have a money-back guarantee, so if you can't stand the sound of my voice or you don't like your coach, whatever, we'll get your money back, no problem. But I think it is so important, and I think too it sets a precedent. In real estate investing, it costs money. There are things in life that cost money, and so you have to get over that if you're going to be in this business.
Ash Patel: I'm sure the Best Ever listeners are also wondering, were you working at the time that you were doing the van life?
Michael Albaum: Yeah, I was working full time for Roofstock. So when I was doing all my traveling and stuff when I left my nine-to-five, I was doing freelance consulting stuff, traveling, and then I got hired with Roofstock full time while I was doing van life. And I was like, "Hey, just so you know, this isn't changing." "No no no, we know. You're doing a great job from wherever you are; so make sure you've got good WiFi and you're good to go."
Ash Patel: Did you work from the van, or did you set up shop in a coffee shop, or outdoors somewhere?
Michael Albaum: No, I worked in the van 95% of the time. A lot of what I was doing was coaching calls and podcasts and stuff, so being on video and having an area that wasn't going to be loud was super-important. So if any of your listeners check out a lot of the YouTube recordings of the podcast, you'll see this wood paneling behind me. That's me in the van.
Ash Patel: Did you blog about this, is there places we can dive into that story?
Michael Albaum: I talk a lot about it on the podcast. I really haven't done much blogging about it. I post about it on Twitter occasionally. But no, I really haven't done much of a vlog. Maybe I should do that.
Ash Patel: Is the podcast on roofstock.com and available anywhere else podcasts are? What's it called?
Michael Albaum: Yeah, so it's available anywhere podcasts are. It's called the Remote Real Estate Investor. So we like to joke that so many of us are living remotely and then investing remotely, so it's like a double entendre.
Ash Patel: Very cool. Michael, are you ready for the Best Ever lightning round?
Michael Albaum: Oh, man. I think so. I hope so.
Ash Patel: I'm sure you'll make it through. Michael, what's the Best Ever book you've recently read?
Michael Albaum: I just read First to a Million by Dan Sheeks. As part of the Academy, we do a quarterly book club and do a Q&A session, get the author to come on and hang out with us, kind of a happy hour. And Dan Sheeks wrote this book as a guide for young people who are just getting started with a financial journey... And while so much of it was refresher for me, it was things that I had known already, it's always so good to get back to basics and get regrounded in the things that you know you should be doing, but maybe have forgotten to do over time.
Ash Patel: Michael, what's the Best Ever way you like to give back?
Michael Albaum: The Best Ever way I like to give back is to donate to causes that are important and near and dear to me. And I think that real estate investing has given me the ability to do that much easier and much more impactful than I think I would be able to otherwise.
Ash Patel: Michael, how can the Best Ever listeners reach out to you?
Michael Albaum: You can find me on roofstock@roofstockacademy.com. You can find me on Twitter at @michaelalbaum. And then I'm also on LinkedIn as well.
Ash Patel: Michael, thank you for your time today, sharing your journey with us. 10 years ago, you started out with single-family rentals, and now you're part of a company, teaching others on how to become investors in a great platform. Thank you again for the nomadic stories, the real estate experience and, most of all, thank you for your time.
Michael Albaum: Totally, Ash. Thanks so much for having me. It's been a pleasure.
Ash Patel: Awesome, Best Ever listeners. Thank you so much for joining us. If you enjoyed this episode, please leave us a five-star review. Share the podcast with someone you think and benefit from it. Also, follow, subscribe, and have a Best Ever day.
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