Shiloh Lundahl is a child and family therapist and investor at Greenlee Investments, a private, family-owned entity holding diversified investments and supporting family-owned business interests. In this episode, Shiloh discusses his unique approach to lease options for his residential investments, breaks down his first commercial deal, and shares his take on the various personalities in real estate investing.
Shiloh Lundahl | Real Estate Background
- Child and family therapist and investor at Greenlee Investments, a private, family-owned entity holding diversified investments and supporting family-owned business interests.
- Portfolio:
- 100 mobile home park units
- 30 multifamily units
- 110 single-family units
- 12 commercial units
- 4 short-term rentals
- Based in: AZ and NC
- Say hi to him at:
- Best Ever Book: How the Mighty Fall by Jim Collins
- Greatest Lesson: Build a team or find a partner that balances your personality and investing style, e.g., if you are risk averse, work with someone who is willing to push a little further.
Click here to learn more about our sponsors:
TRANSCRIPT
Ash Patel: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I'm Ash Patel, and I'm with today's guest, Shiloh Lundahl. Shiloh is joining us from Mesa, Arizona. He is the owner of Greenlee Investments. They learned that floating the option price was a better move than setting it firm. Shiloh's portfolio consists of 100 units in mobile home parks, 30 in multifamily, 110 in single family, 12 in commercial and four in short-term rentals. Shiloh, thank you for joining us, and how are you today?
Shiloh Lundahi: I'm doing great. Thanks for having me here. I appreciate it.
Ash Patel: It's our pleasure. Shiloh, 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?
Shiloh Lundahi: Yeah. So by trade, I'm actually a licensed clinical social worker, so I provide therapy to children and families. So that's what I do as a professional. And then about, I would say, eight years ago or so, I thought I'd really like to increase my skillset as a therapist, but I'd need to go to trainings, and that would cost money to actually go to the trainings, and then the time off of work would also cost money... And so I got into real estate so that I could earn a little bit more money, so that I could go and do some of these trainings, and things like that. And it just kind of snowballed. I got into real estate at a good time, where prices were going up, but I learned a lot about how to do it effectively and efficiently, so now here we are.
Ash Patel: Shiloh, explain to me what floating the option price is.
Shiloh Lundahi: Sure. So in 2015 and '16 we were flipping houses; just got into it, just learning how to do it, and I got a partner about that same time, '15 or '16, and he didn't want to be a landlord. And I understood that you want to get calls, and things like that, but at the same time, the flips were getting smaller and smaller in margins, so we just weren't making that much money on flips. And so we were trying to figure out a way to pivot into a different model for our investing. And so we go to a three-day training, actually taught by John Burley out of Arizona, and he does great trainings on lease options. So we went to that training and we learned about lease options, how as an owner when you're leasing a property with the option to buy, the tenants become tenant buyers, and they take better care of the house than a normal tenant would. You can write into the lease agreement that they're going to be taking care of all the fixes, and things like that... So it really lowers your total efforts in watching over the property; you don't have to watch it over like you would a regular rental.
So at the beginning, we were fixing the option price. So I'm just gonna give you some easy numbers... Let's say we bought a property for $100,000, that if we put $15,000 into it, it'd be worth $150,000. So we were fixing the option price at about $160,000. So just a little bit above what the market price was today. And we were feeling good about that, because that way we can kind of lock in that price, just a little bit above what market is today, and people would be renting it during the time that they lived there. And then the end of the period of time, it might have been three, four or five years, they could go ahead and buy the property from us and we wouldn't have to pay to get it fixed up right before we sell it, we wouldn't have to pay any realtor fees, or -- closing costs were really really minimal. So that was a way of locking it a good price.
But then the pandemic hit. And all of a sudden, all of these prices are going way, way up, really, really quickly. And we were having people buy properties from us for $100,000, below market value. And I had a two-minute conversation with a guy named Kris Krohn, who has a ton of content on YouTube, and does a lot of really cool things... But he and I were talking at a mastermind, and he said, "You probably don't want to fix the option price. Just have it float with the market." It was just a two-minute conversation that's probably made me hundreds of thousands of dollars.
So we stopped fixing the strike price, and we had it float with the market. So we'll put in a floor. So in that same example where you buy the property for 100k, you fix it up for 15k, and it's worth 150k, what we would do is we would say, "Okay, we'll sell this to you for 163k, or what it appraises for when you go to exercise the option." And then they would come in with an option fee of maybe $4,000 or so, and we would take that 4000. And that would just kind of come into us as profit. But then if they go to exercise the option, we would tell them, "We'll use this money that you're giving us as the option fee, we will help you pay the closing costs up to the option fee that you gave us."
So that's kind of the floating lease option. It makes it so it floats with the market, but it does have a floor, so it doesn't go below that floor. So if there's crazy appreciation, the strike price goes up along with the market value, so we don't lose out on 10k, 20k, 30k, 50k of appreciation. And we didn't know what was going to happen with the dollar over the last little while, and so we didn't know if there was going to be a ton of inflation and things like that, and so that's why we started doing this floating lease option about a year and a half ago.
Ash Patel: Shiloh, so as your tenants are in these places, and the property values are going up, you're cringing, hoping they're not going to buy some of these, right?
Shiloh Lundahi: Well, at the beginning, we wanted people, when they would come in, to have the option to buy the property, so we set out to help people become homeowners. That was the goal. And we were feeling good about it, and everything like that, but then it starts to change your feelings just a little bit as they're walking into $100,000 to $200,000 of equity on a property that you had, that you got for them. So I'd like to say that all of my desires are altruistic, and several times they are, but sometimes it's just a little bit difficult to realize I as an investor just sold this property to this person for $100,000 less. So it is a little bit tough.
Ash Patel: Yeah, it's a win/win, but it's kind of a lopsided win in their favor.
Shiloh Lundahi: Well, with so much appreciation, it did become very lopsided. And so that's why we switched over, because we were giving way too much away.
Ash Patel: Do you do this on all different types of asset classes, or just single-family homes?
Shiloh Lundahi: We do this just on single-family homes.
Ash Patel: Okay. It's probably been 10 years since I've done an appraisal on a single family. What does that cost these days?
Shiloh Lundahi: Appraisals range from between $450 and $700, depending on where you are. Now, there's some places where they're going to be $1,500, because they don't just appraise the value of the property, but if you are getting it refinanced, and you're gonna have renters come in and stay there, then they want to do the appraisal on the property, and the appraisal on the rent value. And that can be a $1,500 appraisal. It's awful.
Ash Patel: Okay. Well, in my world appraisal, start at $2,500, because I do non-residential commercial. So it's still a steal. But I love your model, because it brings up an emotional tie to that property. That property is actually worth more to that family, that couple, that individual, than anybody else, because it's already their home. They feel invested into that property.
I've done this with commercial properties, where I will often give somebody right of first refusal, which means if I ever sell the property, they get to buy it at the strike price. And it gives them a sense of ownership and a sense of pride in the property. I've also done where I've sold a commercial property to a tenant that's leasing it, whether it's a store, a business, whatever it is, and it's worth more to them than anybody else. And similar to your situation, because they're paying X dollars a month in rent, they're reducing their monthly burden by owning the property. Does that fall in line with renters in your case as well?
Shiloh Lundahi: Yeah. It's worked out really well, where they do have an emotional connection to it, because it's been their home. And they know the property, they know the quirks about it and everything like that. The thing that I dislike about real estate investing is I don't like getting a house ready for the market, having somebody come in, and then they order an inspector to come in and inspect the property, and his primary job is just to criticize everything with the property. And they may not be criticizing, but it feels like criticism. I just put my heart and soul in here, and now they come in and they say every little thing that's wrong with the property. And it isn't just like one page. It's like 70 pages of things that are wrong with pictures, and how it should be according to their opinion, and everything like that.
So I just really did not like that process, because then they would just try to come back and beat you up on the price, and everything like that. So I really liked the lease options, because people do have a vested interest. They've lived in the property, they've had their kids going to school there, they've become part of the community. They've been there for a long time. So when they go to buy the property, they're like, "Yeah, I'm going to buy this property. This is now my property." So they take much better care of it, and yeah, they appreciate it a lot more.
Ash Patel: Yeah. And with those home inspectors, if they're talking to a first-time homebuyer and they write down, "You've got to caulk the chimney", they're probably wigging out thinking, "Oh my God, that chimney is going to leak, or it's going to collapse. You better pay for this", and it's not a fun process. If I heard you correctly, the tenant, while they're under this lease option, they're responsible for everything, all the maintenance?
Shiloh Lundahi: Pretty much. So what we do is we have the people come in there and they have basically a month to be in the property. If anything major happens in that month, we'll come in and we'll take care of it. We don't want anybody to get into property and feel like they were taken advantage of, that the property is falling apart, or anything like that. So in some properties, we actually do a major rehab. If we get a property that is completely trashed, and just needs to be fully rehabbed, then we'll do a full rehab. But a lot of times we don't do a full rehab. We'll do some things here and there, but they're moving into a property that they can customize and make their own. So yeah, they take better care of it.
Outside of that time period, what I don't want to have happen is they say, "I'm going to exercise this option in two months. And so the AC has been acting up for the last four or five months. I'm going to call them and say that I want them to replace the AC, and then as soon as they replace it, then I exercise the option. Now I get this free AC." That's not what I want.
So basically, you come in and you take care of everything. If something big happens, then I'm going to ask you, "Alright, so are you really looking to purchase the home? Because if you're looking to purchase the home, then putting it in a brand new AC is going to increase the value of the home. So when we talked about this property, and had the plan of selling it to you, my plan wasn't to come in and take out or put in a ton more money into this property right before you buy it." You see what I'm saying?
Ash Patel: I do.
Shiloh Lundahi: So I talk with them about that, and we work out what that's going to look like. If that means that I can come in right now and replace the AC and then they're going to pay me at closing, then we can do that. Because again, they give me an option fee. And so I can use any of that option fee -- like, if they give me $4,000, then I go in, I'll take care of it, but then I won't be helping them pay for the closing costs at the end.
So there's some flexibility, and we'll come up with that and decide on what that looks like... But really, even though I'm doing a lease option with this property, I as the landlord, as the owner, still am responsible for several things with the property. So if the AC goes out and I'm living in Arizona, I need to make sure that that's working, because that becomes a safety and health issue.
So if there's water that starts leaking, it behooves me to go and take care of that. Because if I don't, then now I have a major issue. And not everybody does exercise the option. So if they move out, and there was a water leak, that can cause tons of costs and damage. So I kind of weigh that out, but I let them know upfront that they're responsible. I'm kind of like this middleman; there's the bank, there's me, and then there's them. And my goal is to step out of the process and have them be able to own the property and get a mortgage and pay it off through the bank.
Ash Patel: It's a great model. You've essentially found a way to make single family homes triple net leases.
Shiloh Lundahi: Yeah, yeah.
Ash Patel: Will you only do lease options, or will you do straight-up rentals as well?
Shiloh Lundahi: We've done bowls; we've done rentals, and we've done lease options. And what I find is that lease options are about a third the amount of work as a rental. Because we put people in there for up to five years. So we have a lease for five years, an option for five years... The lease amount goes up every year, but we have so little turnover, and when they're in there, they're taking care of the property, they're not calling us, and we have a nuisance clause in our lease which basically says "If you don't call us, then you get $100 off your rent."
So this is kind of how we do rents real quick. Let's say the rental rate is $1,000. What we'll do is we'll charge them $1,200, and then we give them a $100 discount for taking care of the property and not calling us to take care of anything. So we're getting even higher than normal rents, but we're giving them a discount at the same time. And then that means that they need to take care of it and they need to pay on time.
So when somebody In our property isn't paying on time, they get a really hefty fee, basically, because we take off the $100 credit, and they get a late payment fee. So our people pay on time, and they're taking care of the property. And so it just is a lot less stress, a lot less hassle, a lot less oversight.
Ash Patel: Interesting, a discount to pay your rent on time. Essentially, a hefty late fee.
Shiloh Lundahi: Yeah.
Ash Patel: I like it. Is there a period of time in which they can exercise this option? Do you want so many years of rental income first, and then maybe years three to five they can exercise the option?
Shiloh Lundahi: No, basically we just give them a timeframe. And we've done three, four or five-year options. And basically, we're just starting with the five year, then we went to the four-year, then we went to the three-year, and now we're doing a lot of three-year right now. But they can exercise it anytime within that time period, but we haven't had anybody exercise it in less than a year.
But what's cool about this, real quick, explaining how the lease option works - I had a lady in North Carolina; most of our properties are in Arizona, but we also have about 50 out in North Carolina. And one of the ladies, when we were helping set her up with the lease option, and we were leaving, she says "Well, wait a second... How do I buy the property?" So I said - not really thinking about what I was saying, I said, "We'll go to a bank, sit down with a mortgage officer and say that you'd like to buy the property that you're living in, and then ask them what you need to do to get ready, and then do that. And then just call us back." So I had forgotten about that conversation.
A year later -- because it was just like that, it was just like a minute-long conversation... She calls us and she's like, "Okay, I'm ready to buy the property." And I'm like, "Oh, okay. Great." And then I asked her, I said, "So what did you do to get ready?" and she said, "Well, I just did what you said. I went to the bank, I talked with loan officer and I said I want to buy a property. What do I need to do? And then I just did what they said."
So honestly, that's how easy it is to exercise the option, is you go to a lender and you say, "I want to buy the property. What do I need to do in the next year or two years or three years or four years?", depending on what your credit is; even if you have really bad credit, in three or four years you can fix your credit tremendously, to the point where you can buy a home, where you can get a loan from a lender. So you just go there, you ask them what to do, and then you follow what they say over the next time period, and you'll be in a position to buy the home.
Ash Patel: Shiloh, you also have 12 commercial properties. What are those?
Shiloh Lundahi: Well, I have one commercial building with 12 offices.
Ash Patel: Got it. It's 12 offices?
Shiloh Lundahi: Yeah. So this is actually my therapy practice in Mesa. So I own the building that I have my therapy practice in. And actually, this is kind of what prompted me to get more involved in real estate, is purchasing the building, I'm like, "Oh, I like this. This is okay. I think I can do more." So I purchased the building, and basically there's two sides of the building, two suites. We were just in one suite, and I was nervous that a dentist office was going to buy the suite next to us, and then I'd have drilling going on with little kids on the other side of the wall yelling and screaming, as I was trying to do therapy.
So I purchased the whole building, and then we built out the other side, we put in six more offices, and so there's 12 offices and a group room. And I rent out each of the offices to the other therapists. So that's my commercial building.
Break: [00:18:21.11]
Ash Patel: What do the returns look like on that building?
Shiloh Lundahi: Oh, good question. I bought it so long ago... I bought it in 2014, for like $515,000, and I collect probably close to $9,000 a month in rents. I do pay for everything, basically. So I pay for the utilities, and the internet, and all of those things associated with it... I would say that that building probably creates about $2,000 a month in returning cash on cash return. So I don't actually have the numbers for what the return is. I just get about $2,000 a month in profit.
Ash Patel: Your theme today has been making tenants easier to manage. What's easier to manage than a building full of office tenants that are business owners?
Shiloh Lundahi: Yeah, that's by far my easiest property. Now, however, when people move out - because it's a therapy practice, basically; or a co-op of therapist, so everybody has their independent office, their independent business, and we all kind of use the same building. But when one person moves out, I need to go and search for another therapist that wants to move and join our group. And that's a good therapist, because I want to keep the level of services high. So sometimes it's not easy to just find anybody. I don't just look for anybody. I'm looking for a specific type of person. So sometimes the rooms can be vacant for a little while, but vacancy has been very low. We've had a lot of people in there for a long time.
Ash Patel: So it's essentially two businesses in this office building. It's the therapy, and what's next to you that you were afraid the dentist was gonna go in?
Shiloh Lundahi: Well, you have two suites in the building. I bought the whole building with both suites. But it's so funny, because just the building right next to us does have a dentist office in it. So I'm really glad that I bought the whole building. And yeah, so we're all therapists; there's 12 offices, we're all therapists in that office building.
Ash Patel: Got it. Okay, so it's a single business with 12 suites?
Shiloh Lundahi: Well, not exactly. It's one building, and we have a website that highlights all of the therapists, and every therapist is independent. So that means that there's no front office reception. You come in, you wait in the lobby, and then the therapist comes and brings you back to their specific office. But we have a shared building, a shared kitchen area, shared bathrooms... But everybody has their own business. And so I don't have to worry about anybody else's business. I just worry about the building.
Ash Patel: Okay, I'm gonna play devil's advocate with you a little bit here...
Shiloh Lundahi: Sure.
Ash Patel: Why can only therapists rent an office?
Shiloh Lundahi: Because it's a therapy practice. That's what we all do in the building. So it's kind of a co-op of therapists.
Ash Patel: You're getting closer to where I'm going. If a CPA wanted to rent an office just because they have to get out of their house, or they want a professional place where clients can come, would you rent to them?
Shiloh Lundahi: Probably not. I could. I could rent to a massage therapist, I could rent to a dietician, a CPA... But the whole goal is to keep it themed. It feels like a therapy practice when people come in there.
Ash Patel: Understood. The reason I asked, and the reason I'm probing is we own a couple of co-working spaces. And co-working is very hot right now. People have realized they can no longer work from home, especially in the summertime, when they have kids and pets running around the house, and possibly a spouse that also works from home; the kitchen table has now turned into a two-person office. So those small rental offices are on fire throughout the US. So I would just keep that in the back of your mind if you ever wanted to pivot, and maybe not market so hard for a therapist, but find a low-use office person.
One of our tenants that just signed, they own a travel company, and all they need the office for is a couple of nights a week they do webinars, and they got tired of telling their spouse and kids that when dad's on a webinar, everybody has to be quiet. Nobody can walk above me, besides me or around me. So there's a huge demand for offices. Just keep that in the back of your mind. If you ever get frustrated that you can't find a therapist fast enough, maybe transition to a co-working model. And they may pay higher; maybe not. It sounds like the niche that you've created should demand top dollar.
Shiloh Lundahi: Yeah, the office spaces go for between $650 and $800, which is a going rate for a room.
Ash Patel: Okay, so you're in line with the market for office space.
Shiloh Lundahi: Yeah.
Ash Patel: Even more reason to go co-working. Alright... Do you take on investors, Shiloh?
Shiloh Lundahi: Yeah, I've had a lot of people invest with us, or lend to us; it depends. We have a fund that we open up just to people that know us. So there's where we've gotten a lot of investments, but a lot of people have wanted to see what we do and how we do it, and so they'll lend to us on different projects. Like, we'll get a hard money loan, we'll bring on an investor in second position to help with the rehab, and things like that. Then I put them on my Whatsapp group, and my Whatsapp group - I'll show videos, people can ask questions... So it's like this cool little community of 60 or so people that have lent us money over the years. So it's been great. And honestly, once people lend money to us and have that good experience with us, so many of my lenders have lent to us multiple times. So it's worked out really, really well. But yeah, we've raised millions of dollars through private money lending.
Ash Patel: What is your typical cost of capital when somebody lends to you?
Shiloh Lundahi: It's gone up just recently. It was between 8 and 10. Now it's between 10 and 12.
Ash Patel: Are there any points involved?
Shiloh Lundahi: No. They lend to us on a project, and depending on the amount that they lend to us, if it's $50,000 or more, then we'll give them 12%. But actually, a cool thing is we have a investor appreciation retreat that we hold down in Costa Rica... So we have a couple of short-term rentals, as I mentioned; we have two down in Costa Rica, where we run investor retreats. And so people that have lent to us $50,000 or more on some of the deals that we're doing, they'll get the 12% return, but they also get invited on the investor retreat, where they can come and take part in these fun excursions, and things like that that we do. So we pay for everything, they just pay for their plane tickets down there. And then we go on these awesome excursions and vacations, we talk real estate, and just have a great time.
Ash Patel: Shiloh, when we started this conversation, you talked about the reason you got into real estate was so that you can pay for some additional training. Has that come full circle, or have you just gotten the real estate bug, and you're all-in on real estate?
Shiloh Lundahi: I have gotten some more training. So I do training every year, but I've been able to go and do some training out of state, and that's been awesome. And so I've really appreciated that. And I've been able to buy a lot of training materials as well. But to be honest, over the last five or six or seven years, a lot of my training shifted into learning about real estate investing. And so I've done a lot of training, been a part of a lot of mastermind groups, and paid for one on one coaching, and group coaching, and now I actually provide coaching myself, and helping people get single family homes, or rentals, or do lease options... So I believe a lot in improving myself through education. So I value that, and that's something that I provide people as well.
Ash Patel: Shiloh, as a therapist, you must look at real estate at least slightly different than everyone else. What's the biggest mindset hurdles that you see people make when they're investing in real estate?
Shiloh Lundahi: Good question. There are different types of personalities. And our personalities have a big impact on how we view the world. People that don't like risk, they have a hard time with real estate investing. Because real estate investing has a risk, there's risk to it. People that are highly impulsive will jump into real estate, but they don't count the costs, and they usually make big mistakes, that are very costly, that can make their company fall apart.
So I think that it's important to know who you are and know your own personal strengths and weaknesses. So if you're somebody that's totally good with risk, it's important to have somebody that you work with that wants safety, so there's checks and balances. Because if you're overly focused on safety, then what's going to happen is you're not going to want to take risks that may be very profitable. And if you don't count the costs and what the risks really are, then you can get to a place where you're buying a bunch of deals that are really, really bad. So it's really important to make sure that you balance both of those.
Ash Patel: Great advice. I'm thinking in terms of investors - if I have a conversation with an investor who is risk-averse, maybe I steer them into a debt fund, that just pays a straight 10%, versus a typical 7%, 8% with some upside. Cater to their risk-aversion, and tailor an investment for those people.
Shiloh Lundahi: Yeah, I think that can be helpful, because debt funds - and that's what we have; we have just a straight debt fund. People get paid - again, depending on the amount that they've put in, they'll get paid 8% to 10%, and that's what [unintelligible 00:28:47.01] debt fund. And it's always that way, regardless of whether we make money or lose money with their specific investment.
So in my opinion, that's less risk; it isn't dependent upon how the asset does, it just gives them their return. So they can do that, and that's just an alternative to the stock market or other things like that, that go up and they go down... It's just - this is your return. So I would say that that's better. But can I share something that's really important?
Ash Patel: Please do.
Shiloh Lundahi: Before you lend money to somebody - and I've learned this both by being somebody that people have lent money to, and somebody who's lent money to other people. As I've lent money to other people, I've lost money lending money to other people. And so I've learned how to do it more wisely, and it's helped me when people lend money to me.
So what you want to do is you want to vet the person that you're lending money to. And then you want to vet the asset that the money will be put into. Let's say somebody goes to one of my meetups, and they're like, "I like what you're doing. I want to kind of be part of this Earn and Learn program, lend you some money, get some return on my money, and be involved in that Whatsapp group, and so I can kind of learn and see what you're doing, and everything." So let's say I have somebody that approaches me and says that. So I'd say "Okay, that's great." So, what they would want to do is they'd like to say, "Can I talk with the last two or three people who have lent you money, just to see how it's been for them?" So that's one thing.
And then the other thing is you do a Google search and find out, "Is there anything negative that's being said about this person? And if there is, what's the context?" And then you ask them, "Have you ever lost anybody's money?" So ask them upfront that. So you ask other people that have worked with them, you ask them "Have you ever lost any money?" and then find out about the deal. Where will my money be placed? And then what is the equity over and above my money? What's your system? If you get a hard money lender, and you bring me in as a private money lender, what are the numbers of the deal that you're doing?
So one thing that we've done in order to protect private money lenders or investors is we don't leverage the property above 80%. So we'll have the hard money lender come in with 90% of the purchase price, but that's usually 70% of the overall value of the property, and then what we'll do is we have a private money lender come in to help us with the downpayment and help us with repairs. But as that's happening, the value of the property goes up.
Now, I said 80%, but now because we're getting loans at just 75%, we [unintelligible 00:31:12.17] above 80%. So if we'll have a bank come in to refi us out of a loan that we have on a property that we're buying and we're holding, and they lend us 75%, we'll have a private money lender come in at 5% more than that. So if it's a $200,000 property, they're only lending us 10,000 bucks. But what that does is it helps us so that we don't have a whole lot of our own money left into the deal.
So if we buy the property well, we rehab it and we're able to force appreciation, and then we bring somebody in second position after it's already refinanced, and they just want to park money for a while, for like a year, or two, or three, or whatever, and they just want to get that 10%, this works perfectly, because now we were able to suck out usually what we have into the property. So now we have zero money into the property. It still has 20% equity, and we can go and we can do it again and do it again and do it again.
Now, this does lessen our cash flow, but the thing that's important, in my opinion, is this - I have a therapy practice. And that therapy practice has taken care of a lot of my own personal bills, and everything like that. If I can go and I can buy a property that creates $40,000 of equity, and the cash flow is a couple hundred bucks a month, I'm banking more on that equity creation than my cash flow for my overall return on that property.
So I buy a property, I create $40,000 in equity, and then over the next three or five years I paid it down by another 20,000, and when I sold it, I sold it to them on a lease option for $10,000 more than what the value was. So now I've created $70,000, in a three to five-year period of time. So if I do that, and I do that with maybe six properties every year - so this is kind of like my idea for my new model - buy six, sell six. So buy six, put them in the lease option system, and then I do that every year for five years. Year six, I buy six more, but then I also sell six that I'd had for the five years. And as I do that over and over and over again, I'm creating $60,000 on each one that I sell. So that's a $300,000 bonus every year. Does that make sense?
Ash Patel: It does.
Shiloh Lundahi: That's just part of the system that will help. And then the $200 a month per property is not as big of a deal; you know what I mean?
Ash Patel: I get it.
Shiloh Lundahi: But I get properties to sustain themselves, and so that's why it's important to cashflow positive.
Ash Patel: Yeah. Shiloh, are you ready for the Best Ever lightning round?
Shiloh Lundahi: Let's do this.
Ash Patel: Alright, what's the Best Ever book you've recently read?
Shiloh Lundahi: I recently read the book "How the mighty fall" by Jim Collins. He is the same guy that wrote the book "From good to great." I guess they did a study of all of these companies, and they've written several books from these companies that did really well, and that have failed, and everything like that... And that book was really helpful, because there's so many people that got through the crash in 2008-2009, the crash that happened, that over the next few years, their real estate portfolios just fell apart. And the question was why? Why did they fall apart? What did they not prepare for? And this book was very helpful, because sometimes you think "I'm doing really good in this area. I'm just going to crush it. Everything I do is going to just make money. I have the Midas touch; everything I touch is going to turn to gold." And that's called hubris. I didn't know this term until I had read the book; this idea that "I can't lose. I'm going to win, if whatever." And it's false. So when you do something well, it doesn't mean you're going to do everything well. And that book was super-helpful in helping me take a look at my company and saying, "Okay, where are our risks? And what do we need to do so that if something changes, we don't fall apart?" And this was really really scary for me in the pandemic, when all of a sudden we're told by the government, "Oh, we're gonna put an eviction moratorium on all properties."
To be honest, my lease options did just fine. Because in the option it says if you're 15 days late from paying, then your option becomes void. So all of my option people there are paying the rent. But my renters - I had some renters that stopped paying. And it made me really nervous, and I said, "Okay, if I don't get any money from anybody, how long can my business last before it falls apart?" And I'm like, "Oh, boy, I have like two months or three months" at the time. So I'm like "Alright, so we definitely need to change how things go, put more money in the bank, and just position ourselves so that if something happens, if there's this big shift in something, we're going to be okay." That was a great book.
Ash Patel: Shiloh, what's the Best Ever way you like to give back?
Shiloh Lundahi: This goes back to Costa Rica... I was a missionary back in Costa Rica about 20 years ago, and as a missionary, we went to people's homes, and then taught them, and they fed us... And we just had a great, great experience in Costa Rica. Anyway, fast-forward 20 years, and some of the people that I met and build great relationships with, in the pandemic they were just struggling. So because of all the people that I've met in real estate investing, I was able to bring people together, and we bought some investment properties out there. So we have two amazing properties out in Costa Rica right now. Absolutely beautiful. And I hired these people to come and take care of the property. So we have these caretakers that live on site, and they're the best people in the world. Just super-loving, and friendly, and hospitable.
So that's one way that I've given back, is I've helped the people that helped me when I was in my early 20s. I've been able to go back and bring them to a place where they have an income, they have a beautiful place to live, and they have work, and it's just a great thing.
Ash Patel: Shiloh, how can the Best Ever listeners get a hold of you?
Shiloh Lundahi: Go to a meetshiloh.com. That's my business card on there, you see my Costa Rica properties, my Airbnbs, you see my coaching program, ways to get a hold of me, my YouTube channel, and all of those things. So that's the best way of getting a hold of me. Just go to meetshadow.com.
Ash Patel: Shiloh, thank you for your time today. You started out as a therapist who wanted to earn a little bit more money to get some more training, and you got the real estate bug, like a lot of our listeners. Thank you for your time and sharing your story today. Great outlook on turning residential leases into essentially Triple Net properties. So thank you for your time.
Shiloh Lundahi: Absolutely. Thanks for letting me be on your show. I appreciate it.
Ash Patel: Best Ever listeners, thank you for joining us. If you enjoyed this episode, please leave us a five star review. Share this podcast with someone you think can benefit from. Also, follow, subscribe and have a Best Ever day.
Website disclaimer
This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.
The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.
No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.
Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.
Oral Disclaimer
The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.
