Episode 29: How to Invest in Real Estate with Family

Janelle Howard 0:00

My husband and I were looking at properties in Baltimore, besides the same kind of concept row houses, really inexpensive. So when you told me about it, I was like, "Let's go, you know, yeah, let's go. Let's do what we tried to do this two things. And I really believe I'm a firm believer that two is better than one. When you because a lot of times people are trying to do the same exact thing. And granted, you can't do everything with everybody. I'm not even saying that. But when you can connect and make something happen, I just believe that always. That can be better.

Acquania Escarne 0:39

You are listening to the Purpose of Money Podcast, a podcast where we talk about ways to build wealth and create more freedom in your life today. I am your host, Acquania Escarne.

Hey, guys, welcome back to the Purpose of Money podcast today. I'm super excited. I have my cousin Janelle Howard on the show. We're gonna talk about how to invest with family. I know a lot of you guys out there have been really wondering, is it a safe thing to do? Should I shy away from investing with family and invest with strangers? Or should I invest with family and we all come up together? So one of the cool things that Janelle and I did was we recently purchased our first hotel property. Hey, super excited about getting into commercial real estate in 2020 and crushing all goals. So we're gonna hop right into this conversation.

Hey, guys, I hope you're enjoying this podcast episode. I just wanted to take a break and share a story about an amazing woman who has created freedom and wealth in her life. I promise I'd share these kinds of stories on the podcast, and this week, I'm highlighting Teri Ijeoma of Trade and Travel. Teri has an amazing story about how she went from being an assistant principal, making $40,000 a year to a swing trader making $100,000 a day in quarantine. Ter9i started out investing just a little bit of her money and had a goal to make $300 a day. She just wanted to replace her income so she could travel more and work less. Well. Let's just say she mastered investing in the stock market and is now teaching others how to trade to check out my website the PurposeofMoney.com/invest to learn more about how Teri accomplished financial freedom through investing. Remember, check out the PurposeofMoney.com/invest. To learn more about Teri Ijeoma and her course Trade and Travel.

Hey, Janelle, welcome to the show. How you doing today?

Janelle Howard 2:46

I'm good. Thank you for having me. I'm excited to be here on today.

Acquania Escarne 2:51

Yes, I'm excited to because we have a lot to talk about. So I didn't tell the listeners this in the intro. But you and I have invested before. The hotel was not our first merry go round.

Exactly.

We've been investing for some time, and we've had some learning lessons along the way.

Janelle Howard 3:09

We have.

Acquania Escarne 3:09

So we're going to talk a little bit about that. But before we jump into the details of our investment journey, can you tell our listeners a little bit more about yourself?

Janelle Howard 3:19

Yes. So my name is Janelle Howard. I am a mom of three. I have twins, boy girl and have a four year old. I'm also a wife. But besides those two things, I also am a travel advisor. Your listeners can follow me on @HowWeTravel5 on Instagram. So we have a YouTube channel Howard Family Fun on YouTube. So we have a lot going on, on top of being in real estate investor. So we're pretty busy family. We're also a homeschool family. So we're always busy. We're always got we're always into something.

Acquania Escarne 4:01

I believe it. I remember when your twins were born and we thought that they were going to be enough.

Janelle Howard 4:05

Yes. God said not so.

Acquania Escarne 4:12

God, I love the blessing.

Janelle Howard 4:13

Yes, yeah,

Acquania Escarne 4:14

So our extra blessing. So let's hop into that. So I want to give people an idea of our timeline. I got back from Dubai in 2015. And I would say in the July period, and we started talking about getting into investing in real estate. I already had a rental by then. And I wanted to branch out. So I remember and tell me if you remember any of this too. But I remember in the fall I found a coworker at my job who had told me this crazy story. She said, "You know my husband and I we went to school in Philadelphia and we love to go back. So we go to Philadelphia like every weekend, and now we're about to close on our house in Philadelphia." And I said, "well are you closing on a house in Philadelphia when you live in DC?" And she said, "Oh, because it's cheaper to stay in a house, when we go for the weekend than it is to stay in a hotel." I was like, "What? What are you talking about? Like, please tell me more." So that's when she proceeded to explain to me that in Philly, you can get row houses for really affordable rates, like $30 to $50,000. And you could have a really low mortgage, say $200, or $300. And if you're living in it even better, but if you wanted to turn it into a rental, you have a great opportunity for cash flow, because the rent in Philadelphia is really high. So I, I learned that and then I remember saying, "Tell me more."

Janelle Howard 5:45

Right, right.

Acquania Escarne 5:46

I want to meet your realtor. So that's how I ended up getting introduced to her realtor. And I think I told you about it. And then I remember it was like, December, and we were looking at five houses in Philadelphia in five hours.

Janelle Howard 6:01

Yes, yes, I remember everything. I mean, I wouldn't have remembered until you just tell that story. I should remember that. But I don't know if you know this. And I thought about this today, I have been wanting to be in real estate investing for years and years and years and years years. And in my early 20s, I used to go to seminars about real estate investing with your dad.

Acquania Escarne 6:27

Ah, I think I did know that. I think...

Janelle Howard 6:30

You did? Yes. So I used to do that with your dad. So it's something I've always been interested in. And I think around the same time, you might have been talking to your friend, my husband and I were looking at properties in Baltimore, because the same kind of concept row houses, really inexpensive. So when you told me about it, I was like, "Let's go, you know, yeah, let's go. Let's do what we try to do this two things." And I really believe I'm a firm believer that two is better than one, when you because a lot of times people are trying to do the same exact thing. And granted, you can't do everything with everybody. I'm not even saying that. But when you can connect and make something happen, I just believe that always. That can be better. That can be better.

Acquania Escarne 7:17

I totally agree with you. And so let's talk a little bit about the process we went through. So yes, we went to Philadelphia, we looked at properties in person. But we got lucky. The first time we went to look at properties, we found one. Yeah, it was a property that was being sold by the estate of someone who had just passed. Another good thing about the property is its previous owner basically lived there for the last 20 years. So it was under the same ownership fairly well taken care of. I mean, it needed cosmetic new kitchen, and it was nice to upgrade the flooring. But it pretty much had solid bones.

Janelle Howard 7:54

Right, right,

Acquania Escarne 7:55

from an appearance perspective. So we ended up putting an offer on that place. And we're really lucky that they took our offer right now. Um, I do want to talk about some of the things that we did outside of that. So remember when I was like, we need to do paperwork? Yes. How did you feel when I was like, here's the joint venture agreement, here's how we're gonna split the terms. Like what was your reaction to that?

Janelle Howard 8:22

I thought it was a good idea. I also believe in paperwork, right? So I believe that yes, the same time two is better than one. I also believe that when you have great intentions, right, and it's not anything shady, you don't mind putting it on paper, right? So why not? Why not protect our interest? My interest and your interest? So I thought, "She's talking my talk, I like it, let's go you know?" That's exactly what I thought.

Acquania Escarne 8:55

Okay, good, cuz I was a little nervous. I was like, "she gonna be like, she don't trust me?" But let me tell you, you need the paperwork, you need to understand exactly what everyone's expectations are.

Janelle Howard 9:06

Yes.

Acquania Escarne 9:06

And to really define a responsibility. So in our case, you know, I was the person who kind of handled the books and you were the person who helped handle like contractors and talking to property managers sometimes and getting like logistics done so good. So word to word to the wise if you want to invest with family, definitely do the paperwork and talk about responsibilities. Okay. So next thing we did was we had to go to some contractors. Oh, my goodness. So you remember how many he we talked to like three contractors?

Janelle Howard 9:39

So many. Yeah, I feel like it was definitely more than three. I think maybe three seriously, but we definitely talked to more than three and we worked with at least eight different people I would say, you know now granted we got connected through contract. Just two different people. But we definitely had a team that was either working for us in Philly or was not working for us.

Acquania Escarne 10:10

I like like how you nicely said not working for us, aka they turned out not to be good contractors and we had to fire them.

Janelle Howard 10:19

Yes, that's what that means.

Acquania Escarne 10:21

We did have to part ways with one contractor in particular on that deal. But I would say in the end, we learned a lot, we learned about what was necessary for a property to rent well, which we had an awesome realtor gave us the real deal points like ended, new kitchens give you more money, new bathrooms give you more money, but don't worry about certain cosmetic issues. So that was good. And then we met this bomb contractor who ended up finishing the work after we had the fire contractor. So shout out to James Price on that one. You are amazing. So I would say overall, let's just sum up. How did we think that project went? So let me do my pros.

Janelle Howard 11:03

Okay, you do your pros..

Acquania Escarne 11:05

and then you could throw out some cons?

Janelle Howard 11:06

I'm ready. Yes. Cons and you got the cons?

Acquania Escarne 11:11

Or, or your your perspective. Right? So my pros are, we had a steep learning curve, but we did get cash flow in the beginning, right. Other Pro, it was a cash deal, we closed in less than two weeks. And we were able to hit the ground running. cons, we definitely learned the hard way about contractors, right. And another Pro is because we brought cash to the deal, we were able to do a little bit more than most people would have been able to do. But there are cons to using your own cash for the deal. So...

Janelle Howard 11:54

right so that that's definitely one of my cons is bringing cash at a deal. I feel like for that particular deal. We should have used other people OPM other people's money, right, we should have. That's what I feel because then what ended up happening was a lot of our cash was tied into that. And it wasn't easy to refinance as we thought because that was the plan. Our plan was to refinance in a year. And it wasn't as easy as we thought, because the property wasn't ended up being the money that we thought we would be able to refinance. So a lot of things happen. And so then what we plan to do didn't actually happen. So that is definitely was my con for that property. And then to, although we I took trips to Philly to meet with the contractor, I think you did. And we had I mean, we tried our best to be very diligent. Have send us video of your work, all the things that they say to do to make sure that if you're not there, you have the contract to send your video, the work that they're completing, we definitely did that. Set goals for the contract of things that needs to be completed by certain day. We definitely did that way. And we checked up on the contract there. So I don't know that we could have done any more in that aspect of it. No, we could have I'm sure but what it is I don't know that. But but it did not work, right. So we ended up being or having the same story that so many investors have, you have a contractor doesn't do the work, they took the money, and then you end up re spending that same amount of money to get the same things done that you thought you were getting done the first time. So we definitely had that story. And and it just so that was just a con but I don't know, do you feel like there was something else that we could have done to ensure that that contractor worked out for us?

No I think at the end of the day, he was a good talker, but he took on more than he could chew. You know, like, he low balled his price to get the project and then was surprised that he actually needed to do the work. So I...

I don't think his skill level was there. His skill level wasn't there. That's what the issue was with him. He just didn't have the skill to get it done. So again, I don't think and I granted it cost us but I appreciated the lesson in the sense sometimes. Some lessons cost you something so I appreciated the lesson. I don't I mean, we didn't go under or anything like that. We were able to still get the project done. We still got it all done. You don't want that to happen, but we definitely learned a lot through that experience.

Acquania Escarne 14:56

I agree. I agree. And in the end after two years of having a property, when a real estate investor came along and offered cash to help us get out of the deal, we took it. It took us at that time, it was a great time to sell Philadelphia was booming investors were looking for properties hand over fist. And we were just tired of doing the commute in the checkout. And, you know, we were facing another tenant who might have been on the verge of eviction, eviction, have some financial issues, and we're paying a rent. And so I will say one of the hardest things about being a landlord is having to move someone out of your home at a time where, you know, you'd love to keep them there. So they have a place to live, but it's costing you money, right? Paying their rent. So we did have to make up some real business decisions, right? Yes. Oh, that was a learning lesson. And and I think in the in, you know, we didn't make an overwhelming profit, or we didn't have the deep losses we barely came out on even. Right, but I will say the good news is it didn't discourage us, right.

Janelle Howard 16:02

Yes, we were not this, you would think and and it wasn't a bad working experience. Like, you know, it was a good working relationship. We had the property, we did the best we can. But at the end, it was just, it was taking up a lot of our time, and we weren't seeing the return on investment for the time that it was taken to deal with the property. We were like, "Okay, no, so yes, is that:" And somebody came to us? We didn't put it on the market. We didn't say," Oh, this, somebody said, there's an investor interested in this property." And we said, "okay, okay." And in the end, they they gave us our Ask, right?

Acquania Escarne 16:41

Yeah, yeah, that's true. They gave us our ask and pay to cash pay this cash deal. So we close really quickly. So that was, that was all good. So now, let's fast forward to 2020 two months ago, yeah, um, two wonderful women. Davonne Reeves and Jessica Meyers, were on the Purpose of Money podcast on Episode 26. They are a part of Epiq Collective, an organization that helps people come together and invest in epic opportunities. Collectively, they came to me with a hotel opportunity to invest in a Hilton. And initially, I would say, this is how I know God is good, because the first email I missed it, okay. And the second email came, and I said," Hmm," and all it said was, would you be interested in a hotel opportunity? Okay, so I responded to that email. And then I got the numbers. And I saw a video that Davonne Reeves had created about the opportunity. And then I sent it to you, right? So tell me, how did you feel when I said, so now? as I usually do, I'm the instigator most things.

Janelle Howard 17:57

Yes.

Acquania Escarne 17:58

"Um, who would you like to invest in a hotel?"

Janelle Howard 18:01

I thought, send me the information. Like I was like, okay, send me the information because, you know, low key, right? When you have an investment mentality and a mentality to invest there, you want to invest in an in real estate, right? Commercial real estate, multifamily real estate, however you want to invest? That was something that I was like, "Hmm" You know, but it wasn't an opportunity I was looking for, or nor was it an opportunity that I thought would present itself in 2020, right? So when you said I said send the information, reviewed the information with my husband, and he was the one getting the initial emails at first, and we reviewed the information and I was like, "Okay, okay" and then we read, we also talked about because we talk weekly, we have accountability chats where we discuss weekly, just different things, ventures that we're doing and how we move forward. We had a conversation about vehicles in order to that we could use to obtain this or to be a part of this epiq community. So I said, "Okay, okay, okay. Okay. Okay. Okay." So that's how that was my initial thought, okay, my interest was piqued.

Acquania Escarne 19:21

Okay, good. So I take interest. And I'm really excited about that. Because when I first saw and I started to send it to one person, and then I said, I know another person, another person, and believe it or not, I just started to casually mention it to people that I thought might be interested. It was my first experiment to see who's really interested in leveling up their finances and investing in real estate. So I was super excited when you like started asking more questions. You were on the question and answer webinar, and you were like going down the path going down the pathway. And then I have another sorority sister who is also a client who decided to invest as well. And I've just mentioned it to her in passing, like, "Oh, you want to invest in a hotel? "And she's like, "Tell me more." So you'd be surprised? how, you know, closed mouths don't get fed. So Right, right, open your mouth and talk about it, right?

Janelle Howard 20:18

So you know, what can I pause? I don't want to get you off there. But I think that's something that we shouldn't spend a little bit of time on. Sometimes people don't want to say anything, right? Because they feel like if I say something, then they'll laugh at me or I'll be embarrassed or people think, who do you think you are? Who does she think that she is? So we have all these hang ups about something. But when you have all those hang ups, like you said, closed mouths don't get fed, you can miss opportunities to impact others, if you're the one with the with the opportunity, or you could miss an opportunity to be impacted. Because you're not saying anything. If you don't share your goals, your visions and things, you know that I'm interested in real estate investment, you know that that was something that could possibly piqued my interest. And that's how you said it. But that's because we've had those conversations.

Acquania Escarne 21:18

That's exactly right. And now that we've closed, and we did a Facebook Live about it and put it on social, I found that there are way more people who wish that I had asked them too, they're like, "Why didn't you come to me I had money to invest?" And I would have been interested in doing a deal with you. So you know what I'm saying to those people, get on my list, next opportunity, I'm gonna let my list know. So subscribe to the Purpose of MMoney podcast, and subscribe to the Purpose of Money newsletter, and I will make sure that the next deal comes along, you know about it, right? Email and start talking with me. Because now I'm so inspired to empower more women. So for background for the listeners, there are about 2%. 2% of all hotel owners are people of color are specifically African American 2%. And of that 2%, even less are women. So to have the had the opportunity to bring three women together on a deal that had a very limited amount of investors to begin with. And a third, almost 25% of them are women and black women is amazing. It's amazing. And I'm super proud of all of you for stepping up to the plate taken action. But I also want to talk about, you know, taking risk, you know, I was on the fence, I wanted to get into commercial real estate this year, I wasn't quite sure how I was going to do it. And I was looking for opportunities. And I actually was partnering with other women that I know source these types of deals. And I put my money aside, so I saved and I put my money aside so I could be ready. And I used a very powerful tool is called the EQ RP, it's a investment account, where you can save for retirement as an entrepreneur, but you can also take money in that account and invest in alternative investments such as real estate, hotels, lands, Bitcoin, gold, silver, whatever you want, I'll make sure to include more information in the show notes. So you can link to it and learn more. But essentially, the EQ RP is a enhanced qualified retirement account. And it helps entrepreneurs and anyone else that has money and is investing in real estate or investing in creative ventures, access to their retirement money, that they can invest in the products and the strategies that they want. So I still have my 401k with my job. But I also have this additional retirement account where I'm able to save more money and invest in what I want to invest in. And we both did that. I encourage you now to open one. And that's the vehicle that she used to finance her hotel acquisition, right. So I just want to tell everyone out there that you know, in general, you can take advantage of these opportunities, you just have to know about them. Yes, because unfortunately, a lot of these deals cannot be advertised to the public because of the rules. And you didn't have to be an accredited investor for this either. That's another plus side. So this particular deal. Most people when you're doing investments like this, you have to be accredited, which means you know, you have at least a million in assets, or you're making over $300,000 a year in a two parent, two family household. And you're expected to make that same amount that year, or you're single and you have a high level of assets. And I think it's $200,000 a year in income. But this was a deal where you didn't have to meet those requirements, right? You had to disclose if you didn't meet those requirements, right? So that means more people who were not accredited investors could be a part of it, but they had to know about it. So my advice to you is to network and to surround yourself around people who are exposed to these opportunities. Because within my own circle, I know accredited investors and I know non accredited investors, and they both were able to take advantage of the deal. But you would have never seen this advertised on Facebook, right? Instagram, right? So that's the other thing is just keep your eyes and ears open. I think Janelle your point about talking about your goals. So other people know what they are. And then they can think of you and opportunities come along is is very, very important. I think that's really smart tip.

And then let's see what happens. I mean, end of the day, investing in a hotel is a long term strategy. It's a three to five year project for us. So we expect to, you know, get a return on our money, we, we hope to triple or quadruple our money, but we know that we're not gonna expect to get our money back in 6 to 12 months, right? That's that's not what we're about. So that's really dope, too. But other than that, what are some what are some, I guess, advice that you would give to someone who's considering investing with family? Because I would say so far, our experience has been excellent. But it's been two of us. We haven't actually expanded out to other family members, or other types of ventures. So yeah, you know, what advice do you have for that?

Janelle Howard 26:28

Um I okay. A couple of things. One, I think we talked about it earlier was the paperwork, right to put everything on paper, but then also really begin to build rapport, right? Because sometimes with family, you know them in one way, right? You know them at the family, get together, you know them at the barbecue, you know them at the Thanksgiving dinner, but you don't know them as a business person. So I do think that I don't, I would caution you not to just be like, "Okay, let's do this tomorrow," but just start having conversations, because that's really what we were doing. We started by just having conversations. Before we even did Philly, right. We were just talk, we would just talk we would just talk. And I could tell that our synergy was going to work well, right? Because you are an absolute go getter. I'm not necessarily the person that's going to find the deal. But I'm definitely the person is going to be like," Okay, once you have it, what do we need to do?" I'm pushing forward, and I'm gonna push this thing all the way through, I'll make the phone calls, I'll do the things right. But I don't necessarily because I'm always home with my kids. But anyway. But anyway, so that so that synergy worked well works well for us. So I think that's important, too.

And then yeah, I think really, that's the key paperwork, and just having conversations outside of, you know, normal family conversations to really understand a person's mindset when it comes to business, right? Because you want to know that this is going to work well for you that we will match up that our energies will come together in a good way.

Acquania Escarne 28:19

That's true. That's good advice. That's good advice. And I I second, all of that, I really don't have much to add, I think you just got to do it sometimes see how it goes and then tweak it the next time. And I will say one easier thing about this deal is we it's all passive. We are right in the money. And we will sit back and wait for the dividend check Exactly. But you know, when we invested in a rental in Philadelphia, we we were responsible for a lot of the management and a lot of the process and then a management company monitor taking the rent. So that's another thing I want to highlight for people if you're really interested in investing in real estate, everyone doesn't have to be a landlord. So I want you to walk away with at least that you can be an active investor where you're doing the day to day you're doing a flip, you're doing wholesaling, you're looking for houses, you're looking for deals, you're renting them out, that's active real estate investing, but passive real estate investing like we're doing that's hotel acquisitions, mostly family syndications. It's where you invest capital, and you're still involved, like, don't get me wrong, we're gonna know the money sheets for the hotel every month, we're gonna meet with the group to go over the numbers and make sure hotels performing. But we don't have to make sure employees show up every day. We don't have to make sure the rooms have been cleaned, right and other things like that. hotels are managed by large management companies that handle that type of day to day. So that's really good too because as a life insurance producer, a mom a nine to fiver, entrepreneur, I don't have time. Like I've come to that point in my journey where I've seen Save the capital. And now I want to invest it in projects that are fulfilling to me and will return a good investment for my family. So that's my focus. And that's what I've been working on. So.

Janelle Howard 30:12

And I think that's one of the realizations that we came to, is that we needed to find something where it was a lot more passive for us, because it was just so much legwork in Philly. And it wasn't that big of a return for all the legwork that we were doing. Also, I wanted to add research, right? So what another thing I do, right when when, when we have our conversation is you tell me about something. And then I immediately go all in to finding out more about it. You say EQ RP, I'm like, oh, EQ RP, do I need to know everything I need to know about EQ RP. So that's another thing. I mean, if you really want you, you, you have a responsibility to play in your own knowledge and gaining up information. Because sometimes people don't like when you just don't want to, like learn anything. And they got to tell you everything. So, you know.

Acquania Escarne 31:04

Yeah, that's good advice, too.

Yeah

And you should know, just because you're a passive investor, and you're investing capital doesn't mean you shouldn't do the research on a project, you must do due diligence. If you don't do the due diligence, you can't confirm that it's a good investment. Yes, you know, and every investment has the potential to lose money, and there is a risk, right? So you have to be willing to take that risk, you have to understand what the risks are. And you have to understand the terms of the deal. You know, when are you going to get paid? How much you expected to get paid? How do you know if you're on schedule to get the returns that you have been told or expected from this property? Those are a lot of things that you need to ask beforehand, right. So we ask a lot of questions. I think we were demanding students, personally. But I didn't want to sign any paperwork until I knew for sure what I was signing up for. So very good tips. Thank you so much for that cuz I appreciate it. I really like this conversation that we had. I think that a lot of people should listen to it and take advantage of the opportunity to, you know, responsibly invest with family if you're ready to do so there's a lot of ways to do it. Please check out the show notes if you want to learn more about the types of accounts that you can use. But I want to make sure that if anyone's interested in booking travel, how do they reach you? Please share your website and your handles again?

Janelle Howard 32:28

Yes yes that's a really really good so you can definitely find me on Instagram @HowWeTravel5 is my handle @HowWeTravel5. Also, I did mention Howard Family Fun is our YouTube channel.

Acquania Escarne 32:42

Yes, I'll put everything in the show notes so people know where to find it. I'll make sure to link to your your websites

Janelle Howard 32:48

and links to the website.

Acquania Escarne 32:50

Oh, yeah, how we travel number five, the number five.

And you can you find me on Facebook too. I'm really active on social media so so yeah, look for me on social media and Acquania's gonna put the link to the website in the show notes.

Excellent. Thank you guys. If you need anything, check out the show notes. Make sure to hit me up. Subscribe to all episodes so you never miss a beat. And remember to subscribe to the Purpose of Money newsletter if you want to get the next deal. Thanks so much for listening guys.

Janelle Howard 33:23

Thank you for having me.

Acquania Escarne 33:25

Keep building generational wealth.

Thank you for listening to the Purpose of Money podcast. For more resources and information, check out my website ThePurposeofMoney.com. And while you're there, please sign up for our newsletter so you have the latest information on new episodes and blog posts. Until next time, keep creating freedom in your life today.

Transcribed by https://otter.ai