Thursday, September 12, 2013
Blog Post 1 - Informational Interview
Blog Post #1 - Informational Interview
By: Joseph Krahn
When people think of real estate, they usually do not think of entrepreneurs, and that is unfortunate. Some of the most successful people in real estate are entrepreneurs, and they are successful because of the entrepreneurial thinking that they bring to the real estate market. For my informational interview I talked to Eric Nasalroad. Eric teaches entrepreneurship here at Fresno State and is the head of the entrepreneurship program over at Reedley College. Eric has a lot of experience in starting up and running business, and some of those businesses are in real estate. Eric also gets involved in the community and with his students by helping them start businesses.
Q1: What is it that you do in real estate?
Eric said that he mainly just buys and sells properties, and owns rentals. What he likes to do is purchase a rundown, cheaply priced piece of property. He then rehabs the real estate, which he mostly does himself, and then rents it out until someone offers him the right selling price. He also does this for apartment complexes as well.
Q2: How did you get started in this field?
When Eric was a kid, his dad dabbled a little bit in real estate. When his family moved to a different house, his dad kept their old house and rented it out. This was the first exposure that Eric had to the real estate market.
Eric's first investment in real estate was in 2007 when he and a friend bought a triplex. They rehabbed the property and rented it out.
Q3: What was your educational background?
Eric has a MBA in Entrepreneurship from Fresno State. But as far as real estate goes, Eric didn't take any college courses. The first class that Eric took was a seminar. It was this class that finally pushed him into real estate. Eric also talks to realtors, investors, bankers, and continues to go to seminars, but he is mainly self-taught in matters concerning real estate.
Q4: What kind of education would you recommend to someone who would like to start doing real estate investing like you?
Eric believes that the best resource that people can use is the Internet because there is so much information and data out there about real estate. If you know what to look for, you can do just about anything that you want on the Internet.
Eric also suggested that real estate investors need to have at least a basic knowledge of how finances work. You need to be able to figure out what kind of investments, depending on your risk tolerance, will work and which ones will not: you do not what to be wasting your money on a bad deal. Also, you need to be creative with finances: you can talk to one person and they will say that one piece of property can be a waste of time and money, but if you ask someone who is entrepreneurial, they will be able to find a way to make money off of the deal because they will find a creative solution.
But the thing that he stressed the most is that you always need an out. You do not want to be tied down with a lot of expensive property when the market collapses. Make sure you buy properties at the right prices, not an over inflated value, and make sure you have exit strategies in place in case things start to go south on you.
Q5: What are your major responsibilities?
Eric's responsibilities are to set up the deals either for buying or selling the properties. He also does the initial rehab. His partner does the financials, and they have a management company that deals with the tenants on their behalf.
Q6: What is the most rewarding aspect of doing real estate?
The most rewarding part of real estate for Eric is rentals, and that is both financial and personal. When he rents a place to someone, he is helping to provide a home for that person, and sometimes this means more to him than the money. He enjoys taking junk and turning it into a healthy environment that is safe for families to live in. He also likes to give out Christmas gifts to his tenants to show that he appreciates them.
Q7: What is the least rewarding aspect of doing real estate?
One of the earlier fears that Eric had about getting into real estate was the vacancy issue. An investment can go wrong very fast if you cannot get people to occupy your space. However, now Eric has figured out a system that allows him to add a vacancy factor into his investment equation, so he is not as worried about that issue anymore.
The least rewarding part of real estate is dealing with the people. If you get bad tenants, they sometimes tear up your property and just don't care. Also, if you get people who participate in crime you might find yourself in trouble just because you are the landlord: Eric got a notice from the Fresno Police Department on one of the properties that he rented out saying that he needed to deal with his tenants on that property or face fines. Even if you did nothing wrong you can still get in trouble.
Q8: What is your average return on investment?
When Eric's company buys a rental property, their target ROI is 18 percent, and he has gotten up to 29 percent on certain deals.
The thing that he likes about real estate is that once you buy one house you can use the cash flow from one property to buy another one and this effect keeps multiplying when you start owning more properties. The money from your job helped you buy the first property, and the money you make off of your property helps you to buy other properties so your job money isn't tied up into real estate.
Q9: Which professional journals and organizations would be most helpful in evaluating the field?
Eric said that he looks at the Gazarian website for finding out what is going on in the real estate market. He also used to use http://forclosures.com/, but that site has been shut down. Sometimes he reads the CEO National Conference, and he talks to his management company because they have their ear to the market and to the realtors who work in the field.
In conclusion, this interview with Eric helped me see the potential in the real estate market. You don't necessarily have to be a big tycoon to make money: Just a few properties can generate a lot of revenue for a person. But you also have to be care with what you do since the real estate market is not very stable and can cause you to lose everything that you gained in it.
I would like to thank Eric Nasalroad for taking the time to talk to me about what he does in real estate.