How Anyone Can Create Stress-Free Passive Income Through Real Estate With Laurence Jankelow

REW 20 | Stress-Free Passive Income

 

What comes after property acquisition is management, and it’s a whole different ball game that can be frustrating for some. Providing a solution on how to create a stress-free passive income is Laurence Jankelow, co-founder of Avail. Being a landlord himself, he realized the cost that accompanies outsourcing property managers, so Laurence and his partner created a tool and system that can automate most of your responsibilities as a landlord. He also explains the importance of having a defined system and process in place as a landlord and shares some strategies on how you can achieve it.

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How Anyone Can Create Stress-Free Passive Income Through Real Estate with Laurence Jankelow

I am excited to welcome to our show Laurence Jankelow. Laurence is the Cofounder of Avail, an all in one software solution designed for do-it-yourself landlords that are used by more than 600,000 landlords and tenants across the United States. Prior to launching Avail, Laurence spent seven years in data analytics first as a consultant at Protiviti Chicago and then at Goldman Sachs. Originally from South Africa, Laurence has a heartbreaking spirit, and together with his Cofounder Ryan Coon, they developed the idea of their company on a napkin that solves the needs of thousands of landlords. I love that, the napkin business plan that launches something that changes the world. Laurence is also a long-term real estate investor with a passion for three-unit multifamily properties. Laurence, welcome to the show. How are you?  

I’m doing well. Thank you for having me.

I’m excited about this topic because few people talk about tools that can systematize the do-it-yourself landlord process and systems is what I call the key to bliss. I only work in my business and I manage all my properties. I only work about 5 to 10 hours a month and it’s because of my systems. Systems equal bliss. You are our bliss guy. I’m excited.  

I’m happy to be that person.

Could you tell us a little bit more about who you are and what brought you to this?  

I’m a landlord myself. I’ve got six units in Chicago. I started my first foray into real estate buying a three-flat from a friend who I worked with at Goldman. When I was there, you’re a full-time employee. You’d imagine that a company like that you’re putting in some hard hours and I had these properties on the side and it’s tough doing both. My buddy and I, we constantly stay in contact about real estate investments. He was doing the exact same thing. He was at a different bank and we got together and saying, “What are you using?” We would share stuff with each other. I would send him Excel spreadsheets of what I was using for a rental application where I’d merge cells together and make it look pretty, print it out, and give it to a tenant to fill out. He’d have his rent roll in Excel. He would show me like, “These rows are highlighted in green because I received the rents.” We realized that’s not how professionals would manage their property. We went looking for software tools and systems as you’re saying to help us and automate it. What we were seeing were only things available for someone if they had 1,000 plus units at least back then.

For us, we could do those, but the costs would be more than the rents we were making combined. Not feasible. It was then that we decided we’re going to quit our jobs and start a business that helps solve this problem. We realized it wasn’t just us. It was other landlords of our size and nature. What we didn’t know then was how many of them there are and there are eight million do-it-yourself landlords with less than ten units out there. A large audience we set out to build it. We couldn’t get an engineer to come and do it for us. We didn’t have the money. We rolled up our sleeves and taught ourselves to code and built the website completely ourselves and then it took off from there.

We started thinking about, what are the things that we need to do to manage this property that a professional already has access to? We thought if you need to find tenants, you would normally go to the MLS. We couldn’t do that so we started thinking, “Where else can you put listings?” We built a tool that syndicates the listing to Zillow, Trulia, HotPads, PadMapper, Lovely, all the places that tenants look for houses. We hooked into TransUnion to get criminal credits and eviction background reports. We hooked into a payment system to allow tenants to pay their rent online. We provided state and city-specific lease agreements that could be signed online. We took all of the operational stuff of being a landlord and moved it online and automated 90% of it. You could flow through it quickly and get back to either your life or your other full-time job.

Property managers definitely provide a lot of value, but they also come at a huge cost. Click To Tweet

This is the thing and ladies that are reading, understand that the large investors are such a small percentage. It’s a large business in the United States. The biggest percentages of businesses are small businesses. What makes the world go round there? They’re what makes our economy go round. It’s also true for landlords. Most of us are the little guys. You can be a multimillionaire and be a little guy but setting up these processes is going to be key to keeping it easier for you. 

The average number of units that our customers have is three units. Most of them only have one unit. You can see it’s skewed towards more if you don’t mind the term mom-and-pop landlords, it’s the small business landlord.

A lot of people talk about the way to keep it blissful is to get a manager. I have never gotten a property manager. It’s not my way, but I will say that I have all my properties close to home. Mine are all within a 50-mile radius. Talk to me about do-it-yourself versus a manager and let’s talk about distance. If I were to invest outside of California, which I’m looking at doing because of the way prices are and lending mostly is what I’m thinking about, could you talk a little bit about that, Laurence? 

Property managers provide a lot of value but they also come at a huge cost. For most landlords out there, that cost is going to take you from being profitable to potentially breaking even, and more often than not, not making money on that property. Typical fees to find you a tenant can be something a half month’s rent or full month’s rent. If you want the manager to help you with handling maintenance and collecting the rent, then you’re paying 10% of the rent. On $1,000 rent on one unit, you might be paying $2,400 for the year and that might be the entirety of your profit. If that’s you and you’re using a property manager, your best bet is probably to sell the property because it’s not worth it. If you’re not making the money, then you shouldn’t necessarily be in it. The alternative is to try to figure out what is that property manager doing? How can I do that myself, affordably, and not do it wrong? The value that a property manager is going to do is they know what they’re supposed to do and they have access to tools. If you can get access to tools and you can get access to a process when you’re not going to make mistakes, that’s your better path.

Is the cost of the software significantly less? It’s going to be less than 10%, but it’s another one of those things that I think about that’s going to be another cost involved. You don’t need to give us numbers, but could you give us an idea of what that looks like?  

I don’t mind giving real numbers. When we set out to create Avail, we did it with the purpose of reaching everybody who needs that assistance. It’s free. If you want to use us to list your property and find tenants or collect rental line, all of that’s free for an unlimited number of units. We do have a premium version of it. If you wanted to, for instance, have late fees be automatic, you might want to upgrade for that but by no means, do you have to do that? We’re trying to put it out in front of everybody, make the process seamless and easy. If you put any price point on this, especially because most people aren’t making that much money on the rental, that’s probably a misconception that people have out there that small landlords are rich but they’re not. The average person, maybe they’re making $100, $200 a month on a single unit. It has to be affordable for them. When you compare that then to a property manager, it’s night and day difference.

Thank you for that. Talk to me a little bit more about the process of instituting this into your business.  

That’s critical even if you don’t use Avail or software, you should have a process at the very least. The process is always better supported by some system or software, but your process should always be the same. You want to go through a standard way that you screen tenants, find them and you’re describing the property. Those things help you avoid violations of fair housing laws. You want a lease agreement that you know is going to work for you, state and city. You need all those things and you need to create a process around those things. Similar to rent payments, you have to decide upfront, what are you going to do when a tenant doesn’t pay? Do you charge a late fee? How many days, grace period do you want to give? Also, the law dictates some of that too. You want to know those things and set up that process. If you’re trying to save time and money, you might want to also then supplement that with a software solution that’s going to fit your process. The process is first and foremost, the most important thing that you should try to do and set up when you’re becoming a landlord or if you’re already one and you can’t describe your process in those areas I mentioned, it’s a good time to take a look at that.

REW 20 | Stress-Free Passive Income

Stress-Free Passive Income: In real estate, in general, you do want to be educated in what you’re doing and understand your legal requirements and your obligations.

 

One of the things that I tell people through my coursework is the best way to start setting up a process when you’re going through it the first time is to take notes on what you’re doing because the smaller landlord isn’t usually doing this on a daily or monthly basis, they get rents once a month. They might buy a house once a year. If you have to reinvent the wheel every single time, that takes a huge amount of emotional and mental energy and time. Many of us are busy. A lot of the ladies that are reading this are executive women with high power jobs that are already working 60, 70, 80 hours a week. They don’t have the time to reinvent the wheel and then it hinders them from taking their business to the next level buying that next property when they’re ready. I love this idea of having that process set that is all automated. For me, what I have often said is take notes the first time you’re doing it so that you’ve got those notes and you know what you’re doing the next time. Talk to me a little bit more about if you’re a first-time homeowner landlord and you’re setting up your process for the first house, what is it that you go through to do that? I know that I beat the bush around that but this is what I’m thinking about, Laurence. As a busy woman, do I need to learn a bunch more software and spend a huge amount of time setting up processes that I’m not going to understand is going to cause me frustration? That’s the real question.  

With Avail, you don’t have to learn much. Although we take significant pride in teaching people, we try to do it as they’re going through it in a way where it doesn’t feel like you’re having to sit down and study for a course. In real estate in general, you do want to be educated in what you’re doing and understand your legal requirements and your obligations. It’s time-consuming and hard to go and teach yourself those things and curate that stuff. That’s where I feel like Avail is super helpful in curating a lot of that content for our customers. If you’re a first-time landlord, depending on if the property you bought already has tenants or not, there’s a different path you would take. If it doesn’t have tenants, then you’re going to need to find your first tenants.

Our system is essentially going to ask you to add your units. It’s going to guide you through how to create a listing step-by-step the entire way through. It’s going to tell you where the listing is going to go, why it’s going to those places, what you should do when a lead responds to your listing, how you should screen them. It’s going to give you canned messages to use. A lot of it’s designed to keep you from being in legal trouble. You don’t want to put in your listing something perfect for families or young couples because you’re going to get sued for housing violations. We provide a lot of that material and then next to it, we’ll explain why it’s written such a way. It’s up to each individual how deep they want to go into the learning or if they want to adopt the process we’ve created for them.

Ladies, this is a thing, no matter where you get started, you’re going to have a learning curve. If you can get some tools that are going to help with the learning curve, even if there is learning there is going to be, how long is that going to take you? This sounds like a tool that will speed up that process, right?  

Yeah. If someone’s getting started and they don’t know what they’re doing, let the system do it for you and you can learn as you’re going. If you want to change what the system is recommending, you can, but by no means, do you have to?

Could you tell us about how to find a good real estate deal?  

Good real estate deals are everywhere and hard to identify. I’ve always thought when you make your money as a real estate investor is at the beginning when you buy it. You have to buy it at the right price. I don’t know that I can specifically say, “Go to this website and you’ll find good deals.” When you’re looking for a good deal, there are some things you want to look at. I’ll throw out some terms that are relevant. I don’t want to term wash people here, but for me personally, I look at what the gross rent multiplier is a lot. Each city or part of the city will have a multiple on the rental income that you’d expect to pay. If you can get under that multiple, then you’re essentially getting a good deal. It’s a quick way to assess if it’s a good value or not. It’s a twelve times rent in Chicago standard rent multiplier, where I buy my properties. If I can find a deal that’s less than that, I feel like I’m getting something of value there.

Give us the formula for that because people throw around that term a lot.

A process is, first and foremost, the most important thing that you should try to do and set up when you're becoming a landlord. Click To Tweet

The gross rent multiplier is you take the purchase price and you divide into that, the annual gross rental income, and that will give you a multiple. If you make $10,000 a year on gross rent and the place costs $1,000 then that’s ten times multiple. If you can get what the average is for your area and you get under it, then you know you’ve at least got a good deal for the area. You can’t stop with that though. That’s a quick weed out. You didn’t have to look at the rest of the numbers and how they fall out and what’s it going to cost you to run the place versus what you’ll pull in. Are you expecting vacancies? All those things you should try to use some tool to calculate out a net operating income for the property. What a cash-on-cash return might be for the property and is that better than your next best alternative? For me, I look at properties that have a minimum of 10% cash-on-cash. If I’m buying $100,000 property and I’m putting $20,000 down, I want to make sure I’m getting at least $2,000 a year in net income out of it, or it doesn’t meet my cash-on-cash requirements.

Let’s slow down with that, Laurence. That was good. I want to highlight it. Ladies, we talk a lot about leverage. You buy $100,000 home, but you only put $20,000 down. How much money have you put in? Your cash investment is $20,000. When we’re talking about cash-on-cash, we’re not talking about how much you are making on $100,000. We’re talking about how much we’re making on the money that you put in. It’s so you ladies know, I account for the entire amount of money that I put in. Let’s say, for instance, I put $20,000 in and I had $5,000 in closing costs, my cash-on-cash is on $25,000. I do it a little bit differently than others do it but you should have that number. What does that look like for you each year? What’s important to you? 

I couldn’t say how important that is. It’s critical. You’re going to make all your money by buying correctly. It’s not one of the easier steps to do. There are a lot of online tools that will help you calculate that out. Avail has one as well that people can find, we call it our rental property calculator. It’s something that’s valuable. When you calculate that cash-on-cash return, that’s the thing you should potentially look at, what other investments are out there? No one’s got unlimited money. You want to take what your best option is. If you can get more than that rate somewhere else, by investing in your friend’s hair salon, in the stock market, or in something else, then you potentially should be doing that instead. Real estate generally is a good investment cash-on-cash that doesn’t have the full picture either though, because there is appreciation in a property. You can start to calculate out an ROI or an internal rate of return that runs the gambit of things, but the point is no matter what those terms are, those are easy to google and look up and then try to plug in the numbers and see what you get.

I remember the first time I heard all these terms, I thought, “You’ve got eyes to all these numbers. This is confusing.” I’m good at math. I was a loan officer so it’s not that I’m afraid of numbers, but it gets a little confusing. Understand that all of those terms are out there. If you hear a term that someone says on this show when you’re reading a book or you’re studying and you’re like, “I don’t know what that means,” look it up on YouTube. If you’re more visual, you can look it up on Google, they’re all there. It’s all self-explanatory. Don’t get intimidated by that. As you’re doing your process, do start to learn what those numbers are and why they’re important for you. 

I hope your audience doesn’t take it the wrong way. I feel silly for trying to plug our website, but if you do a Google search for Avail Rental Property Calculator, they can use that calculator. You don’t have to sign up. It’s free. It will explain all the terms as you go. It’s good especially if it’s the first time you’re buying a rental property.

Thank you for plugging your software. I’m excited about looking at it.  

I’ll try not to plug it too much.

One of the things that I’m excited about is, we’re going to be talking more in EXTRA about how to run your real estate investing as a business. We’re going to move into that but before we do that, Laurence, could you tell people where they can reach you?  

REW 20 | Stress-Free Passive Income

Stress-Free Passive Income: In rental properties, it’s important to realize this is a business. If you don’t think of it as a business, you’re never going to think in terms of how to grow the revenue, minimize expenses, and treat customers well.

 

If they want to reach out to me personally, I’m happy to do that. My personal email is Laurence@Avail.co. We couldn’t afford the dot-com. They can reach me there or they can go to our website Avail.co. They’ll see it as a live chat widget. They’ll see a lot of different ways to reach out to us or they can sign up for a free account and check it out. I’d love to give people a discount on the price, but that’s hard to do. What I can do is if you sign up and reach out to our service team, we can go ahead and give you a free rental analysis report. You type in the address of a property that you may be buying or listing, and this will return what the fair market rent price would be for that property.

Are you ready for our three rapid-fire questions? 

Yeah, absolutely.

Laurence, tell us one super tip on how to get started in real estate investing.  

It will be tough if your audience will think of this as a super tip, but it’s essentially doing it. I know when I was thinking about it, I hummed and hawed for years about it. I was nervous about it. I didn’t feel like I knew what I was doing. It’s easier when I started because on Google, there’s so much information out there. Maybe that makes it harder to waste because there’s so much to look at and you don’t know where to go. My super tip is, get started now if you’re nervous about it, go in with a friend, co-investing is good. You de-risk it a little bit. You have someone to help motivate you and guide you along. If that’s what it’s going to take for you to get started, get a friend in and do it now.

Give us one strategy on being successful in real estate investing. 

For me, I’m lucky that I was a Finance Major. I’ve always had this mindset because it got drilled into me in college. If you’re going to buy a rental property, it’s important that you realize this is a business that you run. Even if you only spend a couple of hours on it a month, it’s still a business, it has revenue, expenses and some liabilities. If you don’t think of it, a business, you’re never going to be thinking in terms of, “How do I grow the revenue? How do I minimize my expenses? How do I treat my customers well? Tenants, or customers, we want to treat them well.” That’s where you get into where slumlords may come in. They don’t view their tenants as customers. They don’t necessarily view it as that business where you want to reward your retention of customers. Treating it as a business is critical if you’re going to be successful.

What would you say is one daily practice that you do, Laurence, that contributes to your personal success?  

No one's got unlimited money, so you want to take what your best options are. Click To Tweet

I like to end the day knowing that I’ve accomplished stuff, even if it’s potentially the wrong stuff. I want to know that I’ve moved a needle forward. Every single day I make a to-do list. Sometimes I’ll do it the night before, especially if I feel like I won’t be able to sleep. I’ll have a to-do list of 10, 12 items. I won’t end my day until my to-do list is done. That way I know I’ve accomplished stuff and I can keep going. That provides me the motivation to keep things headed in a direction that’s going to be successful.

Thank you. That was such great information. I can’t wait for more in EXTRA but thank you for what you’ve shared so far. 

You’re welcome.

Ladies, in EXTRA, Laurence is going to talk some more of the specifics about how to think of it as a business. I do a lot of mindset stuff around that, like the employee mindset versus the business mindset, but Laurence has specific keys to what makes it a business. It’s not your mindset, it’s the things that you do. How do you structure? How do you look at the numbers? All of those pieces are what he is going to share with us on EXTRA. This is going to be juicy and valuable. If you’re already subscribed to EXTRA, please stay tuned. This is going to be amazing. If you’re not subscribed to EXTRA, but would like to be, go to RealEstateInvestingForWomenEXTRA.com. You get your first seven days for free. We’ve got about 50 EXTRAs up there, so you can binge on them and you can get this one too. You decide after that if it makes sense for you to stay subscribed or not. If you’re leaving us, thank you for joining Laurence and I for this portion of the show. I look forward to seeing you next time and I appreciate you, but until then, remember goals without action are just dreams. Get out there, take action, and create the life your heart deeply desires. I’ll see you next time.

Important Links:

On this episode, we talk about:

  • How to handle issues as a DIY Landlord
  • What tools and resources are there for you
  • Should you use a rental manager?
  • How to evaluate real estate deals
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Moneeka Sawyer
 

Moneeka Sawyer is often described as one of the most blissful people you will ever meet.   She has been investing in Real Estate for over 20 years, so has been through all the different cycles of the market.  Still, she has turned $10,000 into over $5,000,000, working only 5-10 hours per MONTH with very little stress. While building her multi-million dollar business, she has traveled to over 55 countries, dances every single day, supports causes that are important to her, and spends lots of time with her husband of over 20 years. She is the international best-selling author of the multiple award-winning books "Choose Bliss: The Power and Practice of Joy and Contentment" and “Real Estate Investing for Women: Expert Conversations to Increase Wealth and Happiness the Blissful Way.” Moneeka has been featured on stages including Carnegie Hall and Nasdaq, radio, podcasts such as Achieve Your Goals with Hal Elrod,  and TV stations including ABC, CBS, FOX, and the CW, impacting over 150 million people.

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