The following conversation was conducted over email and edited for flow and clarity.
Acquania Escarne of Wealth Noir (WN): Justin we are so glad to have you share your real estate investing story with our readers. Before we dive into how you built a portfolio of over 70 units and wrote a book, please tell our readers a little more about yourself.
Justin Pogue, author of Rental Secrets: My name is Justin Pogue. I’ve been in residential property management and development since 2003, working in various parts of the country. Most of that time was spent managing a portfolio that encompassed 72 units at its peak.
The properties were located in California, New York, Georgia and Mississippi. In addition, I held a corporate job managing 200 apartments in the San Francisco Bay Area. But, most recently, I’ve shifted towards becoming an author and real estate consultant.
My new book, Rental Secrets, focuses on teaching renters about the issues landlords face so they can help landlords run their properties more efficiently and more profitably with less stress.
WN: It’s amazing how you took your personal experience as an investor and pivoted to writing and consulting. You mentioned having over 70 units at your peak. How many properties are in your portfolio now and what types of properties are in your real estate portfolio?
Justin Pogue, author of Rental Secrets: My current portfolio consists of 38 units after selling some properties. There are four fourplexes, three duplexes, three single-family homes, one single-family converted to office space, and twelve rooms rented individually to students. The majority of the units are in Mississippi and the student housing is in Georgia.
WN: Wow, that’s still a pretty significant portfolio. What initially attracted you to real estate investing?
Justin Pogue, author of Rental Secrets: I actually fell into real estate by accident. My plan was to become a management consultant after getting my MBA. However, I graduated in 2002 right into the imploding tech bubble. Not only were consulting companies not really hiring, but they were also taking back hiring offers they had already made. As in “Thank you for buying a house near our offices, but your services will no longer be needed.” It’s actually a great example of the importance of adaptability. The world looks one way when you start school, but the landscape may look entirely different by the time you finish.
Twenty years prior, my mother had tried her hand at being a real estate agent. While the profession didn’t take off, her general interest in real estate remained. As I was trying to figure out my next move career-wise, she became interested in the concept of buying properties by purchasing tax liens.
So, we went on a road trip from California to Florida visiting most of the county recorders’ offices at the southern end of the state. Ultimately, we found three pieces of vacant land, paid the tax liens that were on the properties, arranged to get clear title, and sold each of them to developers in the area. That road trip was the beginning of my real estate investing career and I never looked back.
WN: Purchasing tax liens is an interesting way to get into real estate investing, and not a method most people know well. How did you find and purchase your first home?
Justin Pogue, author of Rental Secrets: The tax lien properties were vacant land. But, the very first properties we bought with the intent of holding were two duplexes in Georgia. One of my cousins was thinking about attending a small local university three hours south of Atlanta. While touring the grounds, we got a chance to see the dormitories. They were old, rundown, poorly maintained and in a few cases actually had mold growing in the closet.
Knowing we could provide a better service than this, I began to research what else was available in the market and we ultimately decided to purchase two duplexes and rent each of the rooms to students individually.
For this purchase, we put 10% down and financed the remainder with a bank. It was really exciting to redesign these spaces for students and to know that I could do this work once and create an ongoing stream of revenue.
WN: Talk about when opportunity and preparation meet. Seems like your cousin went to school at the right time. You had the ability to recognize a need in the housing market and decided to provide better options for students. So, with that behind you, what was the hardest part of doing your first investment?
Justin Pogue, author of Rental Secrets: The hardest part of the first investment wasn’t finding the money or locating the properties. Honestly, the hardest part of getting the first investment done was the conversation going on inside my head. It’s dealing with those voices that say “You’ve never done this before.” “Are you sure you know how to do this?” “What if you have to evict people?” Silencing these questions is a really important step in becoming a true real estate investor.
As I read more real estate books, attended more seminars, and talked to more investors, my confidence grew and these questions in my head started to quiet down. But, they didn’t go away completely until I pulled the trigger and actually managed my properties for a while.
So, don’t expect this mental uncertainty to completely go away prior to investing in your first property and know it will only disappear when you can respond to those questions with the experience you develop over time with your investment.
WN: Moving forward despite self-doubt is important. What was the greatest lesson you learned while investing in real estate?
Justin Pogue, author of Rental Secrets: As a real estate investor, I have experienced a hurricane, a flood, and water bubbling up through my parking lot. These are only some of the situations I’ve faced as a real estate investor, but since I owned the property every single issue my properties had were mine to solve. I never planned on having to deal with any of these issues, nor were any of those possibilities mentioned in the real estate investment seminars I attended to prepare to be a real estate investor. And my MBA classes certainly never addressed any of them either.
As I faced issue after issue and problem after problem, my confidence grew. I resolved each situation and came out with a livable functioning property and just that much more confidence. When you have a regular 9-5, most of the time there’s an emergency department to call when the situation goes off the rails.
As a small real estate investor, there’s no department to call. In fact, you are that department because your residents are calling you for answers. Thus, the greatest lesson was learning how capable I really was.
WN: You’re right. Deciding to manage your properties yourself does put a lot of pressure on you to take action whenever anything comes up, regardless of the time of day or the issue. But real estate investing can be profitable. Why do you believe in investing in real estate? What’s the one thing you like the most?
Justin Pogue, author of Rental Secrets: For centuries, real estate has been a source of wealth for kings and queens around the world and that continues right up until the present day. If it’s good enough for them, it’s good enough for me.
On a more serious note, real estate offers an element of control that other investments just don’t have and never will [have]. If I own a share of Microsoft and their CEO decides to buy a jet, and I may think it was a poor decision, can I call up their headquarters and instruct that the jet be returned? I could, but I doubt the CEO would even take my call. As a shareholder, especially a smaller one, I’m so removed from business decisions that I practically have no control. My only recourse is to sell the stock.
But, with real estate, I get to determine the highest rent and best use of the property. I determine how to get a washer or dryer into a particular floor plan. And through the process of determining what a building should be, I am creating the value of my investment. If I’ve done my job right, the marketplace readily recognizes that value.
Furthermore, I doubt it’s even necessary to discuss bonds since such a large percentage of them now are a guarantee to lose money, especially after inflation and taxes are factored in. Personally, I can have much more fun losing my own money without paying commissions and fees to invest in bonds. Just my opinion.
WN: Going further into that thought, who do you think real estate investing is a good fit for?
Justin Pogue, author of Rental Secrets: When people think about real estate investing, they think about purchasing a home and renting it directly to a family while managing the property on their own. However, this is only one way to invest in real estate. Other models include multi-family apartments, renting rooms in your own home, installing an accessory dwelling unit in the backyard, or joining a group of investors in a syndicate. So the real question isn’t who real estate is a good fit for.
A better question is which real estate investment model fits you best. Which one fits your investment budget, your risk aversion level, and the amount of time you have to be personally involved? Ultimately, real estate investing can fit anyone who has some patience. But, the key is doing it in a way that fits your skills, risk aversion and bandwidth.
WN: That’s a great way to think about real estate investing. What advice do you have for someone trying to decide if they should invest in real estate?
Justin Pogue, author of Rental Secrets: Feel free to attend the real estate investment seminars and read all the books on the subject you can, but please understand that none of them will cover all the issues and problems that will inevitably arise. At a certain point, you just have to decide that you are ready. But, just as I learned, you’re likely more capable than you think you are.
WN: Sticking to that theme, what advice do you have for someone getting ready to make their first investment?
Justin Pogue, author of Rental Secrets: Real estate investing is not just about buying a great property and then renting it out. The real value comes from acquiring a property that has problems and solving them. Those problems might be livability, too few bathrooms, a cracked foundation, or just poor management.
Whatever the problems are, they are your ticket to a lower initial purchase price. The lower that price is, the higher the chances of your investment staying right side up. Most of the properties I invested in had to be taken back to the studs and completely remodeled. So my first piece of advice is to not be afraid of the problems investment properties might have. Just have a plan to solve the problem going in.
Second, take your time at the closing table. The closing table will very likely be the first place that you’ll see the actual closing documents. Take the time to read them all. If the title company employees give you the stink eye for inconveniencing them by having the audacity to actually want to read what you’re agreeing to, please remember that they won’t be helping you make any of the monthly payments. They are more concerned about getting to lunch than they are about whether this loan is the right one for you. So take your time and read every word.
Finally, if at all possible, schedule your closing in the morning. You may find terms in your closing documents that you’d like to change. I know I have. If so, you’ll need access to the relevant loan officials to negotiate those changes and you don’t want to be working against their 4:00 PM quitting time, especially if they are in a different time zone than you. Schedule the closing early and put yourself in the best position to close successfully with as little stress as possible.
WN: OK, let’s shift our conversation a bit. Some people like to do things as a group. Do you invest by yourself or with partners?
Justin Pogue, author of Rental Secrets: I had a partner in my real estate investing. As I mentioned earlier, my mother had been a real estate agent in the 1980’s. She’d kept her interest in real estate since then, but she never pulled the trigger until 2003 with me. Having a trusted partner definitely makes investing easier since the partner brings additional resources to the investment. These resources include money, time and, most importantly, extra mental bandwidth.
However, investing with family can only work if everyone is on the same page. If not, the process will be difficult, stressful and involve awkward holiday gatherings.
WN: So, are you a full-time real estate investor now?
Justin Pogue, author of Rental Secrets: After hiring a property management company to handle my properties and leaving a full-time job managing 200 apartments, I decided to use my real estate experience in a different way. I wrote my new book, Rental Secrets, which focuses on teaching renters how landlords think and the problems they face.
Unfortunately, the conversation between renters and landlords can be more of a shouting match and renters are voting for one size fits all government “solutions.” Most renters believe that landlords are sitting on buckets of cash and have the resources to do whatever they want. For the vast majority of real estate investors, this couldn’t be further from the truth. By showing renters and landlords how they can work together to their mutual benefit and dispelling these misconceptions, hopefully, we can have a more productive national housing conversation.
WN: Justin, I couldn’t agree with you more. Thank you so much for your time and sharing your story with our readers.
Acquania Escarne is the creator of The Purpose of Money, a community of women building generational wealth for their families one dollar at a time. As an entrepreneur, real estate investor, and licensed insurance agent, Acquania has always been passionate about financial literacy. On her website, Acquania blogs about ways to help you improve your money habits, create wealth, and invest in real estate. Follow Acquania on social media for daily tips.