Manage episode 296972689 series 2926608
The key to buying real estate may no longer be “location, location, location.” According to one long-time real estate investor, it’s now “property management, property management, property management.”
That’s just one piece of sage advice you’ll get from this interview with Myron Schroer. He’s had a real estate license since the 1970’s, has purchased real estate in several parts of the country, and is teaching his kids and grandkids about the business with a family corporation. You’ll find out how he and his wife got started, how they got the whole family involved, how they choose their markets, and where they have invested.
Be sure to join RealWealth for access to the kind of information that has helped Myron become a successful real estate investor. Go to realwealthshow.com and sign up for free. It’s also free to speak with one of our investment counselors who can answer questions and put you in touch with experienced property teams across the U.S.
Speaker 1: You're listening to the Real Wealth Show with Kathy Fettke, the real estate investors resource.
Kathy Fettke: The key to buying real estate may no longer be location, location, location. According to our guest today, it's more about property management and I agree. I'm Kathy Fettke and welcome to the Real Wealth Show. As I said, this is just one piece of advice that we'll get from today's interview with Myron Schroer. He's had a real estate license since the 1970s, has purchased real estate in several parts of the country, is teaching his kids and grandkids about the business with a family corporation and that is so cool.
You'll find out how he and his wife got started, how they got the whole family involved, and how they choose their markets, and what they're doing today. Myron, welcome to the Real Wealth Show.
Myron Schroer: Oh, thank you. It's great to be here.
Kathy: I'm excited to hear about how your family has created a family legacy with real estate knowledge and wisdom passed on to the kids. That's not always easy to do. How has that worked for your family? Starting with you, was your father in real estate?
Myron: Correct. We bought our first house a couple years after we had been married. We moved out here from Indiana, and I grew up on a dairy farm. My father started in real estate and like I said, we bought our first house. He was instrumental in us doing that. Over the years, we continued to purchase additional homes, as it became available. In about 1991, he started doing condo conversions. We had some apartments, and we're trying to convert them to condominiums.
In 1991, that, unfortunately, went south. [00:02:00] We had a problem. Actually, the builder went bankrupt. My father was the money partner of it and he almost went bankrupt. Unfortunately, it took us about seven years to pay everybody back that was owed. At about that time, unfortunately, he passed away of a sudden heart attack. In the interim there, he had formed a corporation and put most of the real estate into that corporation. In doing so, he actually gifted part of that to myself and to my sister.
After he passed away, the corporation wasn't doing well, obviously. We just paid everybody back that we had owned from the previous problem that we had had. In the course of the next couple of years, we actually was able to turn things around, sell a few things get the cash flow going in a positive direction. At that point, the corporation actually started doing well. My mom was actually the owner at that point or the major shareholder. At that point, we decided that, from an estate standpoint, it made sense to start gifting part of the corporation away.
We did that to the kids and the grandkids. We started having yearly corporate meetings, which was really a blessing because it forced us all to get together. Sometimes that's not the easiest things to do. Again, we wanted to do things right from a corporate standpoint. We started having our yearly meetings. [00:04:00] People started getting more and more involved. Really over the course of the years, it's been a real blessing.
Kathy: How I bet? How did those family corporate meetings go? What was [crosstalk]
Myron: Well, initially, we didn't really know what we were doing. It was a lot of questions. I think most of the folks trusted my wife and I pretty much run it. In the meetings, we obviously have questions about where we're going, what are we doing, what do they invest in? Dividend is a big thing. This is a philosophy thing, but we never wanted the good corporation to give off more to the individuals or to give off enough that would change their lives.
In other words, we learned a long time ago that you can't give somebody something for nothing, because it will change who they are and it's just not a good thing. We never wanted the corporation to give off a large sum, the intent was to help the kids, the grandkids, for example, playing sports is relatively expensive in school now. If the kids want to play sports, it can cost as you probably know, a pretty good chunk. We're able to help with that if the kids want to play sports, if they want to do extra things.
I have six grandkids, and four of them are currently in college. It's been able to help with them. One of my grandsons is getting his [00:06:00] aerospace engineer degree, and he just became a pilot. That's extremely expensive. It's been able to not pay for all that but to help him to achieve that goal. In fact, he had his first solo here about two weeks ago.
Kathy: How exciting.
Myron: We're very fortunate to be able to do that.
Kathy: I agree with you that when things are handed to others for free, it's maybe not appreciated, or doesn't necessarily go in the right direction. How do you keep it equitable with your kids? Is there any kind of expectation that, yes, these funds will go towards the sports or the college, as long as you hold up a certain GPA or, or you show up at a practices? Are there any requirements?
Myron: We're really, really, really fortunately blessed. Our kids and grandkids, they're great kids. They understand what it means to work to achieve things. We've been very, very fortunate in that area. What we do is we give out shares and the shares give the dividends, and then it's up to the individuals to do with those as they please. One other thing that we've done, we've been able to take in and actually use a corporation as a bank, in a sense for the kids and the grandkids. If they have additional funds, they can invest in the corp, and we pay a 6% [unintelligible 00:07:41].
It's like putting in the bank only, it's the corp. It helps a corp give us money to go out and purchase additional things, but also it gives them a little bit higher return than they would get in the bank. Then we can coach them [00:08:00] on what to do with those funds eventually also.
Kathy: Are any of your grandkids invested in it?
Myron: They are.
Kathy: With their savings?
Myron: We have a couple that have shares at this point. They come to the meetings. We've tried to come up with guidelines that make sense. You have to be a certain age, in order to take and to buy in. You have to have a certain number of shares to be able to vote so that investing-- Also, we try to take advantage of the tax advantages of having a corporation and having a meeting. We pay the individuals to come to the meeting. Again, like I tell people, and I tell our accountant, we want to take advantage of every tax opportunity that is there but we don't want to take and do anything that's questionable.
If the line is in the sand, we want to be a foot away from the line. The corporate meeting allows us, to take advantage of some of those, tax opportunities.
Kathy: For example, the family could meet in a reunion-type setting and have that meeting and a couple of nights might be covered by the Corporation, the cost, and the food.
Myron: We have not done that yet. We will. Our corp meetings, we have them local and the food and then the travel expense and the attending the meeting, those are all paid for. We've talked about the remote location and having a meeting. We haven't done that as of yet.
Kathy: It seems like it would be really important for your meeting to be somewhere like Hawaii where you [00:10:00] can really relax and create. [laughs]
Myron: I agree.
Kathy: That might be too close to the line, but I don't know, conversations with URCPA. That is really cool. I haven't heard of that kind of scenario besides the billionaire families who do that, I don't know how far you are and your net worth, but I love that the family and the children and the grandchildren are all a part of this family corporation. That's really fascinating. Where are your properties? You live in California?
Myron: We do. We're about an hour out of the San Francisco Bay Area. We actually have properties in Oregon, of course, California, Arizona. We were fortunate that about 15 years ago to go into Texas fairly large. We've got a number of homes in the Dallas Fort Worth area. We just recently went into the Florida market, and those are doing quite well as you know. Then Indianapolis really liked the Indianapolis market. In fact, we're in the process of doing some stuff in Evansville with [crosstalk]
Kathy: Oh, yes. We like that area, too.
Myron: That's pretty much it. We have stuff in Utah also.
Kathy: What role do the kids play in the management of all these properties?
Myron: At this point, not a lot. When we have a meeting, for example, we talk about using a family bank, and so a couple of the individuals were tasked with doing the research on that. What does that mean to take advantage of the corp? The intent was if someone were to maybe want to purchase a home, or if they wanted to start a business, and they needed funds for that, obviously, it's [00:12:00] a little bit difficult to get that from a bank, maybe the corp can help them out. How would we set that up to be equitable? Who would control that? Those type of things.
We're looking to diversify because everything we have right now is real estate, so we're looking to diversify a little bit, and maybe it'll go some into the stock market a little bit. A couple of individuals looking into that to see what does that looks like? What's a good plan to do on that? Those are the kinds of things. We've gone through trying to set up the bylaws as far as who can be in the corp? Who can't? Things come up, people get divorced and [crosstalk] how do you handle that? If that will happen or when it happens, how do you handle it?
Those are the kinds of things that we've tried to look through or work through if you will and look down the road and say, "Right now, it's not an issue, but those things are going to come up. How do we handle it? What do we do? When they do?" Those are the kinds of things that we have tried to work through and talked about.
Kathy: Really incredible. There will be a lot of inheritance coming to younger people over the next decade. I wonder how many of those children are going to know what to do with what they inherit. That's why there's always opportunity for real estate investors because people inherit property, they're like, "I don't want this," and get rid of it. How brilliant to bring them in on the business years in advance where they really understand it and start to take on different positions and leadership roles within that company, so when that transition happens, it's fluid.
Myron: [00:14:00] That's eventually, obviously where we'd like to get. Having the corp also allows them if, at some point in time, they want to sell their shares, they want to get out because it's not for everybody. Some people like it, some people don't. If they want to get out, they'll have that opportunity to take and do that. I believe and have always believed that real estate is just the way for the average person to create long-term wealth. If you stay with it, and if you don't get undercapitalized, that's another key.
Don't get undercapitalized long-term, you're going to do fine on the tax advantages, and stuff in real estate is just that-- I don't know of anything else that is close to it.
Kathy: You've been in real estate for how many years now?
Myron: Actually selling real estate and I got real estate license in 1973. I did it part-time most of my life. I guess it's been, do the math, 50 years.
Kathy: That's why we wanted you on the show to give us your sage advice that starting young is worth it because we're going to be living longer and longer, and a 30-year fixed-rate loan seems like so far away in the future, and it's not that far away. Over the years, I know back in the '70s, there were people saying that real estate was expensive in those dollars. From that perspective, it wasn't really that much easier than it is today. What do you think?
Myron: We bought our first house and I had alluded to [00:16:00] that earlier. I wrote to work with four other people and we would talk about real estate. I had it, but the first listing that I got was actually worked out to be a really good rental. I said, "I'd love to buy that house," but we just didn't have the money. We'd only have been married a couple of years, we didn't have any money. One of the guys I wrote this, "I'd really liked to buy a house too, but I don't have a lot of money either." We bought the house together, we still own that house, that same amount today.
Now, before you say, "Hey, it's already depreciated and you're a fool for still having it." From an investment standpoint, you're absolutely right, but that house, it's symbolized for us what real estate investing is? It's at this point, obviously a cash cow. Is it hurting us tax-wise? Of course, it is. In fact, we're probably going to take and sell it here before long on 1031. You're right, it was tough to get started then, it's tough to get started now. I would just encourage everyone to do what they can do to get into real estate. I know that can be difficult, but again, long term, it's going to pay off, it just is.
Kathy: There is a belief even back in the '70s that how could prices go much higher. My dad bought a home, a primary residence in Atherton for $99,000, and he was a dentist. It was hard, it was a big purchase. $99,000, those homes are 10 million now today. You couldn't fathom that a $99,000 house, it was already expensive, could [00:18:00] ever be worth a million, or 2 million, or 10 million? It's not in our ability to understand that. Yet, it happens every decade, right? What did you pay for that house and what do you think it's worth today?
Myron: We paid $21,500, we'll probably sell it for $700. Let's wait, it'll probably go over 700.
Kathy: Back then, you couldn't fathom that much money.
Myron: No, it was no. You asked about the prices and getting into real estate and one of the things that I'm sure your viewers are probably thinking, "Prices are high right now. Should I invest now or should I wait?" I tell people, "It really doesn't matter." Don't stop watching this podcast because I said that. If you step back and look at it, you need to get in the game. It doesn't matter when you get in as long as you can afford it. For example, right now, you buy a house for $500,000. Interest rates are extremely low.
If that house, let's say a year from now, or two years from now, it's 20% less, and it goes down to 400,000, people say, "Hey, I should have waited." Chances are a year from now or two years from now when that house is $400,000, interest rates are not going to be at three and a half, or three and a quarter. They're going to be up at four and a half and five. Run the numbers, what you'll find out is your payment will be higher than if you bought the home today. Long term, it doesn't matter when you get in but the key is to get in, and once you get in then it's a little bit different story, but the key is to get started.
Purchase your first property, learn the ins and outs.
Kathy: Especially today [00:20:00] when we have the kind of inflation that we have, and what was it just at 6%. If you're sitting in cash, you lost 6% of your money by doing nothing with it, whereas with real estate it usually increases with inflation while you're sitting with the same debt position.
Myron: Another concern that I found with folks is, "Well, I'm afraid if I buy that $500,000 house, I could lose everything." Well, that's not really true. As long as you're not undercapitalized to begin with, as long as you can afford it, if you can stay in at long term, you're not going to lose because of-- In real estate, worst case scenario if it goes down to $400,000, you'd lose a 100,000. That's a lot of money but if you're in the stock market, the stock market can lose 50% in a matter of a week or two weeks. In theory, you could lose--
If the company goes bankrupt, you could lose everything. Your chance of losing everything in real estate, again as long as you're not undercapitalized-- It's not zero because I guess in the theory it could go to zero but land or real estate it's not going to go to zero [unintelligible 00:21:17].
Kathy: Typically it's worth something.
Kathy: You only lose money if you sell. If you're able to use the property for other things like renting it out, then it doesn't matter because you haven't sold it.
Myron: Exactly. Again like I said initially, long-term real estate it is a way for the average person to create long-term wealth. I can give you another real quick story. My son here 15 years ago, we were able to purchase the duplex in Texas and where we get in with nothing down on the whole thing. We financed the whole deal. He put all the money back into it with the intent of [00:22:00] using it to finance his daughter's college education. Well, it was paid off here quite some time ago and as it turned out he didn't need to use it for the college education.
Those are the kind of things that people don't really understand or nobody really tells them. If you're a young person, you have kids and you want them to go to college, it's tough to save for that, but you can take them. Buy a piece of property. Yes, it does take a little bit but there's ways to do it. Hang on to that property, put the money back into it that you're making on it, and then 10-15 years now when your children get ready to go to college, you've got the funds available to do that. Those are the kind of things I like to talk to people about and encourage them, and help them to help set them up to be able to do that.
Kathy: It can be done tax-deferred, so all the equity gain, there's-- All you have to do is look at the charts and look at history to see that prices are going up. Chances are it will be worth more in 15 years, in which case you just refinance at that time take the cash out and you're not taxed on it. Until you sell-- Of course, the tax situation can always change but that's how it is currently, and has been for a long time. What else do we need to know with your years of experience? What are some of the most important lessons that you learned?
Myron: I learned that if you ask an individual what the three most important things about real estate are, they'll say location, location, location. I tell people, "Take that, write it down on a piece of paper, wad it up and throw it away if you're investing in real estate." The reason being that most of the real estate that you invest in is not going to be local. You're going to have to hire a property manager. The three most important things in real estate [00:24:00] if you're an investor is a property manager, property manager, property manager.
You can take a good house and a good location and a bad property manager, and you'll lose your shots. You can take a bad house in a bad location with a good property manager, and you'll still make money. That's a lesson that we learned the hard way, but I would just tell folks, "Boy, it's so important to have a good property manager." That's--
Kathy: Well, have you seen a difference because I sure have. In the '70s I wasn't investing then but I don't imagine there weren't computers. It was a very different world, you were probably just investing locally. Then even when I started 20 years ago, it was not very organized but it's come a long way. What have you noticed over the years?
Myron: Well, like you say in the '70s it was a totally, totally different ball game. It was really the individual, that was the key. Finding an individual who was a jack-of-all-trades, who was very organized, who communicated well in-- What was I saying? Was a jack of all trades, definitely. That was key, and we didn't have-- At least I wasn't aware of the management companies that had two, three, four, 100 doors. They were smaller mom-and-pop type deals. Now the mom and pop guys, they're not there anymore. It's a 2, 3, 4, 100, 500-door companies.
You're right. It's the computer, it's the organization. Communication to me is key. It's just critical to have someone that you can contact or that can contact you. Who does contact you [00:26:00] on a regular basis, maybe that stems from the fact that old school I like the contact, I like to find out what's going on? Computers have made things a lot different. Going in video, the video tours, that's a big change and it's helped a lot.
Kathy: absolutely. For our young listeners, for our millennials, and maybe gen X and gen Z, tell me what the world was like in the-- I don't know if you were selling real estate in the 70s but you were buying it. There wasn't internet, there weren't cell phones, no one had a car phone. How did you buy real estate?
Myron: if I would get a client, I would have to go out. Actually every Friday the multiple listing service would send out a book and it was a book with all the listings in it printed. Well, it was obviously outdated before we ever got it, but you would go out. If I would have a client looking for a house in a specific area, I would go out two or three days before just searching going through, looking at the different houses in order to be able to show them. It was quite different.
You built up your clientele, so if you knew that a house was coming on the market and it was something that you wanted to be able to purchase, you had an end prior to the house coming on the market. That's changed a little bit. Obviously with the computer and MLS and with the millennials now, really they do most of the searching that from a real estate standpoint, [00:28:00] and I still deal in real estate, a client will call me up and say, "Hey, I saw this. It just came on five minutes ago and--"
Kathy: "Can you help me?" It's a lot different. What a world? Oh, my gosh. I will say as much as people complain about the technology age, it's a lot easier than back in those days when even just trying to find the property, you had to use a map, you had to go to the grocery store and figure out how to get a physical map and try to find your way to the property. Boy, those were tough times. Realtors really earned their money then, really earned their money back. It was hard.
Myron: You take Thomas Brothers Maps to people right now, they probably don't know what it is.
Kathy: They don't know what it is.
Myron: It was a nickel back then.
Kathy: You got your client in the car and you're trying to shuffle through these maps to find the property?
Kathy: Oh, my goodness. It's really been a pleasure to have you here. I'm curious, how did you find Real Wealth and with all your experience and knowledge? What do you gain from an investment company, an educational company when you already know so much?
Myron: Well, this is a weird deal. What we used to do, I learned a long time ago enough to try and reinvent the wheel. What I mean by that is we would take and invest in different areas, but it was through contacts of other people, other realtors, other investors that they had grown to know over the years. They had already gone to a certain area in Oregon for example. We were there only because of a friend that I had that had already been there and then vetted out several property managers.
He was doing quite well, so we followed and went there. As far as getting into real-- Well, one more quick story. What we used to do is-- and you're going to laugh at this one, but we would go into a market. For example, after the hurricane down south, we went into Biloxi, Mississippi because of the opportunity. We wanted to find out what was going, had no contacts, went down, and spent a week. We always spend time in Walmart, talking to people and I know that sounds crazy.
If you want to find out what's going on in an area, go to the Walmart, and people will talk. They'll tell you what's going on.
Kathy: Just walk down the neighborhood and talk to people who are walking their dogs or go to the closest coffee shop, they will talk. Absolutely.
Myron: You will learn what the employment situation is. More than that, you'll learn what the attitude of the people is. Different parts of the country, people's mentality, it's just different. The way they look at things, the way they look at personal responsibility, it's different. You'll feel that, you'll learn that real quick. With Real Wealth, we don't do that anymore, because you guys have pretty much gone in and really looked at the areas, you've already bedded the property managers, the realtors that you're involved with. That's pretty much done.
It's made it so much easier if you will especially for the person that doesn't really have any experience. You probably don't remember this but back in 2007, I actually wound up calling and talking to you about trying to save individuals' homes, who were upside down during that period. You actually referred me to some folks up in Sacramento, to try to get some funds to purchase loans from banks. [00:32:00] That's how I first found out about you and Real Wealth, and you were extremely, extremely helpful. We weren't able to put anything together to do that but anyway, that's how I got into to hear about Real Wealth.
Then we did do some things, at least 2007, 2008, 2009 for a while. Then, we've been utilizing you guys. We've been, I think very, very fortunate to have found you. I love the seminars that you do, the education that Real Wealth provides. It's great having the vendors come in and talking. I love the deal where they come in, and you go to lunch with them, and you can have all your questions answered. I think that's a great thing to do. Hopefully, now that COVID is lifting, you guys would be able to just start doing those again. That's the deal.
Kathy: Oh, that's great. Wow. Well, we are really excited to get our next live event scheduled. We hope to do that soon. For any new listeners, who might be surprised the membership is free, and the information and education is free because early on, there was not a lot of information for new people and you had to pay a lot of money for it. You go to these real estate groups, and they'd have some slickster on the stage, get you all excited, run to the back of the room, and pay thousands and thousands of dollars to get the knowledge.
That just upset me at the time and we made a commitment to not do that. Not that there's not good education out there that deserves to be paid for but that's just been our commitment to make it free. If you're new to the network, there's nothing to lose. You just [00:34:00] join. You get access to hundreds of webinars. I'm so glad you've been a member for so long and maybe we can get you to be an educator too.
Myron: I'd love to help. One of the things you learn too is in this whole thing, and I know you guys I just saw recently you're doing a webinar on the giving back. That's the other thing that that's so important. As we are blessed, we're really-- I would just encourage everyone to make part of giving back part of their life also because it's just so important. That doesn't necessarily mean financially because sometimes when you're first starting out, you think that's pretty tough to do. You can give your time and help others also. I think what you're doing as far as giving back is a huge plus also.
Kathy: Thank you so much.
Myron: I can also say that every one of the individuals that we've dealt with in the different cities, the representatives that you have there, they've all been extremely helpful. In this business sometimes you get individuals that do apply or maybe they don't mean to apply pressure, but they do. That's another thing that I think of a plus for the whole Real Wealth network. There doesn't appear to be any pressure. Real Wealth is not there, too-- Obviously, you're making money but the important thing is not the money. It's not about the money. That's another way of putting it and I appreciate that.
Kathy: Oh, thank you. We've always figured that if we can educate and present-- Well, first and foremost, educate and then [00:36:00] present opportunities, the investors will know if it's a good one or not. If it's a good one, they'll flock to it and if it's not, then that's our bad. We didn't do a good job. There's absolutely no pressure. That's a comfortable situation, too because I've been pressured into so many things, lots of pressure these days. We're adults, we should be able to make up our own decisions, make up our own minds.
Well, we are out of time. It has been so great to have you here. I do mean that we should have you as one of our educators on this topic of how to create a family corporation. I just love that. Beautiful. Thank you so much, and have a wonderful rest of your day.
Myron: You as well. Thanks. Bye-bye.
Kathy: Thank you for joining me here on the Real Wealth Show. If you'd like to find out some of the things that really helped Myron be so successful and his children and grandchildren, go check out realwealthshow.com where you'll get access to hundreds of free webinars. It's free to join free webinars, all on things like asset protection and how to improve your credit and how to get the best insurance for your properties and what to look for in a property management company, what to look for in different markets.
Then you also get a referral to teams across the country who help our investors find the properties, get them under good management, and help oversee that process to make it a little less intimidating when you're investing out of state. They wouldn't be on our referral list if they didn't come with rave reviews from our members. If they don't get those rave reviews they're not on the list. Again, you can check that out at realwealthshow.com. I'm Kathy Fettke. We'll see you next time. Bye-bye.
Speaker 1: The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy [00:38:00] or sell any securities or to make or consider any investment or course of action. For more information go to realwealthshow.com
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