Propy Webinar #150: Navigating the Rental Market: Trends and Predictions
Taylor Wing, Co-founder of Black Knight Property Solutions joins Kirsten Heslop, Account Executive at Propy Title to discuss strategies for starting out as a new real estate investor. Taylor shares creative financing options and other tips for investors and discusses how to navigate the current market.
Taylor graduated from West Point in 2018 and served as an Army officer in the 82nd Airborne Division. While serving on active duty, Taylor managed over $20 million dollars of real estate transactions through flips and wholesales and acquired over $5 million dollars of real estate assets. He is currently transitioning into a full-time real estate professional on the Treasure Coast of Florida.
Taylor co-founded Black Knight Property Solutions with one of his West Point peers, and has also joined a TwnSqr, a technology start-up that is an off-market MLS and dispositions platform for investors.
Giving away educational materials
Taylor is very active on social media and posts free educational videos with his tips for succeeding as a real estate investor on a regular basis. He shares that he is invested in helping others due to something a mentor told him when he was starting out in the business. His mentor said, “the moment that you stop chasing the dollars, and you start providing actual value to others, you will not have to worry about the dollars because the dollars will automatically come to you.” That philosophy of providing value is at the heart of every business he starts. Taylor wants to make the world a better place for everyone, and he shares knowledge to help others gain wealth.
Black Knight Property Solutions
“We are a veteran-founded local home buying company on the Treasure Coast of Florida,” says Taylor, “and everyone we hire are veterans.” He describes himself as being more of a “house consultant” rather than the typical flipper or wholesaler. He approaches homeowners wanting to understand their situation and why they may be looking for a cash offer, or why the is property distressed. His goal is helping people out of a foreclosure or probate situation in a way that is a triple win: He wants the homeowners to win, he wants his company to win, and then the community overall wins when that distressed property is fixed up and sold to a new owner.
Three ways to finance your first rental property
For someone just starting as a real estate investor, there are three ways to buy a property. The traditional conventional financing route is the first way. This approach requires going to a lender to be approved for a mortgage, and you’ll most likely need a downpayment of 20%.
The second approach is to get some type of hard money loan or a private money loan. If the property is distressed, you’ll need to finance both the purchase price and the cost to renovate the property. At that point, you can either refinance the property or sell it.
Taylor’s special niche, however, has been creative financing, and this is what he is mostly focused on. This can be things like seller backed notes, or buying a property subject to transactions, known as “sub 2” or “sub to”. This means you agree to make payments on someone else’s loan. Because of using creative financing options, Taylor has been able to purchase 32 properties in less than 3 years.
Getting started with creative financing
“I was young, straight out of college, and didn’t have a lot of cash to start with,” explains Taylor, “so I had to really think about how to scale a rental portfolio without putting 20% down each time.” His goal was to be financially free before he turned 30, so he started to research how to negotiate creative finance deals. He became very good at these deals, and this has become a specific niche for his business.
He shares that he found a lot of opportunities by using direct to seller marketing and leveraging his relationship with each homeowner. “It goes back to taking care of people, and providing other people value,” explains Taylor, “when I talk to homeowners, I’m not trying to lowball them with cash offers.” Creative finance solutions provide flexibility for everyone, and he can negotiate the terms that will benefit him. Frequently he can pay the homeowner more money than they would get with a cash offer.
Taylor urges anyone considering using creative financing to “educate yourself and know what you’re talking about. You have to know how to transact those types of financing strategies before you can even go to the homeowner in the first place.”
About the tech start-up TwnSqr
“I saw the opportunity in TwnSqr because the off-market space is where I operate already,” explains Taylor, “so as an operator, I knew that there was a gap in our industry that TwnSqr could fill and provide value to our community.” Taylor joined the company because he saw their vision, and says, “we are aiming to completely revolutionize the way that the off-market real estate space is transacted.”
TwnSqr is creating an off-market MLS platform, like Zillow, where anyone can go to find off-market investment properties. Along with this is a dispositions tool for wholesalers. He explains that a big problem for wholesalers, especially people who are new to this, is finding a buyer once you get a property under contract. TwnSqr will help wholesalers find a buyer, whether it’s an organic buyer already on their platform, or through the use of their email marketing tools, which have excellent email deliverability rates. They use AI to augment their systems to help locate who is most likely to purchase your property. The platform is for wholesalers to upload their deals, and for buyers who are looking for investment properties.
The difference between wholesaling and flipping
While both are fantastic investment strategies, Taylor explains that there are significant differences to the strategies to be aware of.
A wholesaler finds properties off-market and gets them under contract with a buyer. In other words, a wholesaler is simply pairing up a seller and a buyer, but is not closing on the property, which means they don’t need to bring cash or have a lender. He explains, “a wholesaler is just a third party collecting a premium difference. Let’s say I lock something up for $100,000. I can build in a $20,000 markup in that contract and then assign that contract to a buyer. At closing, I would collect that $20,000 premium.”
Being a wholesaler is a fantastic strategy for new investors because you don’t need much capital to get started. “As a wholesaler, your entire job revolves around finding good deals, and being able to offload those deals to your buyer list,” explains Taylor, “and that’s where TwnSqr comes in by helping them on the back end to find buyers.”
When you are flipping a property, you are buying that property, and you need to be prepared with a lot of cash. While there can typically be a higher profit margin, there is a lot more risk involved because you are closing on the property and you’re paying holding costs, such as interest on the loan. Next, you have the renovations to complete, and from experience, Taylor says that these always take longer and will cost more than you anticipate. When you take in consideration the time to renovate, then how long the property will be on the MLS until someone buys it, it may be 4-6 months before you make any money on this property. You will typically have a bigger payday, but it is stretched out over a longer time period.
Ideally, a real estate investor should incorporate both strategies, as most people are limited on how many flips they can do at a time due to capital constraints and how many work crews you have available. Taylor believes the key to passive income and gaining financial freedom come from holding the property, as that is where the most money can be made.
Rental properties provide freedom
Taylor currently owns 32 properties, and all of those provide different streams of passive income. Having those rental properties gave him the ability to step away from the Army, and spend more time with his family, rather than being deployed doing training rotations and working long days away from his family. He’s able to live where he wants to and can focus on what he’s passionate about.
Learning from mistakes and challenges
Sometimes flipping houses doesn’t turn out the way you expect. Taylor shares that he had one flip that was close to a new build development, and when the market pulled back, the new builds dropped their prices into the price range of the flip. He could no longer compete and had to drop his price. The property is under contract now and he is breaking even on it and adds that not making a profit is a risk you take when doing a flip.
Sometimes you end up with a nightmare of a flip, and everything that can go wrong, does go wrong. This is why Taylor stresses that it’s important to have cash reserves set aside when you’re flipping properties, because if you don’t, you may not have enough money to finish the project. His nightmare flip was located in North Carolina, and the problems started with a squatter who kept breaking into the property, and in the process kept damaging different doors and windows. After he was able to get the squatter situation handled, a hurricane came through the area, and a tree fell on the house. The entire roof had to be replaced. As he was completing the renovations on this property, the HVAC system died. Even though Taylor put a lot more money in this rental property upfront, the good news is that everything should remain functional in this rental property for the next 15 years.
The buy, renovate, rent, refinance, repeat strategy (known as BRRRR) is a real estate investing strategy that allows you to pull your capital out of a project to optimize your return on investment. However, in the “nightmare” scenario that Taylor shared, he went overbudget, and so he won’t be able to pull his capital out of this property for a few years.
Because the market has been softening, Taylor thinks the market will remain flat for the remainder of the year. He doesn’t anticipate seeing appreciation on properties in most areas of the country, and property values may slightly drop. With the interest rates rising from 3% to 6.5%, buyers are not as incentivized to buy, and their buying power has decreased by almost half.
This is a tough time for investors because home values are still relatively high, and interest rates have doubled which take away an investor’s cash flow margins. What Taylor is doing in his business is to slow down acquisitions and cherry pick the best deals that will actually have a positive cash flow. He’s doubling down on creative financing because that is allowing him to get around the issue of higher interest rates. This is opening up opportunities for sellers, as they won’t have to sacrifice their purchase price, and as the investor, it’s a win because he can get a lower interest rate and better terms.
Best tips for new investors
You can’t jump into real estate investing without having a foundation under you, especially if you want to talk to homeowners directly. “You have to get educated,” Taylor explains, “start with the education piece by listening to podcasts, read books, and look at my Instagram, we have a lot of free content there.”
You can pay for mentorship, and there are a lot of different types of education you can purchase to teach you the ins and outs of investing. This education will help you make money, so invest in yourself and learn as much as you can.
The second thing that Taylor recommends for new investors is to narrow down their niche and focus. There are investment opportunities from coast-to-coast, but without having a narrow focus it will be difficult to know what’s a good deal, and you may find yourself stuck in analysis paralysis. His advice to students he works with is to pick a market that they’re interested in, and become a complete subject matter expert on that market. He wants his students to be so well-versed in an area, that he can give them an address, and they will be able to tell him whether that is a good investment opportunity or not.
Finally, Taylor recommends that you want to cultivate a mentality of being a lifelong student. Try to learn something new every day or try to become a little bit better every day. Just like working out every day will make you stronger, find something to learn that will push you forward and make you a better person.
Taylor believes that success is about setting goals for yourself, accomplishing those goals, and becoming a better person every day, rather than accumulating material things such as luxury cars or homes. It doesn’t matter what career you choose, as long as you pursue your passions and are committed to being the best version of yourself every day.
How to contact Taylor:
- Instagram: taylorwing_
- Youtube: TaylorWing
- Black Knight Property Solutions: webuyhousesportstluciefl.com
- TwnSqr: twnsqr.com