March 13, 2023

This week on the LearnlikeaCPA podcast we were joined by Kenny Bedwell. Kenny left his job as a data analyst to start STR Insights, a data tool that allows investors to identify their market based on their own criteria!

Kenny is the sole owner and CEO of STR insights but he is also a real estate investor himself. He owns and operates six short term rentals. Based on this experience, he teaches others how to invest in real estate. One of his rentals, the Watkins Glen property, is discussed on this week’s episode. Kenny said that the area had a lot of traffic drivers (attractions in the area) and was within four hours of where he lives. However, he never would have found it without taking a deep dive into the real estate data. 

Using data effectively is what sets Kenny and his business apart. As he explains on the show, the tool is the data, but it doesn’t end there. There are four key pillars that STR insights use to determine what market is right for each specific investor. These pillars are Cash Flow, Cash on Cash, Tax Benefits, and Appreciation. Every property will differ on each of these pillars and each investor will want a different mix of these four. Your prioritization of these pillars will also ebb and flow as you continue on your real estate investment journey.

When starting out, investors will likely want to pursue a high cash on cash return. This means the priority is on how quickly you get your money back rather than the total amount of money made over time (cash flow). However, as investors get more experience, cash flow becomes more important. As we get further on our investing journey we might trade a few smaller properties with high cash on cash value for a bigger property with better cash flow. This is because when you’re first starting out, time is your most valuable asset and has to be the primary consideration when buying properties. However, when you’re further along and have more properties bringing in income, you have the resources to focus on higher cash flow properties even if they don’t provide maximum returns right off the bat.

Next, Kenny went on to talk about advice he would give to new investors based on his experience. He suggested starting with 0-3 properties. You are just starting to harness your DTI (debt to income ratio). Kenny also gave advice for people with 3+ properties that are trying to grow. He said people in this area often lack confidence. But the biggest killer in this range is lifestyle inflation. Kenny explains that as properties begin to put money in our pockets, it is very natural to want to spend more. The cycle of making more and then spending more can easily get out of hand. To scale, it is important to keep pouring the money from these investments into more real estate investments to create a snowball effect that will lead to financial freedom.

Lending gets complicated as well. Kenny admits that he is not a creative financing guru, but he does have a unique view on purchasing properties. First of all, Kenny ignores the listed price. This may seem a little strange, but he has a good reason for it. He chooses to look instead at the cash flow of the property and then he works back to what the property is worth. This makes it easier to approach sellers and lay out the numbers that led you to your offer. You can then come up with a deal that benefits both parties. Sometimes this will lead to sellers giving concessions at closing or lowering the purchasing price. Without this approach, people can miss out on deals right in front of their faces. There is nothing wrong with running the numbers and bringing an honest top dollar offer to a seller, even if it is below the asking price. There are a lot of sellers that can be very reasonable and willing to work with you. We seem to be heading towards a buyer’s market, which will be beneficial to those of us trying to find opportunities for investment.

Lastly, Kenny talked about timing. He told a story about how when he started with his first property he bought a five bedroom house and thought he could get it ready for short term rentals in two weeks. As a result, he missed out on 10k of revenue during his most profitable renting time. He reminds new investors to plan ahead and set apart extra time because not everything always goes as planned. 

To close out this week, Kenny gives his advice to people trying to get out of their W-2 by investing in real estate or starting a business. Kenny suggests hiring a virtual assistant. He said that he has 14 VA’s and they have helped him to scale his business. Time is valuable, and delegating tasks is important, especially with trivial tasks. Freeing up time allows Kenny to continue to search for deals and help clients.

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