Real Estate Investment: Speaking to the Experts

Disclaimer: OK these two interviews were packed with AWESOME stories and information. I’m going to try my very best to keep this post condensed and to the point. If you want more information on anything you read below, please let me know.

Frans and Bob; two successful entrepreneurs, who found themselves investing in real estate starting at a young age. Based on their experiences, they encourage others to do the same. Here is a brief overview of how they got started, and what their experiences have taught them.

Frans Klinkenberg, founder and previous owner of Los Angeles-based Angstrom Lighting. Frans spent 30+ years renting out stage lighting, cables, and tools for events and productions. A profitable business on its own, but what was happening on the sidelines?

His Story: In an unconventional manner, Frans started out with his first rental apartment in 1986. A friend looking to get out of his mortgage payments approached Frans and asked if he’d be willing to take ownership of the townhouse and assume the loan. Frans accepted his friend’s offer, despite being a complete real estate “noob” at the time, and despite the fact the rental income did not cover the mortgage payments. While stressful at first, he was eventually able to increase rent and break even. Shortly after, he began profiting. And this was just the beginning.

Frans exclaims how truly remarkable it was. “It became like a game”, one rental property turned into three, which turned into seven, and before he knew it, he owned sixteen cash flowing units. Now, not everyone is going to wake up with a rental unit sitting at their feet. It may take a little time, some research, and probably some significant savings, but it could also hold incredible rewards. Frans admits he was lucky to get this first place. His intention was just to help out a friend. But it wasn’t long before he saw the major benefits: passive income and tax breaks. It was an opportunity that he capitalized on and it led to a future that may not have happened on its own.

Frans emphasizes the impact it had on his business: he understood the differences between renting and buying, and from the income he made off his rental units, he ended up purchasing several commercial spaces to advance Angstrom Lighting. It gave him the ability to finance his business, in addition to providing financial stability to his family. It was easy money, and although he had to scrape everything he had to make the first one work, 8+ years later his return was exponentially more than any sort of savings. Years later, an unexpected event posed a serious threat to his business and his ability to keep employees. However, Frans was able to cash out a few of the properties to save both his business and his staff. If it wasn’t for those properties, and the equity he had built up, things could’ve unfolded differently.

Now retired, he’s very grateful for the financial position those properties put him in. He recognizes that while in our twenties, it’s hard to imagine life in retirement (well, maybe not that hard…), it can seem like a lifetime away. But being able to pay off your mortgage BEFORE retirement is something you have to plan for. Setting yourself up now for a fulfilling future ahead is always a good option. Yes, living in the moment is great and important, but don’t be blind to the inevitable future. You’ll be thankful for it someday.

Bob Perkins, founder and owner of Northstar Sourcing, has been looking for his next real estate investment since he was 26-years-old. Understanding the value of land and the solid chance of appreciation, he has chosen to put a large emphasis and concerted effort in real estate investment.

Like Frans, Bob recognizes the importance of thinking ahead, and challenges younger folk: “Are you ready to give up “cool” to live in an area you can afford?”

Rather than thinking about retirement, just think in 3 year increments. Your first place likely will not be your forever home. It’s your first move in the game. Some would say, you’re just dipping your toes in. But that initial dip could be instrumental. Bob bought his first property, a fixer-upper, at the age of 26. He lived in it for three years. But those first three years gave him the financial advantage to buy his next home, and then the next, each one getting more valuable, and all while building equity.

For that very first property in North Carolina, Bob took his savings, and made it work. The house appreciated slightly, not a lot, but when he sold it, he netted several grand. Just enough to help with his next downpayment. And so on. Bob feels passionately that you cannot go wrong with real estate. And the beauty of it? Anytime is a good time. Of course, we can go into the nuances of mortgage rates and sellers vs buyers markets, but the overarching idea that whenever you start, it will just continue to grow from that point.

…And it’s not as impossible as people believe. There are ways to get creative to find something you can afford. A couple examples:

1. Bob used seller financing for one of his early purchases.

2. Look for different types of properties: i.e. multifamily homes. Look on commercial sites rather than residential. There are also a ton of professionals who can help you navigate.

Lastly, land is important. Don’t overlook it. What makes it valuable? The number one thing Bob looks for when buying a new place: is this property unique and why? Often it’s limited space next to an amenity: golf course, body of water, school, view, etc. After all, the building is essentially worthless – it’s the LAND you’re after.

“Fact is, there’s only so much land to go around – particularly undeveloped land. Even if you do nothing, 30 years from now, your property is all but assured to be worth more than it is today”

-Mark Twain

Bob has also created a very successful business on his own, but to this day recognizes that it’s been real estate that has enabled him to own and flip homes in some of the most coveted neighborhoods in Washington and Southern California. In addition to several commercial rental properties in Bellevue, Washington.

Take Aways:

From both of these conversations, there were several key points I took away.

Real estate is historically resilient (2020 is a prime example). In comparison to other ways of investing, it’s much less volatile than stocks, and it’s a significantly higher return than sitting in a savings account.
Acknowledge, the seemingly faraway, retirement. The future will be much more enjoyable if loans are paid off. The financial stability real estate offers can be life changing.
The younger the better, why? Because the earlier you start building equity, the more wealth you will accumulate over time, again giving you financial stability.
Land. Sick of hearing me say it? Well, good. Now you’ll remember. 🙂

The reality that a lot of us face is home prices are high. It’s expensive. Especially in Seattle. But there are options. There is still significant appreciation in affordable places not far from here. Keep an eye out for my next post that will break down the top 5 areas in King County with the highest appreciation in 2020 (& median sales prices under $1M).

Thanks for reading! See ya next time.