"Successfully Building Long-Term Passive Investing Strategy"
Real Estate Investing Expert
Episode 49: "Bad Beats"
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On today’s Best Deals episode of The Real Estate Nerds Podcast, we hear from investor Jeremy Roll. After a decade in the corporate world, Jeremy began pulling his investing funds out of the stock market and pouring them into real estate assets. What started as a series of long nights reading books in the Investing section of Barnes and Noble has evolved into a consistently cashflowing, reliable investing strategy that serves Jeremy to this day.
Jeremy Roll on Cashflow Investing and the Value of Long-Term Strategy
Our host and attorney Scott Smith welcomes Jeremy Roll onto the show. Together the two investors discuss Jeremy’s background, real estate beginnings, and how he developed the strategy that has led to consistently good deals in the long term.
[1:00] Jeremy is originally from Montreal, Canada but moved to the U.S. to obtain his M.B.A. from the Wharton School in Philadelphia. He spent a decade in the corporate world.
[2:00] In 2002, just after the dotcom crash, Jeremy began seeking investment alternatives that weren’t linked to the highly volatile stock market. He began pulling funds out of stocks and bonds and into managed real estate funds. He found cash flow was far more predictable when he began using this strategy, and that he also had more opportunities to diversify.
[4:00] By 2007, Jeremy had pulled all of his investing funds out of the stock and bond markets and was working at Toyota headquarters: “I loved having both the paycheck and the cashflow…But I had enough cashflow to take a risk and leave the corporate world.” Jeremy is now a full-time passive investor with a portfolio that spans a variety of asset classes. Since 2007 he has focused on increasing his passive investment “snowball” to keep the trend going and avoid returning to the corporate world.
[7:00] “In my opinion, the average long-term returns of the stock market will be much lower than real estate,” Jeremy explains. He points to the tax benefits of real estate, and highlights that the freedom he has gained from real estate investing has been a major appeal for him when deciding to make these types of investments.
[8:00] Scott asks how Jeremy went about researching his investing options, and specifically, what that process looked like. Jeremy points out that he spent many nights in Barnes and Noble reading a variety of investing books. Reading about many different ideas and methods helped Jeremy decide to pull the trigger on changing his investing strategy. He was also influenced by a family friend who was achieving success with syndication opportunities.
[10:00] Scott asks Jeremy about his process for determining which asset classes made sense for him, as factors like tax benefits can change. Jeremy explains that “Cashflow investing is the opposite of a get-rich-quick scheme. It takes a long-term view.”
[10:41] He explains that if he were no longer happy with the cashflow coming in, he might change his strategy. But for now, his investments are working for him in both the short- and long-term. Jeremy’s ideal is ensuring that his investments offer consistent cashflow so that he does not have to concern himself with redeploying his capital into other methods.
[12:00] Jeremy points out that his preferred type of investing is highly liquid and draws listener attention to SEC regulations he describes as “anti-flipping laws.” He recommends his methods for any investor who values predictability with their investments. Scott asks if there are personality factors, such as risk-aversion, that drove him towards passive cashflow investing. Jeremy cautions listeners that his strategy is not ideal for anyone impatient or expecting massive returns within the year, even with sufficient capital.
[14:30] Despite having been an investor for 17 years already, Jeremy looks forward to the future: “A long term mindset can determine your success.”
[15:30] “You can invest in assets across the entire risk spectrum,” he adds while also stating he does have a personal preference for lower-risk investments.
Jeremy Roll on What a Best Deal Looks Like
Scott and Jeremy turn their attention to two of Jeremy’s best deals. The two investors also discuss the criteria Jeremy uses to identify good deals, and some of the practices that he has used to remain successful despite the current market’s challenges for his investment preferences.
[16:22] “I think everything is overpriced right now,” Jeremy explains, adding that in a way he looks forward to a downturn so he can take advantage of lower prices. Yet this belief did not stop him from investing in an Alabama-based mobile home park. His investment cashflowed heavily right from the beginning, and he enjoyed 95-97% occupancy rates in a relatively economically strong area.
[18:30] Jeremy believes a strong local economy can combine with other factors, such as better-than-average pricing and the proper operators, can create layers of security within an investment. “You’ve got to invest in the right people,” he explains, pointing out that he was essentially betting on mobile park operators with a great track record. He found the high return rates and low prices appealing, particularly since his preferred types of investments are harder to come by in the current market.
[20:30] Jeremy adds that his operator underpromised and overdelivered through conservative estimates.
[21:30] Scott invites Jeremy to share another best deal and highlight any trends that have contributed to his success. In 2015, Jeremy purchased four self-storage facilities from one of the Top 30 operators in the United States. He purchased three of the properties directly from the investors, and secured prices 10% lower than market value. His investor was a high-profile, high net worth individual with whom he has maintained a relationship.
[22:30] Jeremy was able to secure cap rates between 3.5 and 8% for these A-class Florida properties. He was able to sell the properties three years later, a feat he considers only achievable because he “bought them right.”
[24:30] “We were really picky about how we bought properties,” Jeremy explains. He believes his success is largely attributable to this simple fact–along with having the best operator for a given property. He believes making purchases the right way is particularly important in this current real estate climate.
Lessons Learned from Jeremy Roll’s Best Deals
Jeremy and Scott each chime in about what they feel are the most important takeaways from Jeremy’s story for our podcast listeners.
[19:00] Scott’s main takeaway: “Expect the downturn and price things appropriately.”
[21:20] Jeremy’s advice to listeners is simple and direct: “Be very careful right now. Pricing is high. Real estate is cyclical. You have to be cognizant of where we are in the cycle. If you’re a new investor, step back and look at the cycle.” He points out that you can do everything perfectly, but if you fail to execute the right timing, your investment may fail in spite of your hard work.
Connect with Jeremy Roll
Connect with Jeremy Roll via his email, [email protected]. He’s happy to network with new and seasoned investors alike, including assisting new investors with navigating the waters of the real estate market.
Thank you for joining us on today’s episode of the Real Estate Nerds Podcast.
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