Summary: Last weekend we attended an investment conference run by Agents Invest in Spokane, Washington. While we have been investing in Spokane since 2016, we attended the conference to learn more about the city and to network with like-minded individuals. In this post I cover some of the key take-aways from the weekend.

A couple years ago, as investing for cashflow in and around Seattle became more and more difficult, we began focusing our investing efforts in Spokane.

We chose Spokane in part because it was easy to get to from Seattle, allowing us to make personal face-to-face connections with our real estate agent, contractor and property managers.

We also liked that it was in Washington state, which meant we’d continue to take advantage of the lack of state income taxes.

Finally, we were intrigued by the city’s growth and opportunities, especially the growth of medical education in the area.

In 2016, University of Washington partnered with Gonzaga to establish a new medical school campus and in the same year, Washington State University earned accreditation to form a new medical school in Spokane. Not only would this bring an influx of attending, resident and medical student renters into the area, local community leaders believe that “medical education and related research have the potential to create an annual economic impact of $1.7 billion for the region.”

Since we started investing in Spokane, the city has seen significant increases in rents and property prices. In the last two years, we watched prices grow by double digits some quarters. We’ve seen this growth in our own portfolio value as well. Houses/duplexes that were previously priced in the $150-160K range are now in the $180s and above. It’s fairly difficult to find any duplexes that meet the 1% rule.

That being said, finding deals in Spokane is not impossible. Just in that last several months we’ve seen a couple good MLS listings (one of which we covered in our deal of the week) and, in September this year we actually closed on our newest purchase of a mixed-use property consisting of four 1 bed/1 bath apartments above a commercial space.

While we stopped looking for properties around Seattle a long time ago, we continue to actively search in Spokane. Because we are still excited to expand our portfolio in the city, we decided to attend last weekend’s investing conference in order to further cement relationships with our team, meet fellow investors interested in the market and in hopes of learning more about the future of the city.

What did we learn?

Like the previous real estate conferences we have attended, we walked away from this one having learned something from pretty much everyone we met. Nearly every investor attending the conference had some interesting insights to share. Here are a few of them:

Be Proactive

We were reminded of this one by observing a friend from residency over the course of the weekend. She did two things that I think are worth mentioning (and emulating).

First, during our housing tours, I saw her go up to and start talking to a renter about a property. While we personally haven’t used this method in some time, over the course of our investing career we have often found it helpful to get insights from current property renters. This is because when renters know you are considering buying a property, they will often point out problem areas, discuss the current property managers and let you know about the surrounding neighborhood. They can even help identify problem tenants. Even if you don’t get much useful information out of speaking to a current renter, we don’t know of any downsides.

The second thing, and this really caught my attention, was when she called a seller’s agent on a property she had just found on Redfin. I’m embarrassed to say I never considered doing this! I’ve always left it to my agent to call the seller’s agent to dig for information about the seller and their motivation for selling the property, etc. The downside of relying on your agent is that sometimes they don’t get the information you want. When I asked her about it, my friend said that whenever she calls the seller’s agents, they tell her all kinds of useful information. Lesson learned! I’ll definitely be implementing this strategy with our next on-market deal.

Think Bigger

Kenji talked about this in detail in his last post. It’s definitely one of the big take-away points for us from the weekend, inspired by a talk by on investing by Scott Isaak, who currently owns 850 units in Spokane. Hopefully our next purchase will be a commercial deal with >50 units and eventually 100+ units. Stay tuned.

Not Every Deal Has to be a “Great Deal”

This is a concept we learned this weekend from former economist and real estate investor, Eric Bowlin, who blogs at idealrei.com.

During his talk on escaping the mental box, he advised that every deal doesn’t need to be a home run. He used the example of a person waiting to get 15% cash on cash (COC) return and not buying a property for a year versus a person buying a 12% COC return immediately. In the end, both people end up in the same place because of the financial cost of not doing anything for that first year (opportunity cost) and compounding.

He also pointed out that a grand slam cannot happen unless you’ve loaded up the bases with singles and doubles first. You need the real estate education that comes from owning an investment property first to really make a grand slam deal happen down the road.

The point: get out there and do a cashflowing deal now.

Activate Your “Lazy Equity”

One of our mortgage brokers (and a real estate investor himself), Cody Touchette, gave a useful talk that focused on what he referred to as “lazy equity.” This is the money you have tied up in a property that isn’t working for you.

While your COC may look good on a particular property, if that property has appreciated, there’s a significant chunk of money sitting in it doing nothing. Your return on equity (ROE) is low.

When we reflect on this concept with respect to our portfolio, we have a number of properties around Seattle that are cashflowing decently but certainly have a lot of lazy equity. This fact, when combined with the “think bigger” concept above, was part of what redirected our thinking about selling a few of our duplexes and 1031 exchanging up to a larger property in the next year.

Hard Money Lending is Not Scary

Kenji and I have thus far not borrowed from a hard money lender. We’ve been fortunate enough to have access to capital but then again, we weren’t necessarily thinking creatively about how we could better leverage hard money lending.

But after listening to the lecture by Aaron Cunningham, founder and CEO of Inland Capital, we understood how useful it would be to have the option of accessing capital very quickly (they can close in less than five days in most cases).

Especially in competitive markets, the ability to purchase in all cash can make your offer much more attractive than the next person. Over the years, we have probably lost out on a few deals to all cash buyers,

Borrowing from a hard money lender also could allow us to buy a fairly distressed large property (which a bank wouldn’t loan on), and then rehab it and BRRR it.

After this weekend, getting hard money doesn’t seem like such a black box (or scary at all!). We’ll be submitting our application to get approved shortly.

Your Network is your Net Worth

Admittedly, this is something that the BiggerPockets crew says regularly on their real estate podcast. But I list it here because it is so true. You can learn something from everyone, no matter where they are in their real estate journey as long as you are curious and ask questions. That’s what makes going to conferences and meetups and joining Facebook groups focused on real estate investing so useful.