Riley Oickle – How To JV To Buy Real Estate With None of Your Own Money! Ep 228

Synopsis

Do you want to invest in real estate without using any of your own money? Most people think that you’d need a lot of capital saved up before you can buy a piece of property. But today’s guest, Riley Oickle has built strategic partnerships with private investors that enable him to purchase real estate using other people’s money! Keep reading to find out how he did it.

Key points

Getting Started In Real Estate

Riley lives in Toronto, Canada. In his late teens and twenties, he used to run a maintenance business. Then it came to a point where he wanted a larger business.

So he transitioned into renewable energy. But in trying to start his company, he realized he needed $1.5 Million to buy a hydraulic drill. While applying for a loan, the bank asked for assets as collateral. But all Riley had was a vehicle worth $2,500.

This made him realize that he needed to learn more about what assets are. This led him down the path to real estate investing.

Buying His First Property

The beginning was a lot of educating himself. He’d go on YouTube, listen to podcasts, and read books. Because he had a very low tolerance for risk, it took 2 to 2 ½ years before he finally bought his first property.

Through going to meetups and joining events, he was able to introduce himself to people. Those connections would often ask him what his next steps were. Riley would tell them that he didn’t have enough capital to buy yet.

At some point, someone reached out to him and offered to partner. Riley covered the down payment and his partner covered the mortgage capability. They went ahead and bought a 3 bedroom, single family home. It was a flip that was finished by someone he had met.

After buying it, he and his partner rented it out and split the profits 50-50. The home was bought for $240,000 and it rents for $1,700. After expenses, they share the $800 profit.

Their first property was bought 4 years ago, and since then they’ve moved to buy more properties. They transitioned to buying distressed properties that they’ll renovate then put in tenants.

Buying Properties Without Using His Own Money

Riley later transitioned again and now acts as the expert in the business. He became the active partner handling things like finding the discounted properties, managing the renovation, doing property management, and financial management.

His investors take a passive role by contributing the money and mortgage. They benefit from the return on investment and the cash flow.

Differences Between Investing In Canada Vs The U.S.

Riley has bought properties in Western Ontario, Texas, and Belize. So he is familiar with differences among different countries.

The biggest change he’s noticed when comparing Canada and the U.S. is the lingo or the jargon that investors throw around.

He also shared that their interest rates in Canada were lower at 1.5%-2.5%, but in the U.S. they were 3.5%-4%.

The Appeal Of Airbnb

Riley has around a dozen properties already that are a mix of multifamily and Airbnbs. He likes the significant cash flow you’d get from doing Airbnb.

If you were leasing out a commercial property worth $4 Million, it would likely make $4,000 a month in cash flow. Compare that with an Airbnb, a $500,000 property can earn $4,000-5,000 a month.

However, if you’re getting 2% appreciation per year, then you’d prefer the $4 Million property.

The Cost Of Setting Up An Airbnb

Riley bought a 6 bedroom property for $520,000 with a 5% down payment, which amounted to $25,000. He spent $5,000 on closing costs and $50,000 on renovation. Furnishings cost $10,000 because he bought second-hand.

The initial investment was over $100,000 and the property cash flows for $40,000 in a year. Riley hires a hosting company that does everything for the Airbnb and takes 18% of the income as their fee.

But Riley still does the price optimization because with 200 guests in a year, a lot of work is needed to set the top price based on availability, holidays, long weekends, and how far out they are from the reserved dates.

The Impact Of COVID

The pandemic has been beneficial to Riley and his business. Because people aren’t allowed to leave their province, people who have spent a year without going on a vacation are now looking for places they can spend time away with their family. They want a space with activities like kayaking, campfires, and going into the sauna.

Since there are only a few cottages available that can house 10 people, and people have saved up money, their Airbnb has been very profitable. This led to Riley focusing on 4-6 bedroom properties.

The Joint Venture Structure

When doing a joint venture (JV), there are 4 Ms involved: money, mortgage, management, and finding the off market deal. Each gets a 25% stake or equity. The partners usually do a 50-50 split.

Riley is careful in finding investors. He does 3-4 meetings with them and does his own due diligence and screening of the people. Right now, he already has a pool of investors that are broken down into different categories based on investment amount and type of strategy they prefer.

In terms of metrics or KPIs, Riley looks at getting a minimum 25% total return on investment (ROI). This is the total after equity ROI, appreciation ROI, and cash on cash ROI. He also looks for at least 10% cash on cash ROI, which is the annual cash flow divided by the initial amount of investment.

His Other Investment Business

Riley has another investment business, BNB Capital, which runs and manages Airbnb properties. He and his partner do coaching for people wanting to invest in their first Airbnb.

Riley also does coaching for 50-100 people a year through his own course. It contains 50 hours of content and 30 hours worth of assignments. Students also get half hour video calls with him twice a week.

The goal is for the student to buy a 2-4 unit property by the end of 6 months through doing a joint venture and the BRRRR strategy.

Common Limiting Beliefs

Most people believe that not having the money means there isn’t a chance for them to get into real estate. But Riley thinks that buying the first property is the hardest and will be your biggest accomplishment. The next property purchase is going to be a lot easier.

What’s key is finding someone willing to work with you to get through that first hurdle. Someone who is experienced isn’t bothered by the first hurdle as they might be more concerned with overcoming the 10th hurdle. Real estate is something you have to take in stages.

References

More from our guest

• Connect with Riley Oickle through his website: www.rileyoickle.com
• You can also find him on Instagram and Facebook.