On today’s episode of the Real Estate Nerds Podcast, our host Scott Smith sits down with Fernando Aires. On top of being a long time real estate investor, Fernando is also a tech guru on the forefront of leveraging data and analysis to make the best deals possible. The two investors had a fascinating conversation about Fernando’s unique approach to data, his best deal, and how investors can leverage both numbers and people in negotiations.The Data Doesn't Lie: Real Estate, Biohacking, and Fer...
On today’s episode of the Real Estate Nerds Podcast, our host Scott Smith sits down with Fernando Aires. On top of being a long time real estate investor, Fernando is also a tech guru on the forefront of leveraging data and analysis to make the best deals possible. The two investors had a fascinating conversation about Fernando’s unique approach to data, his best deal, and how investors can leverage both numbers and people in negotiations.
The Data Doesn't Lie: Real Estate, Biohacking, and Fernando Aires' Unique Perspective
Scott asks Fernando about his background and the inspiration for the investment tools he has developed.
[1:44] Fernando talks about his current career and background. He currently self-describes as "an entrepreneur in income property investing in software applications." He came up in the tech industry, specifically in computer chip design for Apple and other major companies. When he sought income opportunities outside of the tech sector, he developed an interest in real estate for its passive income potential. Fernando developed a portfolio of rentals across the country that eventually earned enough income to retire from Corporate America.
[2:40] After his transition, Fernando bought a software company and developed a tool that allows real estate investors to evaluate properties and analyze their investments from a data standpoint.
[3:12] Fernando shares his deep interest in biohacking and longevity. He is a Bulletproof coach with BulletProofExec.com. He also hosts a podcast with Jason Jason Hartman called the Longevity and Biohacking Podcast Show.
[03:48] Scott observes the connection between Fernando’s two interests. Both health and real estate see many trends, but “The data doesn't lie on what really matters, right?”
[04:09] Fernando's engineering background gave him a love of data that spills into all aspects of his life. He personally analyzes blood tests and biomarkers twice a year to track his health trends and analyze how his lifestyle is affecting his health. Fernando's experience with biohacking informed his analysis of real estate. As both a user and service provider, Fernando sees both sides of his tools: “The more involved an investor is, the more educated decisions can be made and therefore fine tuning the portfolio as it goes along becomes a lot easier.”
[05:10] Scott observes that Fernando's software allows investors to see where their time is most effectively spent. He finds having tools to analyze this data makes the process of managing his dozens of properties more efficient.
[Tweet "As long as you're straight with the people you're doing business with, you respect them, you're trustworthy, then doors will open."]
Fernando’s Best Deal
Scott and Fernando dive into the details and context of his best deal.
[8:30] Fernando’s best deal was one of his early ones. In 2012-2013, he formed a relationship with a bank that was seeking out investors to buy properties the bank had foreclosed on.
[09:45]Fernando looked at a package of 14 properties, and selected 10 with a high rent-to-value ratio. These were B+-A properties with higher-income tenants. He was able to find properties with 90% loan-to-value ratios, with excellent loan terms, fixed rates for a decade, and caps on the interest rates to prevent them from rising above 5%.
[11:40] Fernando purchased properties valued at over $1.5 million for less than $200,000 down. Today, these properties are worth over $2.2 million, with a return on his investment of around 384%. Fernando explains that this figure is calculated based on his actual money down.
[15:00] Scott asks more about how Fernando developed the relationship with the bank that allowed this deal to happen. Fernando’s advice is practical: “There’s nothing magic about relationships. The easiest way to build a relationship is to get started. That’s the first step.” [16:00] He also shares how he established a relationship in a new market by simply doing some research and building a good reputation.
[18:00] Scott agrees and points out that anyone can go into a bank and share their plans for feedback from the banking staff. Fernando agrees that you don’t need to know much to get started. He also finds that smaller community banks and credit unions have a better understanding of the investor mentality than large household name banks.
[Tweet "As long as you're straight with the people you're doing business with, you respect them, you're trustworthy, then doors will open."]
Lessons from Fernando’s Best Deal: The Value of Data and Good Relationships
Fernando and Scott analyze some of the lessons Fernando learned from this particular deal. The two also see Fernando’s success story as a lesson on the importance of relationships in investing.
[22:00] Scott alludes to the common dilemma new and experienced investors find themselves in--wondering where deals come from. He and Fernando agree it comes down to relationships. “If you’re straight with the people you do business with, and they see that you’ respect them and are trustworthy, doors will open.” [22:28]
[23:00] Scott asks whether Fernando saw any red flags with this deal. Fernando had concerns that the properties weren’t generating enough rent. Fortunately, rents did increase quickly enough to raise the initially low rent-to-value ratios.
[25:35] A major lesson Fernando learned from this deal is that that tenants in this class of properties tend to stay in their homes longer, which yields better returns. The deal didn’t look as good on paper as it ended up being in the long run.
[26:45] Fernando shares another lesson: “You have to buy the property that makes sense the day you buy it. If you buy a property hoping it will appreciate and having no other exit strategy, that’s gambling, not investing. If you’re not getting a real return, you’re not investing.” He did gamble a bit, but had an exit strategy in case the properties didn’t work out that would have returned him to his baseline. He knew he could sell the properties off easily if they weren’t profitable.
[28:00] Scott asks for details on Fernando’s negotiations with the bank. Fernando admits he didn’t have to do much haggling, but that his inspections revealed some issues with the property he had to ask the bank to fix. The bank was reluctant to make repairs, but ultimately did.
[31:00] Scott and Fernando discuss the value of langauge in negotiations. Fernando doesn’t let fear of losing the deal prevent him from asking for what he wants or needs, provided he’s being reasonable. He reasons that: “A good deal has to be good for both sides.” [32:59]
[34:00] Negotiations present another area where data is valuable for Fernando: “If you’re trying to gain leverage somehow, having data makes lots of sense.” Data also allows people to justify their decisions to higher-ups.
[37:00] Scott notices that some of the best negotiators he has seen are like Fernando--kind to people and nice in relationships, but hard on data.
The Takeaway: Data Drives Better Decisions
Scott and Fernando wrap up the show with some practical tips on incorporating data into an investing strategy. That said, his data is only so effective because he is also focusing on relationship-building.
[40:00] When comparing the two notes, Dmitriy highlights that the win covered the loss. He chose to keep the second property because it was a better value. He could have foreclosed on it, but the borrowers chose to deed it to him instead after defaulting.
[44:20] Scott agrees that “You can’t find out everything from behind a desktop. You need to go out and meet the people.”
