Confidence and education: How one real estate investor builds a portfolio with long-term planning

Real estate investor stories: long term strategy
by Team Stessa, posted in Investor Stories

The Stessa Investor Stories are monthly spotlights about real estate investors who are building and scaling their businesses. In this month’s interview, real estate investor Srikanth talks about the importance of perseverance as he scales up his real estate investment portfolio.

Real estate investor Srikanth Koppisetty currently owns 1 primary home in California and 6 in Texas, with 1 more under contract. When he came to the USA back in 2000, he was fascinated by two things: the country’s beautiful cars, and attractive real estate opportunities.

Recently Sri sat down with us to talk about his real estate investment strategy, and the importance of long-term thinking as he continues to scale up his property portfolio.

1. How did you get into real estate – what’s your background, how did you get started, and how does it fit into your life?

Answer: To be honest, I started out with a bad experience. I made the mistake of buying my first home at the top of the market, in an area that was far away from where I worked, and not conveniently located for shopping and services. I lost money when the market dropped, and I had to sell and move on. But the most important thing is that I learned from my mistake.

I firmly believe that the experience we get from losing something is more precious and in that journey we learn lots of things. That’s because losing makes you much more introspective than winning does. You’re forced to analyze exactly what went wrong.

My real estate investing career really got started when I bought my first rental condo in Roseville, California. I had to pay cash because the market had hit bottom and banks weren’t lending. It was risky, but it turned out to be a great investment. The property was accessible, in a good shopping area, and it rented very quickly.

2. What does your real estate investment portfolio currently look like?

Answer: I live in Folsom, CA, and I recently sold a rental condo in Roseville, CA. That investment really paid off for me and gave me a lot of knowledge to build on. But Texas is where my current portfolio is. My single-family rentals are all in suburbs of Austin: Round Rock, Leander, Pflugerville, Georgetown, and Buda. Plus looking for more rental properties in Dallas now.

Pflugerville, Texas

3. Describe your real estate investment strategy for us – where & what types of property do you invest in, and why you choose the properties you do.

Answer: I always monitor the real estate markets in different parts of the country. I look for growth areas and places where companies and people are relocating due to the high cost of living in California. The state is nice and a great place to live, but California is a tough place to invest because housing prices have reached the point where the rent-to-mortgage ratio doesn’t make financial sense in most areas.

That’s how I found Austin, Texas. The city ticks all the right boxes for me, and I absolutely love the place. The weather is great, the people are wonderful, and the economy is amazingly strong.

One thing you do have to be careful about when you invest in Texas is the high property tax because it takes a big bite out of your annual cash flow. On the flip side, home prices are very affordable in Austin, at least for now. The real estate market here is good because it has slow and steady growth.

4. Why did you start using Stessa?

Answer: When it comes to real estate investing, buying property is the easy part. Collecting and organizing financial data and managing the rental property to maximize the ROI is much more difficult. However, if you want to scale up your investment portfolio, you’ve got to have a process in place to make it happen.

Like most beginning real estate investors, I started out using a basic spreadsheet. But right from the start, I was always on the lookout for a cloud-based rental management software app that let me keep all of my property info in one place. One day I was doing an online search and came across Stessa.

I come from a technology background and I immediately appreciated how Stessa helps to simplify the complex business of real estate investing and property management. It’s obvious how much time and effort the team at Stessa puts into keeping their software state-of-the-art.

5. How do you use Stessa to track and manage your properties?

Answer: I begin by entering details on each property and linking my business bank and credit card to my Stessa portfolio. This allows me to assign each transaction to the right property and P&L line item such as mortgage payments, HOA dues, utilities, and repairs and managing documents for each property.

The system is easy to use and entering data for each property is a breeze. I have real-time information on how my entire rental property portfolio is performing. Stessa lets me drill down and get data on each individual rental to monitor cash flow and fix issues before they become big problems.

Buda, Texas

6. What’s been your best experience with real estate investing so far?

Answer: Real estate investing has taught me how to be a problem-solver and think long term. My first investment property in California was rented most of the time and I learned how to screen tenants and how to take care of most maintenance issues. It was a good experience to start slow and document each of the things I learned to make it easy, trackable and repeatable for future investment properties.

Now I’m investing in Austin, and the process is more like planting your garden, watering and fertilizing, and harvesting the fruits of your investment. You’ve got to be patient enough to find the best deals in the right neighborhoods to keep maintenance costs low and rental occupancy high.

7. What’s the biggest mistake you’ve made that you’d like to help other investors avoid?

Answer: It’s important to choose the right form of ownership that works best for you. Many real estate experts suggest holding each rental property in its own LLC.

There are a lot of good reasons for doing that, but there are also drawbacks too. For example, it can be harder to get a loan for a property in an LLC. But if you buy a property in your own name many banks won’t allow you to transfer it into an LLC. In some ways, it’s a Catch-22.

8. What is the one thing you know now that you wish you knew when you started investing?

Answer: Most real estate agents don’t have experience with rental property, so it’s important to find an agent that works with investors. Buying an investment property is a lot different from buying a home to live in yourself. I’ve found the best rental properties are in areas with easy commutes and near employment districts and shopping centers.

I’d also avoid markets that have double-digit yearly price increases. That’s a big red flag, sort of like a stock price that keeps skyrocketing. The faster things go up, the quicker they could fall. It’s easy to sell a stock, but much more difficult to sell real estate if the market is going down.

9. What’s your favorite book on real estate investing?

Answer: The problem with books is that a lot of times the information can become quickly outdated. For me, the most useful resources for real estate investing are newsletters – including the newsletter from Stessa – along with blogs and online forums like Quora and listening to rental investment podcasts. You can learn about real-time issues from real people and learn how they solve problems, so you don’t make the same mistake.

10. What’s your favorite thing about Stessa?

Answer: The cloud-based Stessa rental property financial management dashboard lets me access data 24/7 from anywhere in the world. With a couple of keystrokes, I can create reports and send them to my CPA at tax time. Whether you have one property or a dozen it’s important to have the best tools. Stessa lets me focus on running and scaling up my real estate investment business without getting bogged down in too many details.

11. How has investing in real estate made your life better?

Answer: Real estate investing has really given me the confidence to solve any problem that life might bring. Being a successful investor means staying on your toes and in the learning mode. My long-term goal over the next 5 or 10 years is that my rental income pays for the mortgage and operating expenses. I’m not there yet, but I’m absolutely positive I will be!

Investing for the long term

Despite an initial setback, Sri learned from his experience and never lost faith. Since arriving in the USA back in 2000 he’s built a multi-property real estate portfolio with rentals in California and Texas. Owning real estate in two different states can be challenging, but the online rental property financial management system from Stessa makes it easier to manage and scale-up.

  • Successful real estate investors aren’t afraid of making mistakes: they analyze what went wrong and persevere
  • Slow and steady growth markets with strong economies can offer the best opportunities for real estate investing
  • Buying a rental property is much different from buying a home, so it’s important to work with a real estate agent who understands investment real estate
  • Scaling up a rental real estate portfolio is a long-term game that requires confidence, planning, and thinking outside of the box