FEATURED STORY
Master Investor
was very affordable and had good jobs and a growing population. “People were moving here in droves, and you know with rental properties, and everybody should know, that they don’t perform unless you have somebody living in the home, right?” he says. AREI has three investment models – Class A, Class B and Class C. Dallas was the ideal market to set up Class A investments, as the 2012 median home price was just under $200,000 versus the national median of $220,000. AREI was able to “buy properties in good neigh- borhoods at a very affordable value,” Larson says. AREI acquires property in many ways, including tag sales, foreclosures and short sales. Then the company does a full renovation of the property. The company saves money by doing the rehabs itself. “All of our renovations are standard,” Larson says. “We use the same materials on every home. It’s our own in-house employees and crews who work on all of our properties. They’re trained to renovate homes to our speci- fications.” Once tenants have been placed, AREI’s sister company, American Real Proper- ty Management (ARPM), manages the properties. ARPM thoroughly vets the tenants, according to Larson. “They have to make at least three times the month- ly rent to qualify to live in one of our homes,” says Larson. “They also have to have no prior evictions, and based on credit scores, we’ll take additional money for security deposits to kind of protect our owners.” Average rents in Dallas are about $1,600 per month, and applicants with a 650 or higher credit score need to put down a one-month security deposit. Credit scores below 650 mean higher security deposits for the tenants. “And then from there, once we get the property fully turnkey — and when I say turnkey, I mean renovated, tenant in place and cash flowing — we transfer ownership to our investors,” Larson says.
to succeed in real estate investing. “For you to succeed in real estate, you can’t just be a handyman,” says Larson. “You’ve got to be a very good people person as well.” Being consistent and a good people person helped him break into the hot Dallas-Fort Worth real estate market in 2012. He says that those traits helped AREI get its “fair share” of available inventory in the tight DFW market. The marketing degree with a minor in entrepreneurship that the now 30-year- old Larson obtained from Central Mich- igan University helps him market homes better than his competitors, he says. “I know how to make my marketing more appealing than the other turnkey pro- viders down the road or someone else in another state trying to do the same type thing. I think that’s part of what’s made me successful in business,” he says. ‘ALMOST RECESSION-PROOF’ Larson had an epiphany of sorts when he obtained his real estate license after receiving his marketing degree. The market had recovered, and although he realized it would always fluctuate, “these rental properties are almost re- cession-proof.” He knew that real estate would be a great tool to build a success- ful business as people will still need a place to live as the market teeter-totters between boom and bust. “If the market does tank again — and it probably will; I mean, everything is cyclical — you still have a rental port- folio of properties that are filled with people,” Larson says. Instead of selling million-dollar homes, Larson decided that renting out properties in good neighborhoods was a better business model. The values of the rentals might drop, but he’d still be receiving rent checks.
PERSONNEL FILE MASTER INVESTOR: John Larson COMPANY: American Real Estate Investments (AREI)
WEBSITE: www.areiusa.com
EMAIL: jlarson@areiusa.com
OFFICE PHONE: 888-323-2734
HOMETOWN: Detroit, MI
EDUCATION: Central Michigan University
FIRST REAL ESTATE DEAL: The first deal I did on my own (outside of a wholesale or retail transaction) was in 2009. It was a fix-and-flip. I purchased the home during the recession for $25,000, put about $30,000 into it. I did all the work on my own with my father’s help. We sold the house for $86,000 cash. GUIDING PRINCIPLES: “AREI does not put our clients in bad positions” – My whole team comes to work every day with that mindset. If we keep that in our minds and in our hearts, we cannot fail. WHAT MAKES YOU GET UP EVERY MORNING: My family and my desire to always put 100 percent into anything I do. WHEN YOU’RE NOT WORKING: I am a big sports fan. I also enjoy listening to podcasts and reading. FAVORITE QUOTE: “It is so much easier to be nice, to be respectful, to put yourself in your customers’ shoes and try to understand how youmight help them before they ask for help, than it is to try to mend a broken customer relationship.” – Mark Cuban
Larson credits the entire AREI team for the company’s success.
Currently, AREI won’t put forward properties for investment with rents less than $950. Larson still isn’t a fan of Class C real estate as an investment, but AREI will source those properties because some clients like the high-risk, high-reward nature of that asset class. Since he’s not comfortable owning them himself, Larson won’t offer an investment with low rents. “I don’t want to own that type of inventory, so I don’t produce any invest- ments that I would not invest in myself,” he says. THE PERSONALTOUCH Larson’s people skills are evident in the way AREI treats its customers. The company backs each of its investments with a warranty, “so you know that you’re really getting a turnkey invest- ment from us,” he says. Also, AREI
assigns each investor an “after-care rep- resentative,” essentially a customer ser- vice representative, to ensure investors’ needs are being met. Larson calls this program a “white glove tech service.” AREI believes that the management team’s responsibility is to find qual- ity investments, place good tenants and take care of maintenance issues, and that’s where the focus should be. Customer service should be handled by a different group that is solely focused on after-sale support. The dedicated rep calls investors monthly to review the status of their properties, go over property management statements and answer questions or concerns. “That one person will know what’s going on with any one of your homes, no matter if you own one with us or 10, you have that kind of one-on-one con- nection with somebody at my company that’s always in contact with you. I think
if anything, that’s what really sets us apart from other groups,” says Larson.
INVESTORS USUALLY START SMALL Larson says investors in AREI’s Class A market usually start out with one property (“To see how it works”), then buy another one three or four months later. He understands, as investors want proof that AREI’s investment model works. Investors in Class B markets, however, tend to buy two or three homes initially, as the homes cost less than Class A properties. “I’ve had investors come to me and ask if they should buy five properties in St. Louis, a couple in Texas – ‘What should I do?’ I just tell them, ‘Hey let’s just start with one. Give me the oppor- tunity to prove to you that this works. Let me earn your trust and then from
INVESTMENT PHILOSOPHY: MOVINGUPTO CLASSA Larson chose Dallas, as the market
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