December 2022

Mindy:
Welcome to the BiggerPockets Money Podcast Finance Friday edition, where we interview Ben and talk about investment strategies after paying off massive student loan debt.

Benjamin:
Now, I guess I’m in a position where we have been maxing out our Roths for a little bit for probably about two years now. I’d say we’re more heavily invested in real estate, so I want to get into how we can best invest, I guess when it comes to the stock market. I know we should be in low cost index funds. How exactly should I be doing that? Like I said to Mindy at one point, I think we’re going to be over the income limit for Roth IRAs. So, now I’m curious, what should I be doing?

Mindy:
Hello, hello, hello, my name is Mindy Jensen and with me as always is my courteous co-host Scott Trench.

Scott:
You know what they call a courteous spy, Mindy?

Mindy:
No, what?

Scott:
Agent. Agent.

Mindy:
A gent. Oh, that’s a great joke.

Scott:
Thank you, Mindy.

Mindy:
Scott and I are here to make financial … Scott is here to make very bad jokes. Scott and I are here to make financial independence less scary, less stress for somebody else, to introduce you to every money story because we truly believe financial freedom is attainable for everyone, no matter when or where you’re starting or how bad your jokes are.

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business, or just strengthen an already strong financial position, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams.

Mindy:
All right, Scott, today we’re talking to Ben who has recently paid off $120,000 in student loan debt. Hooray, hooray, hooray, hooray, hooray. That is fantastic news. But now, he would like to do something with his extra money and like I said before, there’s no such thing as extra money. You have to just tell that money where to go. So, we are going to talk to Ben today about what he should do with the funds that he has left over from his income versus what he’s spending.

Scott:
Yeah, it’s a great discussion we have with Ben and hats off to Ben. He has really built a strong financial position, that is built on a foundation of hard work and discipline with his spending. And then a couple of smart investments and a sustainable approach to building wealth and generating increasing amounts of freedom in his life. So, really optimistic for Ben’s future. We had a couple of tweaks, I think today and a couple … and Mindy had, in particular, some really good advice for him. But this is somebody who’s already on a really strong trajectory and only getting stronger.

Mindy:
Yeah, I think he’s got a lot of potential and he’s just in that beginning of the grind phase, but starting from really strong position. He has no debt. He has two rental properties that are doing really well and now he wants to know where else to put his money. So, I think that we have a lot to talk about today.
One thing that I have to say, because my lawyers, make me is the contents of this podcast are informational in nature and are not legal or tax advice. And neither Scott nor I, nor BiggerPockets, is engaged in the provision of legal, tax or any other advice. You should seek your own advice from professional advisors, including lawyers and accountants regarding the legal tax and financial implications of any financial decision you contemplate. And before we bring in Benjamin, let’s take a quick break.
Benjamin and his wife just paid off $120,000 in student loan debt, yay. And got married and had an epic honeymoon and now, they’re ready to buckle down and grow their wealth. He and his wife have a great salary and the ability to save multiple thousands of dollars per month, but he’s not quite sure where to put that money. Benjamin, welcome to the BiggerPockets Money podcast.

Benjamin:
Thank you. I am very excited to be here and have definitely been waiting a long time to be on the show.

Mindy:
I’m very excited you’re here and I can’t wait to jump into your numbers, so I’m not going to, let’s jump in. I see a combined salary of approximately $230,000 from your W2 and some overtime, which is awesome. I also see rental properties that bring in … two rental properties that bring in $1,800 a month total. We’re definitely going to talk about that. I also see monthly expenses of about $5,000, so I am not going to go into these, they seem pretty spot on. You do have an elevated travel budget, but again, we just said you have your honeymoon, which is eating up a big chunk of your travel budget and you don’t get to go on a honeymoon every year. I mean, I guess you could, but … So, the delta between your income and your expenses is between $4,000 and $6,000 a month. Clearly that’s not where we need to focus.
You have investment accounts 401(k), $30,000 in a Roth, 401(k) and $10,000 in your wife’s Roth 401(k). You have $45,000 in cash reserves including $10,000 parental property and six months of reserves personally. Yay, again. Sorry, I have to comment because that’s awesome. And rental properties, you have a … you hae two rental properties, one on $259,000 purchase at 3.875%, hooray. And one at $262,000 at 4.5%.

Scott:
Is there any other debts or assets? We have a primary house.

Benjamin:
We do have a primary house, yep, and we owe about $205,000 on it and it appraised at $285,000, so we’ve got about $80,000 there in equity.

Scott:
Fantastic. And then how about any other debts?

Benjamin:
Just my wife’s car loan, which is a part of that budget. The $51.23 a month.

Scott:
All right, awesome. And Ben, what would you estimate your net worth at, totaling up all the things we just discussed?

Benjamin:
My total net worth, I’ve estimated at $357,500.

Scott:
So Ben, would you mind telling us a little bit about your money background and story? How’d you get here?

Benjamin:
Yeah, definitely. So, I grew up in a middle class family and I definitely like to earn my money as a kid. I did the lemonade stands and delivered papers and worked tobacco and all that kind of stuff. But I was always saving for something, whether that was a PlayStation, or a dirt bike, or whatever. I got into my early and mid 20s and I spent most of that time being in a band and being very, broke just enough to basically get ourselves from point A to point B. And in 2016, me and my guys decided, “Well, let’s disband and it’s time to actually get full-time jobs.”
So, I didn’t have my first full-time job until I was 27. At that point, me and my friend Rich started talking about how we could make money, what we were going to do, and he read the book, Rich Dad Poor Dad, which I know is a common one, and he had told me he had saved $10,000. So, I was like, “Give me that book.”
So, I read that book in 2016 and was like, “Okay, I need to eliminate … ” or come close to eliminating my housing expense and if I can do that, then I can do anything. So, I began saving money at a job where I was making $15 an hour and doing any side hustles that I could and I saved enough to buy a three-family multi-family home in 2017 in December. And from there, I basically rehabbed it a little bit and saved as much as I could. At the point I had lived there for a year, I had met my wife and we’d been dating. I moved in with her and she had bought this three bed, one bath house, that needed a complete renovation. And when I saw that I was like, “Yes, forced appreciation, let’s do this.” And jumped right in with her and we tackled that and we had some pretty big money talks early on in our relationship because I just wanted to be upfront about who I was. I was like, “Hi, I’m Ben, I’m going to be hard to deal with because I want to make something of myself.” And she was all about that and thought it was really cool.
And so, we spent between 2018 and 2021 renovating our house and adding a bunch of forced appreciation, paying off $120,000 of school loans that she had. Luckily, I didn’t have any because I was a college dropout and yeah, I was halfway through and I ended up getting into the Department of Corrections Academy and so I did that. But yeah, and just eliminating any kind of credit card debt, or anything that either of us had to just avoid consumer debt and yeah, we did all those things and now here we are in 2022 and we’re looking to save a bunch of money and invest heavily and really project our lives forward.

Scott:
Awesome. What do you and your wife do?

Benjamin:
So, my wife is a registered nurse in the ER and I work security at Yukon as well. That’s how we met. And I also just got my real estate license, but I am brand new to that, so I haven’t seen any income from that just yet.

Scott:
Awesome. Any big things, tips to share around how you paid off the student loan debt? Was it all just grinding away, or did you have any big events that helped out with that?

Benjamin:
Yeah, no, we actually did have a big event that helped. We definitely grinded but partway through in, I want to say 2020 when loans … or I’m sorry, when interest rates were really low, I took a look at what we owed on her school loans and decided to look at if we had lowered our interest rate on our mortgage and also eliminated our PMI because her original loan was an FHA loan. So, we decided to get the house appraised. She’d originally bought it for $162,500 and when we got the house appraised, it appraised at $285, $285,000. So, we were able to take out about $58,000 from our refinance, eliminate the private mortgage insurance, bring down the interest rate, and ultimately pay off that $120,000 of school loans and our … I’m sorry, our payment on our house only went up about $120 a month. So, that was an $1,100 and change savings for us monthly.

Scott:
You should feel fantastic about that. Congratulations, you grinded and paid off tens of thousands of dollars and at the same time, you clearly were working hard and spending very little and fixing up the house, and you were able to reap the rewards in a big way. So, life probably feels much better right now, in a much stronger position than it did just a few years ago.

Benjamin:
It does, it does. And I’ll tell you, it wasn’t without its hardships, there were points where I was like, “We have to pay off the school loans before we can update the house.” And one day, I walked into the kitchen and it was out of the 1960s and my wife was basically in tears because she hated it so much and I was like, “Okay, I’m going to cave.” I was like, “We can do the kitchen. I can’t see that happen.”

Scott:
Awesome. Well what’s the best thing we can do to help you today?

Benjamin:
Yeah, so I mean now, I guess I’m in a position where we have been maxing out our Roths for a little bit, for probably about two years now and I’d say we’re more heavily invested in real estate. So, I want to get into how we can best invest I guess, when it comes to the stock market. I know we should be in low cost index funds because I’ve read the books, but how exactly should I be doing that? Like I said to Mindy at one point, I think we’re going to be over the income limit for Roth IRAs. So, now I’m curious, what should I be doing?

Mindy:
Well, okay, so once upon a time I contributed to my Roth IRA in January, max it out because that’s the greatest, then it’ll grow the whole year. And by the end of the year, I had sold so much real estate that I had kicked us out of the, you can contribute to your Roth IRA qualification, which is a super fun … it’s a great problem to have but it’s a pain in the butt because now you have to go back and figure out not only how much did you put in, but how much did that money grow over the year? And of course, it was during a high growth year. So I actually did have growth. Now if you put in too much this year, you may not have any growth.
I am edging into the, I don’t know what I’m talking about department right now with the, maybe there is no penalties because you lost money. You definitely have to take that money out and maybe you’re going to be upside down because you still have to take out all $6,000 even though it may have gone down. I’m going to send you to a CPA but also I’m going to tell you what I did, which was to go to fidelity.com, which is where I had my Roth IRA and I reached out to them and I said, “Hey, I made this mistake.” And they said, “Oh, we’ve got a whole document on it, here’s how you do that.” And it’s some fun, complicated math on how much did you put in and how much did it grow, and this is how much you have to withdraw from your account and it is … You already paid taxes on it so you’re not having to pay taxes again. But it’s just a bummer. So at the end of the year, figure out if you did in fact contribute too much and if you did, then that is the problem.
Now, your contribution, your income limit is based on your adjusted gross income, your AGI, so that’s your income minus any traditional 401(k) contributions that you may make. Traditional IRA contributions that you may make. I don’t know if you have the opportunity to make the switch from Roth 401(k) contributions to traditional 401(k) contributions. If you’re right there at the limit, maybe you could make some traditional 401(k) contributions to pull you down so you can keep all your contributions to your Roth IRA in there.

Benjamin:
That’s true, yeah.

Mindy:
This is what we get into the weeds a little bit. The Roth IRA contribution income limits are a sliding scale, so up to a certain amount you can contribute the entire amount and then there’s a little bit less that you can contribute, the more money that you make. But you cap out, I want to say at 244, probably should have looked this up before I started talking about this. Married, filing jointly it’s $214,000 for this year. So, you’re going to be over and if you’re making 230, you could contribute 15,000 to pull you back down underneath that.

Benjamin:
Now, what if I have a loss on a investment property? Would that count against that total number?

Scott:
No, you earned too much income to claim a loss from your rental property against your ordinary income. Let’s pop out for a second here and frame the question. You’re saying, “I’m going to accumulate … ” I’m trying to reframe for you, so correct me if this is the right question, if this is not the right question. You’re going to accumulate $50,000 to $60,000 in cash over this next year.

Benjamin:
Yep.

Scott:
Is that right in terms of savings? Because you’re doing a phenomenal job with the basics and the fundamentals here. You’re saying, “I want to put that into stocks not real estate because I want my position to be more diversified.” Is that what I heard?

Benjamin:
Oh, I definitely want to go heavier into stocks this year. Absolutely, yep.

Scott:
Okay. So what’s the best way to put that $50,000 or $60,000 into stocks. And now, the next question is where do you want to be in three to five years? Because you can dump it all in your 401(k) and we can find ways to get more of it into the Roth, for sure, but then that’s going to soak up as much as $50,000 of that $50,000 or $60,000 if we put it all into the tax advantaged accounts. In five years, you’ve accumulated 250 grand and probably gotten some growth on that, but it’s all in your retirement accounts. Is that what you want in three to five years?

Benjamin:
No, probably not quite that much. So, we are going to continuously be saving to get outside of our starter home currently. But I would say probably at least half of that because we are going to be saving for our longer term family home, as we anticipate having children within a year or two. But still, I would say at least half.

Scott:
Okay, so we want half of this to go into tax advantaged accounts, the other half to be accessible at your option, within three to five years?

Benjamin:
Yes.

Scott:
Okay, that helps. I think then that you have the 401(k) or the Roth question. And you’re making a long-term bet either way. I have my slight preference towards the Roth. If you would like to do a Roth, maybe one of your employers offers a Roth 401(k). Have you checked that?

Benjamin:
So, we’re technically … our employers are government, so we have the 457 and 403(b), I believe, options.

Scott:
Okay, is one of those a Roth equivalent?

Benjamin:
Yes, yep. I believe the 457 is the traditional and the 404(b) is the Roth, I believe. Because yeah, Yukon is technically state of Connecticut.

Mindy:
Oh the 457 is the holy grail of investment plans.

Benjamin:
We’ve unlocked something.

Mindy:
Yeah, yeah, yeah. Okay, so we need to have a thing on the application that says, “Do you work for the government?” Because the 457 is, you can contribute to the 457 and the 403(b) at the same time, same contribution limits. I want to say they’re 20,000 this year, 20,500 and they go up to 22,000 next year.

Benjamin:
Wow.

Mindy:
You can put 20,500 into your 403(b) and an additional 20,000 into your 457 and your wife can do the same thing.

Benjamin:
Wow.

Mindy:
So that’s, what is that? $80,000, $90,000 right there.

Benjamin:
That’s definitely a lot.

Mindy:
And then you can do that again next year. Now, if you both separate from employment with your current company, you can pull out money from the 457 with no penalty, I believe you pay taxes on it but if you already paid taxes because you’re doing the Roth option, then you just get to pull that money out. If you have low expenses and all of this money at your service in the 457 plan, you could really be doing some interesting things. I am going to send you to the Millionaire Educator website. He is the expert on the 457 plan.

Scott:
Yep, so I think that’s a great option, right? Maxing out potentially those two 457s.

Benjamin:
Yeah, that’d be great.

Scott:
Now, if you stay at the job, you can’t access it without penalty. So that’s one caveat.

Benjamin:
Well, that’s okay. Actually, something that’s cool about working for the government in Connecticut is after 15 years, my wife and I are both vested with insurance for the rest of our lives. So, I don’t intend to be with the state beyond that point, which for me is another seven years. So, I intend to grow my business as a being a realtor and then at the point that I have that insurance, I would be out anyway. So, I guess that would leave that accessible at that point.

Scott:
Awesome. Well, then this is a pretty good, easy answer potentially if you’re trying to get more stock exposure and your plan options are reasonable, dumping everything into your Roth equivalent, in the 457.

Benjamin:
Yeah, I definitely want to focus more on stocks in general because I know when we buy our next home we have the $80,000 in equity in this home and if we’re still in that position and the market hasn’t changed crazy, I intend to get another two to four unit multi-family from that. So, I want my main focus over the next few years to definitely be the stocks, knowing that the real estate side of stuff is going to be taken care of itself and that money’s technically already there.

Scott:
Awesome. Would you mind giving us a quick overview of your real estate portfolio and the two properties?

Benjamin:
Sure. So, I own a three family that I bought on an FHA loan at the end of 2017, which I bought for 259 and now I owe 233 on. That is appreciated a ton, some through forced appreciation and just some through the general market. And now, is estimated between 380 and 400 I would say, based off current comps.

Scott:
And what’s that rent? What’s the rent for?

Benjamin:
3,375. It’s actually a duplex and a single family. Single family’s super small, like 550 square feet, almost like tiny home living but not quite. And then I’ve got a garage over there that runs for a couple hundred bucks a month. Mortgage, taxes and insurance on that are 1,980 a month. And then I set a bit of money aside as well for just typical expenses. Up until this point, I’ve handled landscaping and snow myself, looking to get out of that in the next year.
And then on the one in Enfield I just purchased back in April, that was 262,000 and that was on a conventional 25% down and that currently rents for 3,100 but through a couple items, like we’re going to turn the first floor from a one bed into a two bed. It’s got a huge dining room and we’re going to turn that into a two bed and a few things, we anticipate at least $3,600 a month by springtime and that’s on a $1,702 a month mortgage, taxes and insurance.

Scott:
Thank you for coming on and acknowledging that my cash flow is not my rent, mine is my mortgage. It’s also my allocation for expenses, which seem in your case to be very healthy in a ballpark sense. So, these seem like two winners from a investment standpoint. And just a sanity check it, do they tend to put money into your pocket on a monthly basis?

Benjamin:
Yep, they definitely do. I tend to just let it all sit there throughout the year and then I try to pretend that that money doesn’t exist unless I want to invest a little bit of it further. Or I don’t know if we’re already at our monthly budget and once in a while, maybe once a year I’ll be like, “Well, we can take $200 from that account because we never touch it,” but otherwise, I’m just trying to let it build or reinvest it, or something. I try to forget that it’s there.

Mindy:
What is the CapEx situation on both of those properties? The roof, the systems, the appliances, the HVAC system?

Benjamin:
So, both properties have new roofs. I did the roofs in 2018 on my first multifamily, which cost me probably a combined 11,000. The one in Enfield had a new roof when we purchased it, so that was great. Furnaces are all midlife. Windows, pretty good. Siding is good on both of those. I am going to have to put in a driveway on the Enfield home in the spring. I don’t anticipate anything too crazy, we’re just going to do enough so they can get off the street during the winter, when there’s snow. Otherwise, they have plenty of room for street parking.
When we got the Enfield house, we did put $12,000 into that, to the third unit to basically fully redo the unit because it was renting for like 850 and now it rents for 1,200 and we will probably be putting $5,000 to $7,000 into that first floor to turn that into a bedroom, or into a two bedroom in the spring. Otherwise, not too many major things that need immediate attention over there.

Scott:
Awesome. Well, how else can we help you today? Besides the stock question?

Benjamin:
I think this just my overall allocation was my biggest question. I just want to make sure that I’m well diversified and that I don’t end up too heavy in one area. I’m not very risk averse, so I like to feel safe. So, when I think about my retirement, that’s definitely where I need to be, is a question. If I’m thinking about the number, then I think right now we’re spending say $40,000 to $50,000 a year. Based on average inflation, are we going to need double that by the time that we retire? And if we want to inflate our lifestyle at all, I’m thinking we need maybe $125,000 to $150,000 a year. Does that seem like a reasonable thought process?

Scott:
I think that that sounds reasonable to me at a high level, from this, I think. How old are you guys?

Benjamin:
I’m 34, my wife’s 28.

Scott:
I think you guys are in an outstanding position. You save a tremendous amount of money each year. You’ve got two really strong properties here. You’ve locked in your home mortgage at a low interest rate. You’re thinking about all the right things. You’re going to be able to accumulate 250 grand over the next couple of years. You’re not going to see your salaries go down, or probably your savings go down, over the next couple of years. You have plans to buy more property and continue investing.
So yes, I think that there is some math we could back into from a retirement perspective. Whatever that math is though, your current trajectory is going to carry you past that. I’ll tell you that right now, based on that. I’m not sure, your fundamentals are very strong, you’re going to get wealthy with each passing year. Some years there may be some market declines or whatever, as the portfolio becomes a bigger percentage of the change in your net worth, if your portfolio performance is a bigger impact than your savings rate, but you’re not quite there yet.
So, I think you keep doing what you’re doing and you buy another property in the next couple of years and add a couple hundred thousand to the stock portfolio with the process you’re doing. This is a winning formula. This is a strong financial position. You should feel secure in what you’re doing, in my opinion.

Benjamin:
Awesome, thanks. Yeah, definitely looking forward to it. Definitely want to keep building, that’s for sure.

Mindy:
Have you created an investment plan yet?

Benjamin:
Truthfully, no. My plan was max out my Roth IRA and max out my wife’s Roth IRA up until this point and then I would check when we want to retire and at a conservative interest rate and just be like, “Oh yeah, that number seems really good.” And if I do the 4% rule, then I think I’m there. And that’s about where I’ve left it up until this point. And just knowing that I want continuously get more real estate through refi-ing out and slowly building a portfolio.

Mindy:
So, I think that you and your wife can do some homework and conversations about your investment plan. How many properties do you want to own? And that is not a judgmental question that is a, you guys need to talk about it so that you’re on the same page. You want to own two and that’s it, and she wants to own 200, you need to start having more conversations. If you’re both happy with two and you have two, great, you won. Then what do you do with your money?
You want to invest in the stock market. How much do you want to invest in the stock market? Do you want to have a stock market portfolio where you put in $10,000 a year every year, no matter what? Do you want to have a plan for putting in like hey, when the stock market goes down, Mad Scientist, I keep going back to him because he is like all he does is think about this, but he was talking about how he had this plan to invest and he had a bunch of money and he was investing at this price point and this price point and this price point. And then when the market started going down, he wanted to invest more but he couldn’t do it when it came time to pull the trigger. So, he automated all of it.
So, what does your level of risk look like? What does your comfort level with risk look like? I mean, think back to March, 2020 when the market was starting to go, deep dive down into negative, into lower territory. Did that make you feel like all of your investments in the stock market were a mistake? They weren’t.

Benjamin:
No, I didn’t. I was like, “Okay, everything I’ve ever read says this is awesome and a great time to buy and if you miss the 10 best days in the market, don’t pull out.” Always stay in the market no matter what.

Mindy:
Yes, but you might feel this way. How does your wife feel? It’s one thing to say, “Hey, when stocks are on sale, I’m going to buy more.” And it’s quite another to actually do it. So, having an investment plan and a written investment plan can be so helpful when you’re in the throes of, “Oh, I just put $10,000 in the stock market yesterday and now it’s worth 9,000. The money that I’ve had yesterday has now gone down 10% and I’m freaking out.” Keep to your plan, it says next month I’m going to put in another 10,000 and that’s how it’s going to be, or five, or whatever.
So just, I think an investment planning meeting with your wife, and this is not a 15 minute, “Wow, now we’ve come up with all the answers.” It’s a conversation to have over the course of several weeks or several months. What does our stock investment portfolio look like? What does our ideal rental portfolio look like? And just start, that will help you come to a decision of how to allocate your funds.

Benjamin:
Yeah, no, that sounds awesome and I think you’re right. It’s definitely something that we need to do and further discuss.

Scott:
Yeah, I have a template that I’ve provided that I’ve prepared, that could be a helpful starter piece for that. So, I’ll send it to you. It’s just a one-page investment plan.

Benjamin:
Awesome.

Scott:
So, in three years, I want my portfolio to look like this many properties, this much cash flow, this is my stock position, these are my other assets, this is my side hustle, agent job. Those types of things. And that enables us to do X, Y and Z.

Benjamin:
That’s awesome. I appreciate that. Thanks man.

Scott:
Awesome. Let me ask you, I’m trying to think through your situation and find opportunities here. Your fundamentals are really strong. It’s going to carry you to wealth, like I mentioned earlier. So, I guess one challenge we could talk through is speed to completion of financial independence, the baseline level of financial independence.
What I heard you say is that you’re really backing into an event seven years from now. How do I have the maximum possible wealth in seven years, when this government benefit kicks in? Is that right? Is that how you’re framing things?

Benjamin:
Yeah, I’m thinking of that seven years really allows me the opportunity to build out being a realtor and just overall be in the world of real estate because I do want to, like I said, further build out my portfolio and also, just become a realtor. And so yeah, in that seven year period, I would have the opportunity to leave the state with the insurance for life and just get out of that W2 job. So, I guess that’s more like the opportunity of a little bit of entrepreneurship versus just the W2 paycheck, where my growth will definitely be limited because there isn’t a ton of growth in my department, truthfully.

Scott:
Well, in that case, I would do that exercise in a three and seven year period. Say, what is possible three years from now if I crush it? Too many people I think, start with the conservative case. What’s the worst case scenario? You should do that. That’ll make you feel good. But you also should think about what is the best case scenario, or what’s a likely scenario if a couple of these things hit? Like my agent side business or whatever. And that can produce interesting math.
It could be that some of these other projects that you work on, or side hustles that you work on over the next couple of years, make the benefit of staying for the additional four years to get that insurance benefit, irrelevant to a certain degree. So, something to think through when you’re going with this, is that your fundamentals are strong enough to allow you to actually plan on being a little bit more aggressive. Although, I think there is another component to this, which is if you guys are planning on having children, that will also change the math and we need to be more conservative in a couple of things.

Benjamin:
Definitely. Luckily, my wife’s position as an RN, she works three days a week. So, they are a long shifts, she works 12 hour days. But that definitely for childcare, at least gives us the opportunity to avoid a major cost there because also both of our jobs … more so mine, I get the chance to bid on a shift every three months. So, at the point that we have children, I could go to first shift while she works 3:00 PM to 3:00 A, which is what her shift is. And yeah, it might be tough, but we would be able to switch on and off with the childcare there, so that we didn’t have a massive childcare cost, which I know it can be super expensive.

Mindy:
And if your wife is working three days a week, if one of those is a weekend day, then you only need childcare for three days a week as opposed to-

Benjamin:
Yeah, and she does work a weekend. So, definitely.

Mindy:
Three days a week is a lot better than five days a week. But that’s something to consider. Childcare is very expensive and start … Your salaries make it so that you can afford that easily but that is going to eat into your ability to save. We just did an episode with Jen Narciso from Investor Mama and she was talking about different creative ways to lessen the cost of childcare, maybe connecting with another family and splitting the cost of childcare, or splitting an au pair, or connecting with them and you watch their kid two days a week and they watch your kid two days a week. And some sort of hybrid solution, there’s a lot of hybrid solutions available. You just have to get creative. So start thinking about that now.
But in your application, you mentioned that you may be adopting rather than having children natural … Let’s see, how do I phrase this without sounding a horrible person? Rather than having biological children. And you did address the idea that adoption is expensive and that’s so sad because there are so many kids that need to be adopted. But you’re right, it is really, really expensive. What is it? Like $60,000 or something?

Benjamin:
Yeah.

Mindy:
It’s so expensive to adopt a child and I don’t know any way around that.

Benjamin:
I don’t think so, I heard that … and I haven’t looked into it truthfully enough to know, but I heard that there’s a tax break involved there if you take out a loan for part of it. But I don’t know if it would be worth it, it might just be something that we did straight out, regardless. But I have to look into it more to really know.

Mindy:
Yeah, my sister was adopted and we went through an agency, but I mean, I’m 50 years old, my information is outdated.

Benjamin:
So, we’ll see. We’ll take on whatever comes our way.

Scott:
And that will change the calculus on the side hustles as well, at the very least.

Benjamin:
For sure. I think the plan is just always to be as prepared as we can. Even with that budget that I sent you, Mindy, of 5,123, there’s $1,300 of cost that, if it ever needed to be, we could just cut out right away. Which we didn’t have this up until very recently, but there’s $500 of free spending because we were so budget conscious for a long time, that didn’t get shoes until I needed shoes, or didn’t buy extra clothes until I was like, “Wow, I don’t have good jeans.” So we each allowed ourselves $500 there and then we have $300 that we allocate to a date night or takeout. And so God forbid, if we did have to save extra money to do the adoption, which I’d be happy to do, we could knock out quite a bit of that budget just with extra spending.

Mindy:
Oh, you know what I wanted to suggest, Scott, what do you think of this? A HELOC on his primary right now because they’re going to turn it into a rental. I don’t know if there’s any more opportunity or space in his equity to open up a HELOC?

Benjamin:
I’m not sure, what percentage can you usually go to, loan to value on a HELOC? Right now, we’re probably just under the 80% mark. Yeah, I’m not sure how much more we could go. I think there are some that I’ve seen that’s like 85, 15 but not a ton.

Mindy:
Yeah, okay. So, that doesn’t sound like that’s worth exploring.

Scott:
Yeah, I think you could be able to get some if you really shop around, but it’s not like you have 40% equity in your property right now.

Benjamin:
Yeah, we did, but then with the school loan, that’s no longer the case.

Scott:
I think you did exactly what you should have done. So, you’ve already harvested much of that benefit.

Benjamin:
Thanks. Yeah, I looked at what … because we’re probably 18 months to maybe even further out, probably even further out, from getting our home. And then I looked at what this home would currently rent at in the current market and the cash flow wouldn’t be great, although it’s on super cheap debt, so it kills me to sell it. But we would get much better cash flow by getting a two to four unit when we sell this. So, probably going to do that regardless of the fact that we have a great rate on this house. So, yeah.

Mindy:
How soon do you want to move?

Benjamin:
So initially, we were going to probably be in that mark that I was just talking about, but then we decided that we’ve just been pushing, pushing, pushing for every next move for the last few years and we’re like, “You know what? Why don’t we invest more into stocks and put some of that savings that we were seeing monthly into our next home purchase?”
So honestly, this was a very recent conversation, so I’m not exactly sure what that timeline looks like, but we’ve pushed it out just so that we’re not always like go, go, go, go and stressing towards the next thing, just to give ourselves some, hey, let’s relax, let’s go on vacation, let’s enjoy ourselves a little bit.

Mindy:
Yeah, okay. I think that’s valid.

Scott:
So, your plan, just to be clear, is you’re going to sell this property-

Benjamin:
Yep.

Scott:
… at some point in the next 12 to 18 months?

Benjamin:
Probably. Probably further out, actually. That’s what our original plan was. But now that we’re saving towards the next home, we’re allowing ourselves a little bit more time. So, probably two to three year range, truthfully.

Scott:
Okay. And then do you plan to buy one or two properties at that time? A two to four unit and a primary home? Or is the two to four unit the home you plan to move into?

Benjamin:
Nope. So we’re going be saving part of that $50,000 to $60,000 we talked about, that we have the ability to save per year, if we’re doing say half of that, we’ll be saving that over the next few years and using that savings, not what we’re putting into stocks, to buy the primary home. And then the $80,000 or wherever this home is at in a couple years, all the equity from that will go into our next multifamily purchase.

Scott:
Love it. So, you’ll get two properties and sell the current one?

Benjamin:
And that’s what I love about it because even right now, we’re saving up for, I would say our more expensive house. I think the budget we’ve talked about is like $450,000. I still feel like I’m saving for an investment property right now because I know I get to sell this and get another investment property, so I’m still hyped up about it.

Scott:
I love the mentality. I think that’s 100% the way to think about it.

Benjamin:
Yeah, yeah. Keeps me motivated. Yeah, I love it.

Scott:
Well, great. Any other questions for us?

Benjamin:
I don’t think so. I think you guys have pretty much answered my questions about the diversification, where I can go for further education on what our retirement will look like. And that was definitely my big thing because I like to know what direction I’m heading into. I like clarity. Clarity’s super important to me, so this will definitely help with that. So, appreciate you guys on that.

Scott:
Yeah. Again, I can only emphasize, I’m glad those … I think those are a couple of good points that we had today. One is starting with the end in mind and making sure you’re clear and where the portfolio is going, which is not going to be a hard exercise for you because you’re pretty clear on it, if we’re being honest right now with it. I think it’s affirmation that you’re doing all the right things. There’s not much I would change about the way you’re approaching your personal finances. It’s super strong. You’re going to get rich as you keep this up in a really stable way that you should feel secure about.
And then I think Mindy’s great point about the government benefits that you have for retirement accounts, I think that simplifies a lot of this. Now it’s just, okay, everything goes into that plan except for that which you want after tax readily available for the purchase. Maybe even not that because you can just take it out if you want to buy that property by switching your job.

Benjamin:
Yeah, no, that’s awesome. Thank you for that. Appreciate you both.

Mindy:
Yeah, I can’t find the 457 link to the Millionaire Educator who was the one that I have always gone to, but I did confirm that the 457 can be accessed once you separate from service with the company that is giving you the 457 in the first place. I would do some research into the 457 plan versus a Roth 457 plan. I’m going to ask in the Facebook group and if anybody has any comments about a 457 versus a Roth 457, any commentary on that? I would love to hear it. So please go to our Facebook group at facebook.com/groups/bpmoney to share your thoughts on the 457 plan versus the Roth 457 plan.
I think there are advantages to both, and perhaps it would be more advantageous to contribute to a traditional 457 plan if it reduces your taxable income, so that you can hit on your Roth IRA, now, the Roth IRA contribution limits, you have to get all the way down to under 204,000 as a married couple filing jointly, in order to be able to contribute the entire 6,000 and there’s a sliding scale. At 213,000, you can only contribute $600 to your Roth.

Benjamin:
Okay. All right, cool. I noted that, so I’ll check that out for sure.

Mindy:
There’s lots of options there. And then my last piece of advice is also, I already said this, but make an investment plan. Sit down with your wife and have an investing strategy meeting. Grab a bottle of wine, or a bottle of sparkling water and have a nice dinner with no distractions, and talk about where you want your investments to look like in five years, in 20 years, in stocks versus real estate. And see if you guys are already on the same page, you win. And if you’re not, then you can each pitch your side and see how your plan’s going to work and put it into action.

Benjamin:
Absolutely. That sounds like great advice.

Mindy:
Awesome. Well, Ben, this was a lot of fun and I really appreciate your time today. Thank you so much for coming on the show and we will talk to you soon,

Scott:
And congratulations on all the success you’ve had so far.

Benjamin:
Oh, thank you guys both. Honestly, I’ve looked forward to this for a very long time. When I first found BiggerPockets, I was like, “One day I’m going to be on that podcast,” and I didn’t know which one it would be, but I’m very happy to be here and yeah, it’s definitely dream come true. So, thank you guys so much.

Mindy:
Thank you, Ben. All right, that was Ben, and that was actually a pretty fun story. Scott, I really like all of the options that he has and I am super excited for him and for anybody else listening, to do an investment plan. If you don’t have a written out plan for what kind of investments you want and where you want your money to be going, how do you know that it’s going where you really, really want it to go? Especially in these emotionally charged times where you can see the stock market dropping sometimes rather dramatically and wondering, “Ooh, is it the right time to put my money in there?”
So, I encourage everybody to go to the show notes for today’s episode and we have the link to Scott’s document, his investment plan and download that. And really take some time to either fill it out yourself or if you are partnered up, have a conversation with your partner about where you want your money to go.

Scott:
Yeah, I think Ben was a great example of someone who has a very repeatable set of circumstances. This is a person who is 34, he said his wife’s 28, and they’re about to start their family. So, they’re in the period in which they’re double income, no kids, they’re … His wife is a nurse, he’s a security guard. This is not an unrepeatable set of circumstances. This is not someone that’s not ordinary in the United States, in terms of their ability to generate income and build wealth and discipline, frugality, long-term planning, all of these things, that hard work on the side to repair multiple properties over several years, that’s generated a couple hundred thousand dollars in net worth and a trajectory that’s going to carry them to financial independence over time. They got to be planned, they got to be smart. Their expenses will creep up as they start their family, especially if they choose to adopt, which as we noted is pretty expensive and will suck out about a year of cash flow, but it’s a really strong position and got to commend him for what he’s done.

Mindy:
Yeah, absolutely. They have done so well so far, and I am excited for what they have coming up and just, I like when couples are on the same page, so that’s why I’m encouraging them to have the investment plan. It sounds like they, for the most part, are on the same page. So, I think it’ll be a very easy conversation for the two of them to have. All right, Scott, should we get out of here?

Scott:
Let’s do it.

Mindy:
Okay. That wraps up this episode of the BiggerPockets Money podcast. He is Scott Trench and I am Mindy Jensen saying, stay safe. It’s a jungle out there.

The traders make their final moves of the week. With CNBC’s Dominic Chu and the Options Action traders, Carter Worth, Mike Khouw and Scott Nations.

Dave:
This is On the Market, a BiggerPockets podcast, presented by Fundrise.
Hey, what’s going on everyone? Welcome to On the Market. I’m your host, Dave Meyer. Today we’re going to be talking about the impact of natural disasters on local economies and the housing market because of what happened recently in Florida with Hurricane Ian. Most of us here at BiggerPockets were actually at the BiggerPockets conference during Hurricane Ian or right after Hurricane Ian. And one of the most common questions that I got then, and following that is, how does this impact people, either renters or homeowners, landlords in the area? How do governments, how do investors respond to these types of situations? So since then we have been gathering some information. We’ve done a bunch of research on how these types of events impact the housing market, and we have the press secretary from FEMA, the Federal Emergency Management Association, who’s joining us today to talk about how the federal government basically assists state and local governments in their recovery efforts.
So not only if you were impacted, hopefully not either directly or indirectly by Hurricane Ian, there will be some really good information for you about how to access some of those funds. But also just as investors, home buyers, people in general interested in the economy, there is some really good information about how to prepare yourself, how this all works. And so I think we have a really interesting show for you. So make sure to stick around for this one.
Okay, so if you’re not familiar with Hurricane In, it was a huge disaster. Unfortunately, 146 people in Florida died from the event as it hit mostly Fort Myers and Naples, Florida. As we learned from our interview with Jeremy in a few minutes, there’s actually 26 counties in Florida that were directly impacted. And this has just been a terrible situation across the board. Obviously, personally, people have lost their homes, they’ve lost their possessions, many people are displaced. I read a sort of heartbreaking article earlier about elderly retirees who are struggling to rebuild.
And so this has been a really big issue. And of course, we don’t want to make light of the humanitarian and social issues that came out of this. We deeply feel for the people have been impacted. But as this show talks about investing home ownership, we want to talk about what happens in these situations to our businesses, our investments, the things that the people on the show might be wondering about. So we did some research and what we’ve seen is that since the events in Hurricane Ian, the housing market in this area has really taken a very significant hit. And a lot of this area of Florida, which is Western Florida, was already starting to see a decline. You probably know this, but it was one of the hottest markets in the entire country during the pandemic, and it was starting to come down.
But since then, in the weeks ending October 16th, so just a couple weeks ago, we saw that the pending home sales down nearly 60%, 60%, year over year in Cape Coral, Florida, which is really significant. We’re also seeing similar numbers in Naples, 52%, and North Port, 51%. Meanwhile, elsewhere in Florida, the housing market is cooling but not as much. Like in Miami for example, it’s 47%. In Jacksonville, it’s 46%, Palm Beach, it’s 43%. So you’re seeing that this area of the country is seeing a more significant slowdown in the housing market than the rest of this. Nationwide, I should mention, that home sales are down 32%. So when you look at areas like Cape Coral, it’s nearly double what’s going on in the US as a whole. And that obviously makes sense because there’s just less inventory on the market, a lot of homes need to be repaired.
But obviously, this means that we’re going to see some decreased activity in the housing market. For example, in Cape Coral, we’ve seen that new listing sank 59% on a yearly basis, and this is just going to further exacerbate this problem. We’re not going to see a lot of home buying activity in this area until there’s more homes that have been fixed and can enter the market. Now, this does have longstanding implications, not just for this area, but also due to just some of the things that we see happen after a hurricane. So thanks to Pooja Jindal, who’s our researcher, did some research into this and we found that after hurricanes, financial hardship causes a large spike in home mortgage delinquencies.
For example, after Hurricane Ida, which was in 2021, but we wanted to compare what’s happening now to something previously. We saw that in Houma metro area, which is in Louisiana, the delinquency rate for mortgages went up from 1% per month to 7%. So it’s 7x’d because of these hurricane. And now we’ve seen that the percentage of home buyers in Houma who are at least three months behind on payments jumped by 50%. So this sort of makes sense logically that all of these areas are going to be negatively impacted economically. And we don’t know exactly what will happen with Hurricane Ian specifically. But if this pattern continues, this could be a drag on that area’s economy for the foreseeable future.
The second thing that I think is really interesting and potentially has long standing implications, not just for this part of Western Florida, but also for Florida and really the whole country, is what happens with insurance here. Because this event, Hurricane Ian, private insurance losses are expected to reach $67 billion. This is one of the largest natural disasters in the United States history. And that doesn’t even include funds. We’re seeing these huge numbers come out.
CoreLogic, one of the greatest, biggest real estate analytics firms came out and said that they think that the damage that was caused could be between 28 and $47 billion just for home sales. That first issue included businesses and other stuff. But just for that, it could be one of these deadliest costliest storms in the history of Florida. And this comes at an interesting time for Florida because Florida has already seen a lot of insurance companies start to leave, and premiums in Florida have gone up very, very significantly. Florida insurers, people who still operate, insurers who still operate, depend heavily on what is called reinsures. This is basically insurance companies for insurance companies. So like insurance companies, they analyze risk and they estimate how much to charge in premiums to ensure that they can pay for everything in case there’s an event like this. But sometimes they’re wrong.
And so they actually take out insurance to make sure that if they’re wrong, someone else comes in with even more money to refill their coffers basically. So they’re really dependent on these reinsurance programs. And actually Florida has actually, the state government has had to come in and create its own reinsurance programs because there’s just not enough insurance dollars coming into Florida. Just as an example of what is going on with Florida’s insurance program back in May, Governor Ron DeSantis called a special legislative session to try and shore up the insurance program and lawmakers took steps to including providing $2 billion in reinsurance to carriers. But obviously, that’s not enough, right? $2 billion, that’s great. But I just said that some of the estimates here are that insurance are going to be between 28 and $47 billion. Now, we haven’t really heard from any insurers that this is going to be a catastrophic event for them and they can’t pay for it.
But we’ve already start to see insurance premiums go up in states like Florida or in places where I invest in Colorado where there’s more wildfires. So that is just an open question about what goes on with insurance. I don’t know exactly what’s going to happen, but there have been a lot of questions. I’ve been reading Florida newspapers all day preparing for this about what’s going to happen with the insurance market in Florida. So although it looks like, according to Redfin, housing market activity is really declining, it looks like investors are actually not really that deterred right now. There was a recent Wall Street Journal article that says that investors are basically swooping in. And I was very excited to see that the person they quoted was Ken Johnson, who we had on this podcast back in, I think it was like May or June, to talk about his rent versus buy model that he created. Just as a reminder, it’s a great episode if you want to go check that out.
But according to Ken Johnson, what he thinks is going to happen is, quote, “We’ll most likely see an increase in prices almost immediately driven mostly by continued strong demand and stormed induced inventory shortages.” He goes on to say, “While pricing might be erratic for the first few months, the demand for living along a coastline with warm weather and a business friendly economy seems to have led to quick economic recoveries after recent past hurricane strikes.” So this is just something to note that although it does look dire right now, and that is sort of going nationwide where we’re seeing a decline in housing market activity, Ken Johnson, who again was on the show, thinks that this is going to be probably pretty short lived. And according to his research economic activity, home buying activity has picked up relatively quickly in Florida after similar events in the past.
So we invited on Jeremy Edwards from FEMA to talk about how the federal government is helping state and local governments shore up the insurance system, provide disaster relief for the people who need it. And so we’re going to take a quick break, but after that, we’ll welcome on Jeremy Edwards from FEMA.
Jeremy Edwards, the press secretary for FEMA. Welcome to On the Market.

Jeremy:
Thank you Dave. Great to be here. Thanks for having me.

Dave:
Absolutely. Thank you for being here. Before we get into some of the more recent events, can you help our audience understand what exactly FEMA is and what its mandate is?

Jeremy:
Sure. So FEMA is an emergency management agency. It’s a federal emergency management agency. We kind of operate as a big coordinator of federal resources when there’s a disaster. So most typically, folks’ interactions with FEMA is like something terrible or tragic has happened, whether it’s like a hurricane, a wildfire, flooding event, tornado. And basically what happens is the state or a territory will have a specific amount of resources to respond to that disaster. And usually, if they’re going to tap out of those resources or they don’t have enough money to respond to something significant, then they’ll call on the federal government for what’s called a major disaster declaration or an emergency declaration. And then that’s kind of when FEMA steps in.
And again, our big kind of tools to address those is either direct funding through individual assistance or public assistance. And then the other hat that we put on is a coordinating officer. So we’re basically at HQ pulling, together the various disparate parts of the federal government, whether it’s like the US Army Corps of Engineers, HHS, those types of agencies. Coast Guard, sorry, I was blanking for a second, the US Coast Guard. Bring them all together and then kind of mission assigning them like what they’re going to do.
So we’ll say, “Okay, US Army Corps Engineer, you’re going to go help get the power back on. HHS, you’re going to help set up some temporary health facilities to address those needs. US Coast Guard, you’re going to help us with search and rescue.” So that’s kind of our main role. The other hat we kind of wear that’s been more important with climate change, increased extreme weather is resilience. So we provide a lot of funding through our resilience office, resilience grants. We have flood mitigation assistance and hazard mitigation grant funding, which basically gives communities funding to strengthen them to better stand up, build back better. So that way when disaster is going to come, they’re able to withstand it.

Dave:
Got it. All right. Thank you. So it sounds like you’re funded by the federal government and respond and help preempt. Is it only natural disasters or is there other types of assistance that FEMA provides?

Jeremy:
No, actually, so it’s hazards. So our authority comes from the what’s called the Stafford Act primarily. And basically, natural disasters are usually what people think of, but it’s really any hazard. It could be something that’s related to nuclear, it can be a manmade disaster. We also have a role with continuity. There’s like an issue with there’s some sort of terrible thing that might happen in Washington, DC for example, where we have kind of a continuity role there too. So folks usually think of us when it’s hurricane season because those are kind of the biggest types of disasters that will hit the nation, but it’s really any hazard.

Dave:
Got it. Okay. Thank you for explaining that. Well, we are definitely guilty of thinking of you when it comes to hurricanes because the impetus for this show, our show focuses on people in the real estate industry and home buyers who want to take a data driven approach to their home purchase. And obviously, with Hurricane Ian recently, there was a massive loss of property, obviously, tragic loss of life as well. Can you tell us a little bit about how FEMA was or still is involved in the recovery from Hurricane Ian?

Jeremy:
Sure. So I don’t want to say a good thing about hurricanes, but one benefit in terms of disaster preparedness is you can kind of see it coming a few days out. So we’re tracking the storm early on. Before the storm made landfall, President Biden approved an emergency declaration for Florida, so that way they could kind of preposition materials. That emergency function really helps with the life saving and life sustaining efforts. So making sure that we can move personnel swiftly to an area, making sure they have commodities on hand, helping them with first response, search and rescue operations, things like that. So that was on the front end. We basically put a bunch of people and a bunch of resources in areas that were close enough to where once the storm passed we could basically flood the zone and get in there but far enough away where they’d still be safe.
And then that’s kind of like that immediately response action. So like I said, that’s a lot of search and rescue efforts, making sure we’re saving lives, et cetera. Then, basically right after that happens, you’re switching into recovery mode and that’s kind of where we are now. And that’s something that’s going to continue on likely with a storm like this for years, given the amount of devastation. So right now our primary role is supporting the state in things like debris removal, but then also providing both public assistance and individual assistance. The public assistance is what’s going to the state for things like infrastructure projects. So there’s a lot of bridges that might have collapsed, roads that need to be repaired, and that’s when our public assistance comes in. And then the individual assistance is kind of the money we provide directly to survivors to help them make their homes habitable again, maybe give them some temporary housing assistance as well. So that’s kind of the mode we’re in and that unfortunately, with something like this, is going to be a few years.
Yeah. You just see the pictures, it looks horrible what happened down there and I’m glad to hear that there’s concerted effort by the federal and state governments to help everyone affected by that. What do you typically see? You said years. In this type of situation, I don’t know if FEMA has any estimates, how long does it normally take for communities, we hear specifically about Naples and Cape Coral, some of the worst affected areas, how long does it take for them to recover?
For a disaster like this, we’ve been told it’s probably going to take somewhere in the ballpark of about seven years in this recovery. If you look at old disasters or disasters that we’re still recovering from, like we’re still recovering from Storm Sandy up in New York and New Jersey. There’s still recovery efforts underway for Hurricane Maria, which that community five years later is in the middle of recovery and then they get hit by another hurricane. So these are long efforts.
Part of that is because when you have severely damaged infrastructure, it’s just going to take time to rebuild those things. When you have areas where communities example in Fort Myers Beach have been completely almost washed away in some areas, that’s going to involve folks not only trying to rebuild their lives, but in some instances, they might have to think about making tough decisions, can we even move back here? Can we rebuild here? So these recovery efforts take a long time, but FEMA has the funding and the resources and the personnel. We’re basically there until the recovery’s over. So we still have folks down in Puerto Rico who were originally recovering from Maria, they were there five years later. We have folks all over the country that are still helping folks recover.

Dave:
Got it. Okay. And so for specifically, let’s just look at Hurricane Ian, the recent example, does FEMA help reconstruct homes, for example? You mentioned bridges and stuff, but what about local economic conditions or is it homes, businesses? What is the scale of what you’re assisting with?

Jeremy:
Yeah, so there’s a few different things. The first thing is FEMA is not necessarily the builder or the contractor. What we’re really doing is providing the funds so the state can lead that effort. And a phrase that we use around here is state and local led, federally supported. So the state, because they’re close to the issue, they’re closer their constituents, they’re closer to the residents, they know what they’re going to need and they’re going to have to make sometimes those tougher decisions of maybe we can’t necessarily rebuild a community right here. We might have to start elevating homes. We might have to say this is actually now in a flood plain, we would not advise people building houses here. So we’re basically going to be giving those folks money.
So right now, the federal effort, all told, that’s FEMA assistance and small business administration as well, is about $2.6 billion has gone to the State of Florida. And then beyond just helping folks either rebuild their homes, a couple other tools that they can use are, there’s SBA low interest disaster loans that are available for both homeowners, businesses and in some cases renters that basically in addition to any sort of FEMA assistance, they can get that type of assistance. And FEMA also offers flood insurance. We have a National Flood Insurance Program that insures properties up to $250,000 worth of damage. So there’s a few things, few resources that folks can take care of, but primarily it’s a state that’s going to kind of be leading on those rebuilding efforts and then FEMA’s kind of funding a lot of that stuff.

Dave:
Got it. Okay. You mentioned insurance, which is something I want to talk about, I’m sure something you talk about all the time. But the idea of home insurance is that you are covered in these types of situations. So how does FEMA work with or augment personal home insurance?

Jeremy:
Yeah, so just to start off, generally, insurance is a confusing concept for a lot of people. It’s very technical. But most homeowners’ insurance actually doesn’t cover things like flooding, unfortunately. So that’s why separate from homeowner’s insurance, if you live in a community that is participating in our NFIP program, the National Flood Insurance Program, FEMA is basically the insurer. They’re underwriting those policies so you can get flood insurance through us and then we will insure your home or property. And then the individual assistance basically is to fill gaps or for folks who might be uninsured.
Now, what I will kind of say to your listeners is that FEMA’s job is really to jumpstart your recovery. We’re not necessarily there to make everyone entirely whole, that’s kind of the state’s primary job. We’re there to basically say, okay, here’s a disaster, here’s injecting money into the problem, either directly to people or to the public through public assistance to the states to basically start that process going. But flood insurance, to your question, is really the best way to protect yourself, which is why we encourage everyone, even if you’re not living on the beach or next to a river bank, to consider getting flood insurance because wherever it can rain, it can flood. And we’ve seen disasters where Hurricane Ida, for example, comes up as a hurricane, turns into basically a storm system and then all of a sudden we see massive flooding in places like New York City that wasn’t even in the path of the storm, so to speak. So that’s definitely going to be the best way to protect yourself from these types of damages.

Dave:
Okay. So it’s not like FEMA’s coming in and people who don’t have insurance are essentially getting recovery funds to completely replace the role of private insurance.

Jeremy:
Exactly. So it’s like you have these pools of money. So you got the flood insurance money that we would encourage everyone to get. If you don’t have flood insurance, we have individual assistance to help those types of folks. But again, reminding everyone that it’s really there to just jumpstart your recovery. And then some other things we have while you’re kind of trying to figure out what to do next, we have transitional sheltering assistance, which basically pays for you to stay in a hotel or a motel. And then we also have our housing mission, which is actually just being stood up now for a few counties where we will basically provide either a trailer or some type of other structure where you can live in while you’re in the process of rebuilding your home or making those necessary repairs. Because the last thing we want is for people to have to stay in a home that is clearly uninhabitable.

Dave:
I’d love to get back to that housing mission in just a minute. I think that’ll be of particular interest to our listeners. But wanted to ask one more thing about insurance, because this seems to be a big issue, particularly in Florida. I was reading that in Florida a lot of insurance companies are leaving the state because it’s becoming so expensive to insure there and that the state has actually stepped up and provided some reinsurance to some of the main providers. And I was just curious how FEMA reacts to that. Is that going to mean that FEMA’s going to have to inject more money into states like Florida in the future because private insurance might be doing less?

Jeremy:
I think what that really means is that, to your point, climate change, rising sea levels, warmer oceans are going to be leading to more of these types of events. That is just the reality of the situation. And what that is going to end up doing is likely going to be higher premiums for some folks who are living in riskier areas. We’ve implemented here at FEMA a new methodology for how we determine folks’ premiums, called Risk Rating 2.0, which basically identifies the true risk of a property. So folks can start making those decisions because that’s what it’s going to come down to, just saying, is it worth the risk to live in an area like this? And that’s what those types of tools will tell you. There’s also other tools like the National Risk Index, which is a great tool that I would encourage anyone who’s moving to a new area considering developing some new property, buying or renting a home, to check that out.
We also just recently announced a new tool with Argonne and AT&T called ClimRR, C-L-I-M-R-R, which is a cool tool that basically shows your future climate risk, mid to late century. So you can look not only what’s your risk today, but you can look like, okay, what’s this area going to look like in 20 years, 15 years? And those I think are important tools because especially when it comes to someone who’s looking to build property or build a new home, you’re not going to want to move to a place that could very well be underwater in 20 years. So these are some tools. As far as FEMA’s concerned, we are going to continue to provide flood insurance to communities that are participating in the National Flood Insurance Program, whether or not there might be private insurers there.

Dave:
Got it. All right, that makes sense. Thank you. Thank you for explaining that. And then one last question about the insurance thing. I guess maybe it’s not insurance. I read something about the 50% rule and that FEMA basically will only provide funds to help rebuild if the repair cost is less than 50% of the appraised value. Is that correct?

Jeremy:
Not exactly. Basically has to do with what local and state ordinances are saying. So basically a state and local government, you can’t basically rebuild if your home is seen to be substantially damaged. So if the home is substantially damaged, they’re not going to let you rebuild there unless you take certain actions to alleviate the risk in the future. So whether that means elevating a home, moving it out of a flood plane for example, but that is more of a state thing. And I’d actually love to get you some more information on that because we have some more detailed information that I could share as well.

Dave:
Great. Yeah, that would be awesome. I obviously don’t know that much about it when I was reading about it, when I was researching the show. And so if you do have any additional information about that, we can make sure to put it in the show notes for anyone listening, they can go and download that resource there.
So I’d love to get back to something you mentioned, which is the housing mission, which is something I think our listeners will be particularly interested in. You mentioned it provides temporary housing for people affected by these hazards and natural disasters. Can you tell us a little bit more about how that works?

Jeremy:
Yeah. So there’s two things that are going on. On the one hand, we’ll offer things like rental assistance to people if they need help with that. We also have the Transitional Sheltering Assistance and that’s like our hotel and motel program. And then we have our Direct Housing Mission. So we have that currently authorized for four counties in Florida. And basically, what that is, we determine that rental assistance is going to be insufficient to meet the needs of folks living in those counties. So there’s a few things that we might provide. One is multi-family lease and repair where FEMA will enter into a lease agreement with the owner of a multi-family property and make repairs to provide housing for those applicants.
There’s also basically they FEMA trailers. The technical name is a transportable temporary housing unit. That’s where we’ll basically bring an actual trailer to the property or adjacent property that’s in a safer area and folks will basically live in there while they’re either rebuilding or doing repairs for their homes. And that mission usually lasts about 18 months. And the only thing I would emphasize there is that these are temporary options. There’s not meant to be long term solutions. There’s other folks who are working in the space, like our friends over at Housing and Urban Development, who kind of have longer term housing solutions should you need housing beyond those 18 months. But that’s, that short term to medium term solution while folks are trying to get their lives back together basically.

Dave:
Got it. Okay. So it sounds like your first priority is to provide rental assistance rather than housing. So what does that mean? They could get vouchers to lease an apartment while their home’s being repaired?

Jeremy:
Yeah, basically. We’ll basically provide them with some sort of funding to basically, let’s say they can’t save at their house, they need to go do some short term lease somewhere else, we’ll provide rental assistance to them that way. The other way is the transitional sheltering assistance that I mentioned, which is they just go to a hotel that’s participating. I believe we have them in Florida, Alabama, and Georgia, where they can go to basically stay in a hotel and we’ll just pay the hotel directly for their stay there. And then if it looks like their road to recovery is going to be longer than that, that’s when that Direct Housing Mission comes in where it’s like, okay, the rental assistance or those transitional sheltering assistance is just insufficient to help this person, their needs are going to be a little bit longer. So then that’s when the direct housing comes into play.

Dave:
And does that apply to both homeowners and renters?

Jeremy:
Yes, this all applies to both, besides rental assistance of course. But with homeowners there’s also, like I mentioned, those SBA loans. But the direct housing transitional, it’s really just about whether you’re a renter or homeowner, is your home currently habitable? No? Then, these are where these programs come in.

Dave:
Okay, got it. If there are people listening to this, we have a lot of landlords on the show, people who own multi-family properties who want to offer this service or interested in working with FEMA on there, is that something they can do?

Jeremy:
I would suggest that anyone who has questions like that, call 1-800-621-3362. 1-800-621-3362. That is our basically individual assistance line that’s in. That’ll put you in touch with recovery folks. Frankly, I’m not entirely sure what there might be for homeowners who want to help out on the rental side of things. But at the very least, if you’re looking for that type of assistance, that’s your best way to get it. Phone lines are open, got a bunch of people waiting. I’ve been told that call times have decreased significantly since the beginning of this disaster. And then there’s also disasterassistance.gov, which is somewhere we would encourage folks to check out.

Dave:
Thank you very much. That’s super helpful. And is anyone eligible for these types of programs or just FEMA assistance in general? Is it just like anyone who needs it or are there criteria for who can get assistance?

Jeremy:
Yeah, so the primary criteria is are you living in an impacted county? So going back to your first question about what does FEMA do, how does this process kind of work, when there’s a major disaster declaration, we will, at the request of the state, identify the counties that are impacted. So in Florida, I believe we’re at 26 counties right now. That means anybody living in those counties is technically eligible for individual assistance. Now, the major caveats are legally we cannot duplicate benefits. So that means if you have an insurance claim and the insurance is going to pay to fix your home, you’ll likely not qualify for individual assistance unless, this is a hypothetical, but let’s say your insurance only covered for wind damage or something, you actually don’t have flood insurance. Then the individual assistance might come in to fill some of those gaps.
And then the other part of it is through our policies, we’re required also then to do home inspections. So if you’re like, “Hey, my basement got badly flooded, it’s causing some structural damage here, mold,” et cetera, we will then, once you’re in the process, send out a home inspector. Usually at your convenience, they kind of work that process out and they’ll come in to basically just assess the damage. And that’s all part of how we determine the amount of assistance that person’s going to receive. So the short answer is yes, if you’re in a eligible county, you are eligible for assistance. But then there’s just those little caveats that I mentioned.

Dave:
Thank you for helping with that. This has been very helpful, understanding how you all react to disasters and hazards. You mentioned at the beginning of the show that part of FEMA’s mission is also to help with prevention or with awareness. Can you tell us a little bit more about that?

Jeremy:
Yeah. There’s basically a bunch of grants that we give out through our resilience directorate, which are basically to help communities harden themselves to extreme weather events. So our big pool of money is what’s called hazard mitigation, our Hazard Mitigation grant program. And basically what that does is when there is a major disaster declaration, those communities are then eligible for hazard mitigation grants moving forward. So basically, it’s like you get hit by a hurricane, now you can start applying through that disaster to get these hazard mitigation. So the next time you might be hit by a hurricane, it’ll be lessened.
Two other areas that we have are flood mitigation assistance grants, which basically provide similar type of funding to make communities more resilient. And then we have the Building Resilient Infrastructure and Communities program, or what we like to call it around here, BRIC. And that is a program that has been a received increased funding from the president’s bipartisan infrastructure law. That does the same thing. It’s basically communities who want to build up resilience, apply for grant funding, we review their applications, and then we will basically provide them with funding depending on what they need to help just build up resilience there.
And what I really love about those two programs in particular is we’ve have implemented new initiatives to basically get more money to underserved communities. So historically, communities that have been historically underserved, disadvantaged, vulnerable, have had a harder time accessing this type of money. And then ironically, or even maybe even expectedly in some ways, it’s those communities who end up suffering the most when there are disasters. So this is kind of a way for us to say, okay, we want to make sure that everyone’s able to have access to this money. So it’s just making those programs more accessible.

Dave:
Got it. And you’re saying the communities. Does that mean that it’s state or local governments who are applying for these or do individual homeowners or renters have any option to access some of these funds?

Jeremy:
Depends on the program. So a lot of these though, are usually state and local communities are applying for the grants and then determining where that money is going to be spent. For example, there’s a program that we have, which is effectively a flood buyout program. So if your home has been impacted basically repeatedly by a flooding event, the local community can basically determine what properties that they’re just going to want to buy out. They’ll just buy your home from you. And then FEMA will provide that money to the local and state community to carry out that program. And that instance, it’s like the community slash the local government or the state government is the one driving the program, but it is to basically help individual households out.

Dave:
Okay, great. So if you are a homeowner or investor in these areas, sounds like the best that you could check with FEMA, but also check what your state and local governments are doing to build resilience and allocate some of these funds.

Jeremy:
Exactly.

Dave:
All right, great. Well, Jeremy, thank you so much for being here. Is there anything else you think our listeners should know about FEMA’s mission or how they can build resilience against these types of hazards and disasters?

Jeremy:
Yeah, the one thing I would just like to say is preparedness, which I don’t think we talked a bunch about, but it’s, I think, arguably the most important thing that you can do when it comes to these disasters is just take steps to make sure you’re prepared beforehand. We have a ton of resources available, low cost and no cost options to prepare. I want to tell your listeners to check out ready.gov or listo.gov, which is our Spanish version of the same website, that kind of has preparedness tips. We also recently relaunched our FEMA app, we revamped it’s more accessible and it’s got a couple cool tools that folks can use. And it’s just as simple as plugging it in on your iPhone or your smartphone. And that will tell you not only local emergency alerts, but it will tell you where shelters might be located. It will tell you how to apply for disaster assistance if you’re impacted. And it also has a lot of those preparedness resources.
And just on that note, coming off the pandemic, which a lot of people are moving to areas that they’ve never lived before. We have a lot of people moving across the country, living in environments that they’re not used to. So that’s what really where the preparedness comes in. There’s people living in places, they might have never gone through a hurricane. They might not have any experience with wildfires, which is where this preparedness stuff comes in. And the final thing I’ll say on the preparedness piece is, don’t get complacent. Just because, you didn’t get hit… Folks in Tampa, this hurricane was originally supposed to hit Tampa. At the last minute, kind of shifted down, but it very well easily could have gone there.
Maybe next year they get hit. Maybe next year Miami’s on it, or we see with things like Hurricane Ida, you’re not even in the path of the storm and then you’re suffering other things from the system, tornadoes and things like that. There’s few places in the country where you’re not going to have to deal with some sort of possible natural disaster. I used to say Upstate New York was the safest place to live, but then we just gave Buffalo a major disaster declaration for all the snowfall that they just got. So really, just don’t take it for granted and do everything you can to prepare. Even if it does seem a little silly sometimes, you’ll just like never know when you might actually need those skills and those resources.

Dave:
All right. Great. Well, thank you so much for joining us, Jeremy. We really appreciate you being here for this episode of On the Market.

Jeremy:
Thank you. I appreciate you having me.

Dave:
All right. Big thanks to Jeremy for joining us from FEMA. That was a really interesting interview. I am embarrassed to admit that I did not know very much about what FEMA does or how they provide help to communities and homeowners and investors previously, but learned a lot about that. We did pull together some stats just so you can understand of the scope of what’s going on in Florida and what FEMA does. FEMA has, to date, provided $603 million to households and 322 million to the state of Florida for emergency responses and to help survivors jumpstart their recovery. It has made individual assistance available to 26 counties in Florida. And as of October 22nd, FEMA’s National Flood Insurance Program has received more than 42,000 flood insurance claims. Wow, 42,000 claims. And paid more than 147 million to policy holders, including 103 million in advanced payments. So that’s really interesting and good to hear.
And I think there are some main takeaways that I sort of wanted to just recap from the interview with Jeremy. First and foremost, as he said, part of their mission is to provide housing assistance, either in temporary housing or rental assistance or putting people up. So one, if you are personally affected, hopefully you’re not, but if you are, you should seek out those assistance programs. But if you have a tenant, for example, or someone who is seeking housing, you should encourage them to seek out the state and government assistance. And if you have vacancies or open multi-families like they were talking about, perhaps you can come in and provide a service to the people who are affected and sounds like FEMA and the federal government will foot the bill there. So that could be a great win-win situation.
The other thing that I think that Jeremy hit on that I wanted to talk about was just preparedness and buying good insurance. So flood insurance, counter to what people often think, is not included in standard homeowner policy. And I really like what he said that anywhere could flood. So I mostly invest in Colorado, it’s where I was living prior to moving to Amsterdam. And my home was actually in a flood plain. And if you know anything about Denver, it never rains there. But it’s almost like because it never rains, when it does rain a lot, these huge flash floods come around and it could be really detrimental.
And so I really encourage you to look at the flood plains, flood information for your neighborhood and make sure that you are properly insured for anything that could happen. Because like you said, it’s like one of those things, insurance, you never want it, but when the time comes and your number gets called and that happens, unfortunately, you’re going to want the best insurance. So I’m a big believer in buying good, high quality insurance and recommend that if you are an investor, homeowner of any type, you reevaluate your policy.
I also loved what he said, or I didn’t love it, but whatever, I think it was a really important point, is that people are moving to new places where they don’t have experience. Florida, for example, has seen this huge increase in population over the last couple years. And so there probably are a lot of people, maybe even if you owned a home in a different state or in a different city, are moving to a new place where you don’t know, maybe you haven’t lived through a hurricane and need to take some new consideration, make some new considerations about your insurance. So if you have moved to a new place, whether it’s Florida, or like Jeremy said, Buffalo, New York, you should reevaluate some of the risks that exist in your area and make sure that your insurance policy has you adequately covered.
All right, well thank you all so much for joining me for this episode. This has been really interesting. I learned a lot from Jeremy. Hopefully this has helped you understand how housing markets and how insurance markets react to these types of disasters. Thank you so much for listening. We’ll see you for next time for On The Market.
On the Market is created by me, Dave Meyer and Kailyn Bennett, produced by Kailyn Bennett, editing by Joel Esparza and Onyx Media, research by Pooja Jindal and a big thanks to the entire BiggerPockets team.
The content on the show, On the Market, are opinions only. All listeners should independently verify data points, opinions, and investment strategies.

Patrick Carroll, Carroll Management Group founder and CEO, joins ‘Power Lunch’ to discuss which way Carroll sees rents trending, if the company’s a builder of homes or an investor and whether there’s a lasting impact from the pandemic on the real estate market.

David:
This is the BiggerPockets Podcast show 698.

Sarah:
There’s nothing very satisfying to me about just watching my money grow in a bank account. I had been actively trying to pay off the debt and there was nothing active really about the financial independence journey. And I feel like so many people were couponing and I’m like, I hate coupons. I hate it. I don’t want to go to the grocery store with envelopes and coupons for the rest of my life. I’m not going to bike to work, I’ll be sweaty. I don’t want to be there and dripping sweat when I get to work because I biked here and live that minimalistic lifestyle that I think was really prominent. So then real estate was really my answer on how do you do financial independence faster.

David:
What’s up everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast, the biggest, the best, and the baddest real estate podcast in the world, joined today by my fearless sidekick and oftentimes leader, Rob Abasolo. Rob, we had an amazing conversation with Sarah King. She just leaves you feeling really good. What were some of your favorite parts of today’s show?

Rob:
Well, Sarah King’s story is just the ultimate version of inspiration. I mean, genuinely a lot of people, they’ll put reasons out there to never get started. Sarah actually got started again and she’s crushing it now. We’ll talk about it in the story, but there has been some adversities that cause her to have to restart her real estate journey. And when most people would’ve given up and thrown in the towel, she went all in and she decided, “Hey, I’m going to own this and I’m going to be reborn in the world of real estate.” And honestly it’s one of those things where it’s like, “Man, if she can do it, it should be an inspiration to everybody that anything is possible with enough tenacity.” She is like tenacity… I don’t know. If you were to look in the dictionary, she’s [inaudible 00:01:49] right there.

David:
Personify.

Rob:
Personify. There we go person. Thank you. I needed that.

David:
I was expunging what you were spitting. Yeah, I thought her story was impressive and inspirational without being intimidating. That’s what was so impressive about it.

Rob:
Totally.

David:
Listen to this, you’re like, “Man, I just want to get out there and do it,” but you don’t feel like I could never do that because Sarah’s so relatable. So you guys are definitely going to enjoy this episode. We cover a lot of cool stuff. We get into overcoming adversity. She talks about how she had a spouse who got into chemical dependency and how that left her on her own to try to figure things out with the kid and how real estate really helped her to bridge that gap and provide stability in her life. We talk about getting into one asset class and then jumping into another one to improve your lifestyle, setting goals to figure out where you want to go, and then pivoting once that’s happened, and finding a niche that nobody else is into, which I think a lot of us are looking for right now. So this episode is very relevant to making money in today’s market. I’m very excited about it. Before we get to Sarah though, Rob, what is our quick tip for today?

Rob:
That’s right. Our quickest tip is-

David:
Quick. Quick.

Rob:
That’s right. Quick, quick, quick tip. I don’t know which sound effect we’re going to go with there. But, okay. So quick tip for today everybody is learn, understand, and master funnels. I think this is something that people sleep on quite a bit, right? A funnel is effectively the user journey that someone takes to get to your final product or service. And for a lot of the people at home today, that final product or service is either property management or the actual real estate that you’re trying to lease out to people. If you can understand how people are going through the user journey to get to your property and you can open up different ways to market to them so that they go through this journey, this funnel down to the service that you’re offering, it could really lead to a very, very small amount of vacancies across your portfolio. So we’ll get into this a little bit more at the end of the episode. But do yourself a favor, go Google funnel marketing, check out stuff on YouTube. This to me is the marketing strategy that makes real estate millionaires.

David:
Wonderful. That’s really, really good. And if you could learn to see the world that way, you will end up having more success in all of your business ventures. Brandon Turner talks about this now, Rob Abasolo is talking about it. It’s very true. And we actually get into the episode later in the show so make sure you listen all the way to the end where we talk about how improving your funnel. And improving the way you approach things from a funnel perspective will absolutely make operations easier once you land that perfect property to build your wealth. All right, let’s bring in Sarah.

David:
All right, so Sarah, tell me how did you get started in real estate? What happened? And then how did you have your rebirth?

Sarah:
Yeah, so really this is kind of my round two in real estate is what we’re kind of thinking about, is really what I’ve done in the last year and a half to two years. So in 2020 I started out house hacking. So I moved into a house hack and that was my first foray into private money, bought a house of private money and then I refinanced back out after a year and put it on the lovely 2.6% interest rate we had in about 2021. And so started house hacking. It was actually a single family home with a walkout basement and I remodeled it over the course of about six months into a basement unit. That was honestly the first major remodel I’ve ever done by myself. I had to YouTube how to drywall and do all these things and I hired out most of it, but there was just… You learn quickly the cheapest contractor is not great and all of that. And so I burned through a lot of contractors just trying to use friends and family in cheap labor before probably costing myself twice as much.

Sarah:
I think my original contractor bid that I thought was overpriced was $12,000 and I ended up being $26,000 by the time I was done, so that was unfortunate. But that really could have got me started. And so my dream, which we’ll kind of talk about over the years has always been to house hack and to kind of get into the situation where you aren’t spending a thousand dollars or more on your housing costs. And so that was kind of step three in my whole process of trying to reach financial independence and to start building out my real estate portfolio.

Sarah:
So once I was living for free, then I started buy additional real estate. And by then I had used private money once. It was a really good way of doing things. And so I ended up using private money I think four more times after that. So I’ve used friends, I’ve used family. And then recently I’ve been doing a round of raising private money on Instagram, which is interesting, which we can chat about. And then, well obviously legally too, so just kind of building out an email list of people that are interested in potentially being lenders. And then there’s an email list I send out deals that I’m generating.

Sarah:
And so in 2021 after I refied, I bought another duplex, and so I was at four units. And then this year I’ve bought nine units across four properties. So I have one single family home. I bought two duplexes and a fourplex. And then hopefully by the end of this week or maybe next week I’m going to be under contract another fourplex, which is awesome. So using a combination of commercial loans, conventional mortgages, and then private money kind of all together. But private money has kind of really been the driving, I guess, charge here to kind of build that quickly. If I was using my own money, it definitely would’ve been slower. So figuring out how to do that and getting over your fear of pitching it was definitely I think the secret of getting to 13 units in essentially under two years.

David:
What caused you to choose that asset class and that location?

Sarah:
Location, I live here so that was really helpful. So I’m in Indiana, I’m in the Midwest. My primary market is Fort Wayne, Indiana. And so it was nice because my family’s here. I went to college in a few different places. I lived in Michigan for a while, I lived in South Carolina for a while. And so really being back in this area, I was finding deals pretty easily in a lot of markets I feel like you don’t have that. So I was fortunate I didn’t have to be an out-of-state investor, I could invest in my own market. So just the community I knew was really to get started.

Sarah:
And then I liked the idea of providing essentially a housing that people needed, something that people could finance with a conventional mortgage. So I was the multiple ways in and out of a deal. And so I kind of liked the one to four unit niche to get started. I think I have some self-loading beliefs probably about large commercial that I need to work through at some other point. But right now, loving the small multi-family. It’s been good to me so far.

David:
Rob, what do you think about that? Because I know you got into your niche market of short term rentals. Maybe even not just short term rentals, but you’re kind of drawn to the kitchy unique type of thing. Sarah clearly has a similar system where she’s found a market that other people are not in. Do you think there’s a part of us that investors that like knowing that, “I found a thing that other people aren’t doing” and we get a sense of comfort from that?

Rob:
Oh my god, yeah, for sure because it’s like one of those things where, A, I love a good challenge. I love a good challenge of finding something that’s a little bit more undiscovered. And to a lot of people that’s a very risky thing. I honestly feel like with enough strategy and hard work, you could probably figure that out. And then once you overcome it and you become really good at it, then it’s something that I really love really diving into because, because I know that there can be a learning curve with some of that, then it’s actually a little bit more comforting to go a little bit more all in and really dive deep into a strategy like that.

Rob:
So for me, when I was doing unique Airbnbs for example, I know that there’s a lot of questions that are involved with figuring out the logistics of setting it up. And because of that, I know that I probably am not going to have a lot of competition around me. But then again, I always spoil that too because I’ll just talk about it on YouTube and really give the details on how to do it. So I’m really only able to buy myself a little bit of time, but I don’t know, I think that’s the itch that we scratch in real estate is just challenging ourselves and then really going all in. So that’s really cool, Sarah.

Sarah:
Yeah. I definitely think the real market, people tend to be really afraid of it. When I tell people that Rentometer doesn’t work in my market, they don’t know what to think. And then I build out my own Excel spreadsheets of rent comps because there aren’t any when you’re investing in these tiny towns. But it was pretty easy to see there was a need, an unmet need. You’d see people on Facebook all the time looking for housing and that’s still a big area I pull renters off of. And so it was more using grandma’s strategy of pretty boring investments, especially from your guys’ standards, doing the one to four units single family homes, like there’s 0% sexy about it but it’s a really good tried and true method. But I think the tiny markets were definitely a risk with something that’s been pretty easy to differentiate yourself when you provide a quality unit in an area where a lot of landlords are kind of depressed and aren’t really maintaining their units very well. It’s nice to be a quality housing provider in these areas without overdoing it too.

Rob:
Right. Yeah. Okay, so first of all, clarify this for me because I’ve said this name before on YouTube and people kind of laughed on me. Is the way you say it Rentometer? Because I always say Rentometer.

Sarah:
I’m probably mispronouncing it. I have no idea.

David:
This is a topic of contention in the world of investing, this comes up a lot. This is one of those like, “Should I buy an LLC or should I buy in my own name?” Here’s the only way that I’ve ever addressed it. We don’t call it a speedometer in your car.

Sarah:
Right. Speedometer, yeah. It’s weird how they write it in the name though. I think it’s hyphenated. Now I need to go back [inaudible 00:11:24] on their website.

David:
Yeah, they make you think it should be Rentometer, which is exactly right. And also maybe it depends on how fancy you think you are. I don’t know if you guys have watched that ancient apocalypse show on Netflix that’s trending really high. They were on the Joe Rogan Podcast. But the guy is British and so he doesn’t say Indonesia, he says Indonesia or amnesia. Like everything, it’s chance, not chance, right? And it just sounds fancy. You’re like, “I’m going to listen to you and believe what you’re saying because you’re British.” And clearly, speedometer sounds much fancy. It’s like saying finance instead of finance.

Sarah:
It does sound better.

David:
All right. So tell me, Sarah, you got into investing and my understanding is you sort had a little bit of a break and then you started again. What happened and what made you want to have this new approach to investing?

Sarah:
Right. Okay. So I got started… Well, it’s kind of interesting because I’m a very big Dave Ramsey dropout so I got started in a whole different world than what BiggerPockets plays in. So I started out as a Dave Ramsey person at about 2016 and learned really just educating on money and getting finances and everything straight. So I’m kind of a finance nerd through and through. And so kind of started with that. Obviously Dave Ramsey buying a bunch of real estate and having a million dollars in real estate debt, which I’m super proud of, isn’t a big hit in the various circles. You’re either cool in one and not in the other.

Sarah:
And so it was kind of a slow process of kind of undrinking the Kool-Aid, kind of backing yourself out of this really big scarcity mindset after paying off a lot of debt. And so I took about two years in the Dave Ramsey camp and got to a 50% savings rate, paid off $118,000 in debt kind of after college, newly married, working through all of our debt pieces and got everything paid off. And then about a year in, I was like, “Well, what are we going to do with this 50% savings rate? I’m not going to go back to just spending it.”

Sarah:
And so then I got reading into the financial independence guys. So a big name around here is Coach Carson. So he’s an amazing guy, love his idea and his philosophies on things. He kind of also walked the line. So when I was fresh off the Dave Ramsey boat, the idea of massive leverage was a little scary at first. And so it was relatable to hear him at least talk about using debt strategically. And I think that kind of made me dip my toe in the water of trying to build wealth in a different way.

Sarah:
So essentially, I got into financial independence, did the standard path you’ve all heard of. It’s like the Rich Dad, Poor Dad. And then it really was Scott Trench’s book actually, so a BiggerPockets book where he wrote Set for Life and it really talked about lifestyle design and he hits really hard on your car and your housing and your income. And so those are really my big three that I took away from that book. And that period of time was just, “How can I get my income up?” And about the same time in my career, I kind of reached the epiphany that in the world of the W2 job, they don’t really care about you. The hardest worker is often not the one that’s getting the promotion. And so I was just kind of burning myself out at the sake of other people. And so I just really took a step back and I’m like, “Okay, what is the life I want to be living?”

Sarah:
And so I really started going after those, I guess, big three of trying to get housing costs and income up and transportation. So the house hack is the third piece of the pie. So that came in a couple years later. But first I made the hop out of hospital jobs. So out of the W2, I switched into a W2 in corporate America to get the income up. I actually raised… So over the last six years I’ve tripled my salary, which has been a lot of job changes, which is really crazy. I was always told you like, “You’ll never make a lot of money in your career field. You’ll make good money, but you’re never going to make what a doctor makes.” And I’m in mid-level. I’m a genetic counselor, that’s my degree. And so I was always told like, “That’s not really riveting. You’re never going to be this great career woman.” I think my first job starting out was like $56,000 or $57,000 and you just didn’t think there was a lot of high income earning out of that career field.

Sarah:
But I really started diving down, I’m like, “Okay, what can I do with my degree that actually pays me?” And then I discovered this beautiful box called the MSL role that kind of helped me boost this financial independence journey where you actually got a company car. And so that checked my other Scott Trench, I guess piece. I’m a really good box checker, I figured that out over my life. And so essentially checking that next box on the list of like, “Okay, so I got my income up and then I figured out how to get a company car.” So I no longer pay for a vehicle, I don’t have a car payment, I don’t pay for gas, I don’t pay for car insurance. And so it was a career that I’d never even heard of before, but I just started searching like, “How can I do this differently and what jobs can I take?”

Sarah:
But then I honestly, after you learn about financial independence and you educate yourself on investing, read The Simple Path to Wealth, got really pro index funds, got really nerdy into that whole rabbit hole that is the financial independence community. But it all seemed very intangible at the time. It was like, “Oh, you’re going to super save into this giant fund of money and you’re going to build this beautiful IRA and these 401(k)s and it’s going to have $3 million in it and then you can retire.”

Sarah:
But there’s nothing very satisfying to me about just watching my money grow in a bank account. I had been actively trying to pay off debt and there was nothing active really about the financial independence journey. And I feel like so many people were couponing and I’m like, I hate coupons. I hate it. I don’t want to go to the grocery store with envelopes and coupons for the rest of my life. I’m not going to bike to work, I’ll be sweaty. I don’t want to be there and dripping sweat when I get to work because I biked here and live that minimalistic lifestyle that I think was really prominent. So then real estate was really my answer on how do you do financial independence faster and how do you accelerate that path? And so that was really kind of the pivotal moment that led me into real estate.

Sarah:
At the time, it was about 2018, I was married and had taken this new job. We decided to have a baby because again, all the box checking, you did everything in order, you graduated college, you graduated grad school, you have this degree, you get the nice job and then you have kids, right? And then later, so when my daughter was born, it was a planned pregnancy to me and my husband. And then when she was about three months old, he actually started acting really weird and our life started getting really, I guess, confusing and I couldn’t figure out what was going on. And it ended up he developed a drug addiction.

Sarah:
That was kind of the beginning of the end of our marriage, was really he started on this drug path and I had a three month old daughter and he was never around and we had just started buying real estate together. So I don’t know exactly when it started because honestly we were so busy with the newborn and we were buying investment properties. We had five properties by the time I actually ended up stepping away from the marriage and filing for divorce. But during that time I actually had to learn because he was always the handyman. He was amazing with projects, he did really good work. He was an amazing tile work. And I had to start taking on all those projects because he was just unavailable to do that. And I always thought I needed to be handy. I think that was really the turning point for me deciding I am a real estate investor and this is going to be my passion.

Rob:
Right. So I’m sure that was really tough to find out when you did. I think a lot of people would probably just try to figure out how to cash out and start over. What was your thought process here in the real estate side of things where you’re like, “Oh my God, it’s all over”? Or were you still wanting to really pursue this path into real estate? Tell us a little bit more about that turning point in your life.

Sarah:
I definitely thought everything was over. I remember the first time I found out exactly what was happening with him and actually found the drug addiction piece, I was so embarrassed I didn’t tell anyone for three months because I was humiliated, like how can my husband be doing this and making these choices? And so honestly, a lot of it was just fear. I was really frozen for probably three to six months where you just didn’t know what to do and I’m like, all I can do is take care of this baby, otherwise I’m not really… And just keep the rentals going.

Sarah:
Now, granted we had only three of the units had tenants in them at the time, so I was really only managing three long-term rentals. It’s super easy, super passive, but I remember taking the newborn to meet HVAC contractors and things. But yeah, you definitely are frozen in place. And my idea was really not… It was really just to keep a hold of everything when your entire world was crumbling apart and you didn’t know what to do. And so definitely building out a real estate empire was not on the forefront for at least a year and a half. I would say I’d make a strong case for almost taking two years for me to actually figure out that real estate is what I wanted to be doing because it was such a mess and it was so horrible and soul crushing to kind of walk through that.

Rob:
Was there ever a moment in that time when you wanted to throw in the towel on the real estate side of things? Was there a moment where you’re like, “I think I’m ready to just hang up the hat and I don’t want to do this anymore”?

Sarah:
There’s definitely been moments. I would say crazy enough it’s been while I’m in the scaling up phase, less so than in the divorce phase because at that time COVID was just starting to happen and he was laid off for a period of time. I still had my job and I was like, “Oh my gosh, if he never gets better and he continues on this path, I’m down to one income, what if I get laid off?” And so my number one fear kind of went to, “Okay, my family’s falling apart. I need to keep my daughter healthy and going, but also someone has to pay the bills and someone has to have it together. And clearly, that’s going to have to be me.” And so it was just really scary. I feel like as though for me, I’ve learned over the years, money’s a very big sense of security and I hear that pretty commonly with women actually. I’m sure men also feel that way to some degree, but sometimes there’s just the security of having these stay jobs sometimes that we kind of clinging to.

Sarah:
And so losing and being a one income family in a volatile time, I just dodged a layoff too right around that time. And so it was a little terrifying. So it became a, “I have to do real estate because I need a second income stream and that’s going to be how I do it.”

Rob:
How did your life goals change at this time? Obviously, there’s a lot going on and it seems like you were moving towards your ideal picture perfect life, but then it all changed up. Were there any big changes and a different end goal during this whole process?

Sarah:
Yeah, I think that’s really interesting. So it probably took a couple years where I just stopped doing goals because your whole life is torn apart. You don’t know how much money you’re going to end up with. I didn’t know if we were going to sell the houses, if we were going to keep the houses, if the partnership was breaking up, if he was going to go to rehab, what was going to happen. And so you really just stop making goals.

Sarah:
I actually went to this goal setting retreat last year in December, a year ago. I was sitting there and everyone’s writing down their goals and there’s these experts on stage with these giant notebooks. I think a lot of people watch these amazing goal setting people that have their daily notebooks and all these big tasks and everyone’s doing like year of the goal setting. And I just sat there and couldn’t think of a single thing to write down because you’ve been such in a survival mode for so long just trying to keep afloat and keep the pieces together that you… And I’m always an achiever personality. I’m always like a goal checking. I love achieving things. I like having always been to move forward too. I have a very specific lifestyle I’ve always wanted to get to. And I feel like the end goal was always there but the pieces stopped being there just because you’re in survival.

Sarah:
And so I would say for just this year now I finally have some written goals again. But it was almost scary to start writing them down after you’ve seen how quickly your life can change. Writing out a five year plan seemed insane to me when my five year plan was destroyed in a day. So it’s a learning curve to almost get back to goal setting.

Rob:
100%. David, you’re kind of the king of goal setting. I’ve been very inspired with how much of a process you have. What is your process, man? Because we did a podcast a couple of weeks ago and you really laid down, you had goals and you had micro goals. Honestly, it’s very inspirational. And for someone that’s has as much success as you David, is there a system that you actually implement to write down your goals when you’re doing it?

David:
Yeah, the system is the simplest part. I take all the categories of my life I care about, I write it on a Google document in the center of the page like I center do it. And then I write down what the goals are for each of those businesses which are typically very general, like, “I want to buy this many houses. I want to increase cash flow by this much. I want to sell this many homes, do this many loans, go to the gym this many times,” whatever that would be, okay? And then I start with that information and I work backwards. Like, “If I want to sell this many houses, what are the steps I have to take to do that?”

David:
And that’s where the micro goals come out that you talk about, Rob. And then once I’ve got that mapped out, I say, “Would I like this life?” And oftentimes the answer is, “No. This life looks miserable. If I’m trying to do all these different things, I would hate it.” And so I move goals off or I ask the question, “What would I have to do to accomplish these goals but me not have to be the one to do it?” Or, “How can I accomplish two of these goals at the same time?” So selling houses and doing loans are two different goals, but one action can do the same thing. If we do the mortgage and we sell the house, they’re each becoming a goal, right?

David:
This framework is why I’ve sort of built the businesses out the way that I have because I want to create synergy with all of the different goals that I have so that one person can accomplish all of them. But it’s also something, and I think Sarah, you can probably attest to this, sometimes you make your goals, you start down the path and you realize, “I don’t like how this worked out.” That happened with me when I got to 50 single family rentals. “Okay this is miserable. I don’t know why I ever did this in the first place. I wanted to get to 100.” And I realized. “I just wanted to get to 100 because that was a number with three digits.” So there’s no reason to ever do that.

David:
So I sold them and I bought a bunch of short term rentals and now I’m saying, “Why the hell did I buy 18 short term rentals at the same time? This was a terrible idea.” I knew it was work, I just didn’t realize how hard the work would be and how many people it would burn out and quit my team because they couldn’t do it, right? So I don’t want to make it sound like I got everything down. I’m having to learn this stuff. But what it comes down to is when you set the wrong goal, it doesn’t fit your lifestyle. Real estate investing is not now serving the goal you had, which in your case Sarah, could have been some security. “My husband’s on drugs, I can’t rely on this person to help provide for our family. Real estate’s going to provide security, or maybe freedom, or maybe fun,” right?

David:
Like, right now my portfolio is anything but that. It’s stress and it’s frustration. And it makes my life harder because now I have to go hire new people because the people I had had to quit because they couldn’t keep up with the demands of what happens when you buy 18 of them in a row. So now I’m kind of redoing those goals.

David:
I guess I’m just saying this because it’s okay to say, “I don’t like my goal. I accomplish it or I’m on the way to accomplish it” and then to pivot and go into another realm. And you sort of mentioned that. You started off scaling and buying these properties and then you realized, “Okay, well I can’t make enough money this forever” so you started raising capital. Then you want to move into a safer asset class, you’re going to feel better at because you’re raising capital so you owe people money, the stakes are raised. Now you want a little bit more security and you’re probably okay to take a little bit off the upside if the downside is more secure. And do you plan the next step? What things are going to go?

David:
So as far as where you’re at with your life plan, how do you like how things have worked out and what do you think the next step for you is going to be?

Sarah:
Yeah. So I feel like that was the other piece. I’ve scaled up pretty quick this year. Not a ton of units obviously, but doing midterms is definitely a job. And I still have a job still to this day. And so I’ve kind of done a good job where my biggest fear in life used to be being laid off. So I’ve kind of gone from my number one fear being a laid off to, “Actually, I would love to be laid off but please also give me a severance package. That would be great.”

Sarah:
So essentially, your biggest fear kind of becomes your dream now where essentially I would be fine if I didn’t have a job, which is what I planned on doing, but it’s a lot more active than I was anticipating. And so I was able to hit that number and get to that income level by doing the midterm. So I need less units to do it. But exactly like David’s saying, it’s a lot of work when you start having turnovers and I had my first tenant destroy a property and police called and all of that fun stuff. And so it’s you kind of go through the punches and things. And so when you are used to managing three or four, that’s a whole different ballgame than having 13.

Sarah:
And so just kind of deciding, “Where do I move from here strategically so I’m not making my job harder?” And at what point do you hire more people to help you reach your business goals and what’s the enough point on it. Or do I pivot back to long-term or maybe long-term type of rentals but maybe a larger property, kind of deciding where to go to actually get the lifestyle I want because I’ve definitely built myself essentially a second job now.

Rob:
Yeah, 100%. Okay, I would love to hear from you Sarah, because I love your approach here. I would say my biggest weakness that I’m recognizing this, I’m self-aware of it and I’m happy to have finally just figured it out, it’s hiring people. I, in theory, have the lifestyle that I want, right? I work hard, I put content out, I teach people how to do this every day. The lifestyle is exactly what I dreamed of. And it was so hard for it to be as fulfilling as… I thought it was going to be more fulfilling and then I really started sitting down and thinking, “Why is this not working?” And I realized I do too much. I’m really bad at hiring people.

Rob:
And so what is that in your real estate journey? Because I’m so understaffed. I’ve written out the plan and I’m starting to go down that rabbit hole and it’s very refreshing. But what’s that like for you? When do you know when to hire people and why is that complimentary to your lifestyle?

Sarah:
Yeah, I hire out most things now. So in order to be a single mom, and I have full custody obviously given the circumstances, and so it’s hard because you can’t just go spend the night at a property and paint all night when you have to get something done. You can’t do that anymore. She has a sleep schedule and school and all the things. And so I don’t work on any of my own properties anymore. Rarely I’ll still go in and furnish them. The last two I furnish. So I guess on the real estate piece, you need to find a team of contractors, you need to find HVAC people. So I just have lists upon lists of people.

Sarah:
From my personal life, I guess I’ll go with what I’ve done and then what I still need to do because I think we’re in the same vein. So I guess from the business standpoint, from the real estate, I’m hiring pretty much everyone but I still self manage from a property management standpoint. So I still do all the communication and placing tenants, but I have most of that automated through social media pieces using Facebook and having funnels and all of that stuff to find tenants and screen them. And then I funnel them to a property management software and they have a self screen and all of that good stuff. And I do two showings of property now. The people that do 100 of showings, I don’t know how the heck they’re alive. I’ll show it once maybe twice. So property management side.

Sarah:
And then from a personal side, in order to have time with my daughter and actually see her while I’m working full time and building out a real estate empire slowly, or I guess fast, depending on how you look at it, I also hired out cooking. I have a cleaner. I don’t do my own lawn. There’s very few things I do. So when I have my evenings with my daughter, I am just with her. And sometimes we’re doing real estate stuff together. I have a picture I think in every property I’ve bought so far of us having Chick-fil-A on the floor of a rental property and then everyone comes through social media and yells at me for eating on the dirty floors. But so far she’s still alive so I feel like I’m doing pretty well.

Rob:
That’s amazing. I think really what you just hit on is what I think has been my internal struggle here, which is we all are getting into real estate or financial freedom or whatever these side hustles are, or front hustles if you will, we’re doing it because we want to make more money, right? And so the idea of hiring people means that we have to make less money. And so we don’t want to do that cause we’re trying to make more money.

Rob:
And then actually once the money is good, if you’re working super hard all the time and you’re never taking a break, the money is not fulfilling. It’s not adding to the happiness factor. So what I love is that you just said you hire a lot, right? The cooking, the lawning, it’s all that kind of stuff. Because I think the big… I turned the corner sort of this week really on this and it’s like happiness is actually making less money. And what I mean by that, it’s hiring people to make my life easier. And yes, that will mean that I make less money but it also means that I can actually breathe again. And that’s really cool to hear that you’re sort of there too.

Sarah:
Yeah, I think my next step as a personal assistant. That just was going to be-

Rob:
Oh do it. Do it. I love it.

Sarah:
So I actually hired one, but we have to break up. It’s just not a good fit.

David:
Get used to that. It’s okay. You’re going to kiss a lot of frogs before you get your [inaudible 00:33:04].

Sarah:
I’ve gotten rid of contractors before. I don’t know why the assistant I just feel bad, but I’m like, it’s just not a good fit. I just know it.

David:
It doesn’t get better. It’s like that bad relationship.

Sarah:
A terrible divorce will give you a good gut instinct, I will say that. And I should have known before I hired her. I should have known better. There was a feeling and I couldn’t put my finger on it or verbalize what it was, but I just should have known. So trust your instincts also.

David:
Oh, that feeling is huge. In fact, I wish I could write a book called The Feeling, because it’s undefeated. It’s like father time. When you hire the wrong person, it’s hard to put to words what it is. It is a feeling like, “It shouldn’t be this hard. Am I crazy?” You start asking those questions like, “Is this on me?” Like, “I would’ve thought that when you canceled my appointment, you would’ve also realized, well if I’m not going on this trip, you should get me a refund for my airline tickets or you should cancel the babysitter that I had coming because now I’m not leaving town. Or you should at least ask me.” And they’re like, “Oh, well you didn’t tell me to do that,” right? That feeling in so many times in life is crucial. And it happens in real estate too. You’ll see a property and be like, “Ugh, it works on paper, but I just don’t know.” Rob, what were you thinking?

Rob:
Well, I was thinking that you’re probably going to have to have that conversation with your assistant before this podcast comes out.

Sarah:
Yeah, we’re destined to have it next week actually. So [inaudible 00:34:15] break up, it’ll be the holidays.

David:
This is accountability.

Rob:
I know. Please don’t listen to this. It’s going to happen. I’m going to get a mean text later. I’m sorry. It’s just not an ideal fit.

David:
It’s good for everyone to hear that because what I found when people try to scale, I have this theory that I call the three dimensions of success, okay? Let me walk you guys through this. So the first stage is just one dimension like a plane. Imagine Mario in Mario Brothers just running to the side, okay? You start on the left and you suck. The more you learn about what you’re trying to do, the better you do. And if you get all the way theoretically to 100, that’s where you’ve maxed out your own productivity. In that realm, you cannot make more money. You can’t sell more houses, you can’t own more rentals, whatever the thing is you’re doing. You’ve learned all of it for the most part. And when I say learn, I just mean learn the skills. There’s always knowledge that can be learned, but you max out.

David:
The only way to do from that point to do more is to leverage. But the problem is leverage is a completely different access. It’s a second dimension. This is Mario jumping, and you start off not jumping very high. You’re like 100 on this plane but you’re only in two and you suck. And no one explains to you. You’re stepping into another dimension with a whole new level of skills that you have to get good at just like you had to get good at owning rental property or analyzing property or all the crap that we have to do if you want to be a good investor.

David:
And because you expected that, “I’ll just hire someone. That’s what I hear David Greene say on the podcast like, ‘Oh I suck at hiring. I guess I’m not meant to be this’.” Everyone goes through this. I watch it happen in every single endeavor I’m at. For some dumb reason, we human beings think that the first time we get on a bike we should just ride it. The first time we get on a snowboard, we should just cruise down the hill. And nothing works that way in life ever, but when we fail at something, we’re like, “Oh, I guess I’m not a prodigy. I should have just stepped in about a black belt my first time doing whatever this thing was.” And it’s not, right?

David:
So if you can give yourself that grace of knowing “I’m going to hire and fail and hire and fail just as long as it took me to get good at investing in real estate,” it’s manageable. And then here’s the reward, Sarah. As you get all the way to the top of leverage, you’re like, “This is awesome. Let’s scale this and take it into another bunch of places.” And you start all the way over in the third dimension of leadership, which is going away from you. And now you suck at that and you get to… It never stops sucking guys, that’s what I’m telling you. So fall in love with the suck.

Sarah:
I was talking to one of my friends that was like, “Being an entrepreneur leaps. There’s like the leap phases.” And it makes so much sense because there’s sometimes where you’re like, “I don’t know how I managed. My long term suddenly became easy and they didn’t used to be easy and now I have more long terms than I ever have and I hardly ever think about them.” And now I’m just like, “Ah, damn you midterm rentals.”

David:
You started over. You got a new learn access that you’re on.

Sarah:
And I also switched markets because I went from small towns where my contractors were used to traveling everywhere to a different city where they’re like, “Well, I don’t work in the town. I’m not driving through the traffic.” And I’m like, “Here we go again.” So yeah, I feel that deeply. And I should know that about the personal assistant as well. So I know I need one and I need a new one. It’s just…

David:
You should know the talks Brandon Turner and I have had late night in Hawaii over the woes of trying to deal with personal assistance. We’ve often thought we should film this and sell it because it’s just so funny and deep. But you’re not the only one is what I’m saying.

Sarah:
I have a call with other female investors, there’s four of us. Our topic for the last month, every single week has been, “How do I hire a better personal assistant?” because we’re struggling through it. So that might be something to bring in. That’s a business idea.

Rob:
I mean, I will say one of really the first hire officially on payroll that I ever made was my assistant. It is one of those things when you hire someone and they are good, it’s kind of like a, “Oh, wow, what was I thinking? Why did I do that earlier?” I hired a COO a couple months ago. That was another big moment for me. It’s one of those things where I’m so bad at actually managing my personnel, my staff and my team right now because I’m so spread thin. And so I’m realizing I need to have a few of those key players that will alleviate so that I can actually provide the leadership that you’re talking about, David. Because that’s really the hard part, is I’m so used to working side by side with other people and I’ve gotten really good at that, but actually being able to lead them and delegate has been really tough like that.

Rob:
The assistant journey has been a good one because that is really your stepping stone into leadership because they’re going to follow your lead and they’re going to do what you ask them to do. And if you don’t have systems, then it makes it a lot harder on them. So a lot of the times that I have seen failures, and not that my personal assistant fails, but anytime that there are moments of like, “Ooh,” it’s always my fault because I did not lay out what I needed and I wasn’t clear. So it’s a really good learning experience,.

David:
But even when you are clear, they find a way to screw it up. That happens a lot of the time. Systems have two parts to them. We only talk about one. The first is knowing what to do. Writing out the steps, “Here’s where the tenants take their rent check.’ We think that’s what a system is. No, that’s half a system. The other half of the system is finding a person execute that. You still have to be good at what’s happening. Someone could teach you, “Hey, here’s the way that you shoot a bow and arrow. Let me lay out all the steps for you.” But there’s still a skill of archery that some people will learn and some people don’t learn. And so finding the right people is crucial. Yeah, without a system their job’s going to be way harder, but even with the system, they can screw it up.

Rob:
All right. So Sarah, we kind of glazed over this because we’re talking about so much good stuff here, but I don’t want to go back to it. I want to really ask you about funnels. You talked about how you set up your different funnels and how you’re able to find new clients that way for some of your rentals. Can you explain what a funnel is and why a funnel would be beneficial for a real estate investor in any of the, I guess, niches that you’re in?

Sarah:
Yeah, so I mean, funnels to me are how my brain operates, but I’m in a logistics nerd and I did my MBA for fun. So essentially, a funnel’s a giant triangle. So essentially you’re bringing in 100 people and you want to get down to one or two tenants. So you can use this for tenants, you can use this for social media. We can go both routes, it depends which way you are most interested in. So essentially from a property management standpoint, I feel like Facebook marketplace is where everyone goes to troll landlords, but it’s also a really good start of your funnel. So having a Facebook page for your property group. So I have a web or a Facebook page. I list all my properties, Facebook marketplace that are not furnished. So I have a different funnel I guess for my midterms.

Sarah:
And so I usually get around 100 inquiries, which is in these little tiny towns, which is fascinating to me because I didn’t realize our population was that large to get that many inquiries, but there’s a lack of good housing. And so I like to be the best housing provider while still hitting people’s budget, and so a thousand dollars a month is at sweet point. And so essentially getting everyone, the 100 people that say, “Hey, is it available?” and poke the button on Facebook like, “Hey, is this still available?” they get an automated message. And the automated message says you have to fill out this pre-screen and gives them a link. About 40 people actually make it through that link. They’ll actually click and start to fill out your, I guess, pre-screening questionnaire. And so then I’m left with instead of 40 people saying, “Is this available?” that I’m DMing, I now have about 40 people that import into a Google form that fills in a Google sheet actually.

Sarah:
And then from there I can go through and actually pick out people that qualify and then people will say dumb things. One time I had income, I didn’t require a number in there, and so people would free text in. And so one person, I said like, “What’s your income?” and he said, “Enough.” And I’m like, automatically that’s a no for me. It just is a no. People are dumb. So you automatically have some people that just aren’t going to qualify for your properties so they don’t make enough income and you’d strap them for cash. So it’s just finding the right people and then ultimately picking maybe two to four people max to actually show the property too is kind of one example.

Sarah:
And then how I’m using the same strategy is through Instagram to work on my private money. So I kind of use the same structure online where Instagram is essentially my beginning point. So I started out on Instagram as a content creator, trying to be like, “Okay, I’m going to build this business.” And every year I lose money on my Instagram account. I don’t know if I’m just really bad at monetizing, but it’s a blood bath out there to try to make a sustainable money on Instagram.

David:
No, I make $14 maybe. So don’t feel bad.

Rob:
Oh, no, no. I make no money on Instagram.

Sarah:
And every year I’m like, “I made $1,000, but I spent 3,000 to do that.” So it’s just really depressing. Every year with the amount of money I make, it goes up, but every year my spending goes up.

Rob:
Yeah, but you just said you raise money on Instagram though, right?

Sarah:
I do.

Rob:
So you actually didn’t lose the money because it brings you in money through the funnel.

Sarah:
Right. So that’s the cool thing I’m doing with Instagram right now that I just started doing this year, was essentially I started talking about my deals more and deal analysis and actually talking to people about private money, high structured deals, how I’m paying lenders essentially like mailbox money to be a lender on a property where they essentially act like a bank and they get guaranteed rent on intangible asset. So I just talk about that online. And then I started building an email list. So I essentially used the same process.

Sarah:
Where I do a Google form, it goes into a Google sheet, I ask them this set list of questions. If you go on Instagram, you can totally see this and essentially build out a funnel. So now I have a dedicated list of people that may be interested in lending private money. And so that’s kind of how I’ve pivoted to being a failed content creator on Instagram to being like, “Oh wait, actually maybe I’m not.” If that’s just the start of my funnel, then I’m kind of successful and really all I need to do is curate those relationships and kind of love what I do most, which is buy real estate.

Rob:
Yeah, this is huge. I think everybody go and rewind and watch the last five minutes. Funnels are genuinely where millionaires are made. If you understand funnels, this is how every business works, right? A funnel is basically a journey that people are taking and you’re sort of at your product or your service, the actual conversion is at the bottom of this funnel.

Rob:
So the way I like to think about it is like a calendar, right? We always say it’s a triangle, but I think of it as a calendar that has all these holes in it, right? Along the journey as they travel down this calendar-like funnel, whatever, this conceptual thing that I’m making up on the spot, a lot of people are going to fall through the holes in that calendar, but some will keep making it down. And there are different layers, right? So it starts with, let’s say on Instagram, you say, “Hey, I’m going to do the… Reach out to me.” Or you basically make content that interests people. A percentage of them actually reach out, a percentage of them fill out the form like you talked about, a percentage of them actually talk one on one with you and then a percentage of those people actually give you money and invests, right?

Rob:
Every single business works this way. And it’s really cool to hear you explain it that way with real estate because real estate is funnels, but no one really understands that concept that, hey, the way that you market your Airbnb or your midterm rental or the way that you get tenants, that’s all just a funnel. And if people really understood that user journey, they would never have vacancies.

Sarah:
So now I need to work on applying this to midterm rentals because I’ve kind of pivoted my social media. So now I feel like I’m not “failing,” I guess air quotes because it’s a total different way of bringing in partnerships, like equity partners.

David:
I think there’s a deeper truth to what you two are saying right now that people need to hear. A lot of the time, remember I said that we fail when we expect our first hire should just be the hire-

Sarah:
Exactly.

David:
… and we realized that you got to do it a lot? But that’s that form of a funnel, right? I think a lot of people assume, “Well, they said to buy a rental, they said to use the BiggerPocket calculator. I did that, I bought it. But I’ve had nonstop problems the whole time I’ve owned it. I must suck at real estate.” And I bet if you trace it back, they rented out to the first person that applied. Or they had two people that they talked to, they didn’t do a credit check, they didn’t screen them. They threw someone in there thinking that’s how the system works.

David:
If you understand it’s supposed to be a funnel, you start with a lot of people, you whittle that down. And like you said Sarah, you only show it to two out of four because you’ve already whittled a lot. Your experience with real estate is so much better and now you like it and now you want to do it more, but that never gets told to the people who are first starting. The expectation they had is like, “Oh, you just find a tenant. It’s in a good area. I should get a good tenant.” They don’t know how to find a good tenant, or their property manager doesn’t know how to find a good tenant so the whole experience sucks. And so I’m glad you guys are saying this because it’s going to save a lot of people a lot of pain if they understand, “Oh, once you buy the property, it’s still work. I thought the work was done? I thought I was just supposed to analyze another 100 deals.”

Rob:
100%. Yeah, 100%.

Sarah:
And I will say that’s probably why my midterm, because it’s newer, is sucking right now because I haven’t really built out my funnel. My long term things I feel so comfortable with that funnel development and being able to weed out people. And I feel like my strategy just isn’t there with midterms yet. So maybe that’s the leap phase of my business. Maybe I’ll start liking midterms again.

David:
Maybe that’s why fate has you here with us today, Sarah.

Sarah:
Maybe it is.

David:
You need to hear it’s okay to suck. You’re supposed to suck. Every time you switch to a new thing, you start over a new cycle of sucking, which is like the real estate god’s ways of stopping us from going too deep into shiny object syndrome.

Sarah:
It is.

David:
Because it’s the thing that we love to punish ourselves where, “I suck, I suck, I suck. I finally got good at it. Oh my god, years of misery are over. It’s running like I want. It’s smooth. I have all my time. We enjoy it for a week.” And then we go, “This is kind of boring. What’s that guy doing over there? Creative financing. That sounds good. Let me learn about that.” And we jump into a whole new cycle of suck that makes us miserable again, right? Right when we got out of the thing that we were good at. And so there’s definitely a balancing that you have to take in between.

Sarah:
Is this like the check to see if you should be an entrepreneur? Do you just constantly sign up? Because I’m like, that’s how my whole journey… Dave Ramsey got boring. This got boring. Someday real estate will probably be boring because long term rentals kind of get that way. But now I’m like, ‘Ugh, this sucks again.” But your suck always changes. After you’ve replaced so many furnaces, I;m like furnaces and foundations don’t scare me anymore because I’ve had that suck before and now they don’t make me nervous. But for your average person, like…

David:
That’s it. Boring’s just a form of suck. You could have boring suck or you could have incredibly stressed out losing money, hating your life, chaotic suck, right? Boring’s not the worst thing ever. That’s one of the things I try to remind myself.

Sarah:
Right.

David:
Like, “Oh, I want to go jump into another realm of real estate investing like I did in a short term rentals.” Well, I shouldn’t have done 18 at one time or whatever it was I bought, right? But-

Sarah:
You 10X the chaos. Yeah.

David:
Yeah. Now my suck is like this incredibly crushing anxiety that sits on my chest of eight properties that are probably 10 grand each that aren’t bringing in any income at all plus the huge rehabs I’m doing. Now the boring suck doesn’t seem so bad. Rob, what about you? What do you think?

Rob:
Yeah, I was actually just talking with the BP superstar, Jamil Damji, about this because this is a big thing, right? So I think that the important skill is recognizing if your suck can get better, right? So a lot of the times the you sucking or you’re not being good at something really comes down to reps. If you do more reps, you will be better at something. But sometimes you are just not made for a specific thing. So for me, I’m not athletic. There will be no world where I become a basketball superstar. It is not in my body type. I don’t have the hand-eye coordination. And I know that if I play basketball every day, I mean I’ll get a little better at it, but I’ll never be… You will always laugh at me, I’ll put it that way.

Rob:
But I know that from a skill standpoint, I’m good at real estate generally speaking. I understand concepts. And so when I look at things like wholesaling or sub2, I’m going to suck at doing that for a long time. And it’s not because I’m unable to, it’s just because I haven’t done enough reps. So if I go all in with wholesaling or sub2 just to diversify a bit, it’s going to be me putting in reps every single day and getting better at talking to people, understanding scripts, understanding funnel marketing. And the more I do that, then I know that I will one day not suck. So I think recognizing, “Can I actually be good at something?” is a really, really important skill that most people they don’t recognize and they’ll just automatically write something off and never even try.

David:
Yeah, because they’re following somebody else’s blueprint.

Sarah:
And I will say I feel like once a month I find something new I want to get better at. Last month I met with title companies, people who work for title companies. I just need to understand the process better. Right now I’m trying to pitch seller financing more because I just feel like that’s kind of the name of the game that the market’s flipping a little bit and everything kind of pivoting a bit. So I’m going to get really bad at doing sub2 and then get better hopefully.

David:
All right. So with all the options you’ve got at your disposal now, Sarah, because that’s cool when you do get enough rental properties to replace your income and you get a form of security, the whole world’s oyster. But a lot of oysters smell like fish and that doesn’t mean that they’re all good, right?

Sarah:
Right. Not all oysters are good. It’s a good… Yeah.

David:
That’s exactly right. Not every oyster is good. They’re not all full of pearls. The gulf oysters?

Rob:
Not good.

Sarah:
No. Yeah.

David:
So what are the goals you have now moving forward based on what you’ve learned about yourself and what seems interesting to you?

Sarah:
Yeah, so I think when we were prepping for this episode, I was like, my biggest goal was to really hit this very specific number. So if I stopped today and paid off everything, I’d have about $13,000 cash flow on paid off properties. But that sounds very unsexy in the world of real estate where everyone leverages. And so I’m like, okay, so I built to that point where if I got laid off and the world came tumbling… My worst case scenario was realized or something, I’m like, “After you go through a terrible divorce like this, nothing’s that scary anymore.” So you’re like, “Oh whatever. I built my second income stream, I did it.” So you’re like, “Do you stop now? Do you keep going?”

Sarah:
So it’s always this kind of philosophy of… And where I’m at right now is you kind of do both. I think I’m going to try to get a couple mortgages paid off just so I have that security because I like the fact that these properties are all mine. If I get remarried, prenups, all the things, these are mine to be financially independent. So if anything ever happens in the future because you can never expect to see these things coming, never in a million years I just expect this would be my life story but here we are, you have the safety net that would be for me and my daughter always. And so that’s really important.

Sarah:
So I think if I get into partnerships or another marriage someday or kind of develop a life with somebody else, that I always keep my core portfolio. And so it’s like, “Do I stop and pay things off now? Do I pay off a little bit and start doing other projects?” So I’m kind of in this philosophical debate of I got to my magic number and I’m supposed to stop right now, but that sounds terrible. So now how do you keep going strategically? Can you do both? Can you pay off 13 units, which is six properties? Or do you forget that stop throwing money at it? But I’m like, now at least I’m trying to buy deals using my private money funnel I’m developing and put none of my own money into my new deals while I’m kind of working on stabilizing this core portfolio on the side. So kind of like a two phase business. I think actually might open a new LLC for my new kind of ventures to keep going. So that’s kind of my thoughts.

Sarah:
But I don’t know. How do you challenge that philosophical question? Because I know this is where a lot of people say, and I mean math will always say you keep scaling with leverage, it just will. But then your gut check is, “There’s nothing more secure for you and your daughter’s future than having six houses that are paid off. There’s really not much more secure than that. Real estate is such a good asset to be in. So where do you go? What do you do?”

Rob:
Yeah, yeah. It’s one of those things, right? I’m always like, “Do as I say, not as I do,” right? Because it’s one of those things where I definitely believe in leverage a lot. I’m like, “Okay, if you want to get to $50 million or $100 million dollars, you have to leverage. I mean obviously there are people like Dave Ramsey who have done it, but it’s a rare scenario. But sometimes I’ll be very honest, there are times where I think about paying off things like my personal home or a couple of my homes.

Rob:
The way I of justify that to myself is let’s say I have a one and a half million dollar house, it would be very foolish in a lot of people’s minds to pay that off. But I sort get very tempted about that because I’m like, “Well, I have that as a savings account.” If things ever go wrong, I can always pull out a HELOC or I can always do a cash out refi and pull the money out if I really, really, really, really need to. That goes against everything I actually believe and do, but there are a lot of times where I’m like, “Well, maybe just one time. Maybe just one time I’ll just pay this off and have that liquidity, theoretically, liquidity to my name and pull from it when I need it.

Rob:
I think I actually kind of justify this because I’d like to get into more BRRRRs, BRRRR STRs and flips, that if I could have a lot of equity in a house and just have a giant call it $1.5 million to $2 million home line of credit, I would never have to go to the bank again. I could just use that home line of credit and I would never have to worry about underwriting and stuff like that. So that would be a trade off that I think it’s worth, “Hey, am I not leveraging to the fullest ability?” Sure, but I also make my life a lot more convenient by never having to get permission from a bank.

David:
Part of this philosophical question that we’re discussing here has to do with, “Should I feel bad that I want to pay things off?” It’s not mathematically sound, it’s not the right thing to do. The reason we look at it that way is because the metrics that we measure are typically cash flow and equity. When you’re looking at life from that perspective, yeah, leveraging is the right answer. You’re going to make more. And because we all came here to make money, that’s what we do.

David:
But if you came here to live a better life and you don’t need more than 10 grand a month or 20 grand a month or whatever it is, getting from 20 to 30 or 40 grand a month isn’t going to change your lifestyle a whole lot but it might change your peace of mind a ton. And in that position, if you don’t want to own more real estate, you don’t want to take on more headaches, you don’t want to hire more people because hiring people is hard, sometimes the way you make progress is paying down the debt. That’s another way to get more money, albeit not as much money, but it’s still more cash flow than you were getting if you had leverage without taking on more headache.

David:
And that’s the question is, what metric are you measuring? Are you measuring peace of mind? Hours worked? Or are you measuring purely the growth financial metrics? Because whatever one you’re looking at is going to be what you see as the right move to make.

Rob:
100%. Are you trying to fulfill a financial goal or a lifestyle mental mindset goal? Those are two very different things. If you’re doing financial, yeah, then metrics are going to scream one thing and, “Hey, leverage, leverage, leverage.” But if you’re just trying to be happy and make a little cash flow for peace of mind like you talk about, that’s a whole nother thing. That’s a whole different thing than the financial aspect. And I think there is a balance. We probably don’t give it enough credit, but there’s definitely a happy balance of how much should you leverage and how much should you pay off for peace of mind.

Sarah:
And I will say I think it’s pretty easy to answer that question because I feel like the only goal I’ve ever had was this very odd specific vision. People talk about the vivid vision a lot, you guys have all heard of this, where you always have this very specific goal. And so my current dream in life, which is really depressing I feel like for most people because everyone’s like, “I want to be in Hawaii and do something cool…” And I’m like, “My dream is drop my daughter off at school and go to any coffee shop. There’s this really cute little boutique coffee shop down the road and I love it. And just sit there all day and be on my computer and I can work from anywhere, be fully remote.”

Sarah:
So I could be working from a coffee shop in Indiana or I could be traveling anywhere across the United States and be working. Essentially, I want to sit there. And essentially, the coffee shop people or the locals walk in and out and they’re like, “Who is this girl that’s always here? Does she even work? What does her husband do for a living?” And it’s like, “No, it’s my real estate that makes me able to sit here.” I’m running an empire off my laptop and it’s all mine that I’ve kind of built for me and my daughter to have this really stable foundation going forward where we’re not really in this scared, afraid mentality of what happens if mom loses her job or something. Just knowing we’d always be safe, but not really having like, “Oh, I don’t really have a rich husband. That’s really just me.” If I do awesome someday, that’d be great. But I mean for right now it just sounds pretty cool to just have the flexibility of calling any coffee shop my office for the day.

Sarah:
And so I think that vision’s kind of been the direction of wanting to go where I don’t miss school activities. This year is the first year I ever miss something for my daughter because my job started traveling more. So I was on a work trip and she had school picture day and I couldn’t do her hair. And she’s three years old, she will never remember that mom did not do her hair. She actually doesn’t like when I do her hair that much, she’s very particular about her aunt doing it. So she lived her best picture day life. But it’s just hard. I don’t want to miss little things like that. And so I think that’s the trade off when you get into high paying corporate jobs, is that’s your trade off. And that’s not ultimately the life I want to have. I want to be working from anywhere, but then always being home when things are important or I don’t want to miss something.

Sarah:
And so I think that vision is kind of the guiding path, but then real estate’s just really fun. So then you always end up in this philosophical debate back again because it’s very hard to stop buying, which is I’m sure something we all probably have in common, is just the enough point. And we tend to get in and over our heads I think a little bit.

David:
Well, buying because it’s fun is different than buying because you feel like you have to or you’re supposed to. I think you’ve told a very beautiful story so far. It’s fantastic where you’ve gotten, it’s provided the security that you lost obviously when you have a spouse that gets into drugs and they lose complete control over their life, their decision, their impulsivity. That’s going to rock anybody’s world. And so I see real estate’s kind of provided a little bit of stability there.

David:
And now I would just encourage you don’t be in a rush to try to figure out what your next move’s going to be. Like you said, real estate’s fun. So just wait and see what sounds the most fun and what’s going to be the least intrusive on my life. And then I have no doubt if you’ve got this fire, you’re going to be great wherever you go there. But there’s no big rush. But the way that the economy’s going, it’s kind of nice that we can be patient. We can sit and wait and say, “Oh maybe I don’t have to fight for deals as hard as I used to. I can kind of wait and see what comes my way.”

Sarah:
Right. Because I think I… I don’t really realize I was in a rush until I hit that number and I was like, “Okay, I guess I was in a hurry to get here.” And I think I need to learn to take a breath and be more present and be on my phone less and really refocus because I got a little too far away from now I’m neurotic at a coffee shop. I don’t want to be anxious. I feel like I need to be doing something at all times. I want to be relaxed.

Sarah:
And so taking a pause is kind of where I’m at, which sounds depressing in a world full of goal setting. But I think taking a breath and really making sure that, like you said, you’re building the business that… I wrote down actually from this. Like, “Do I like this life?” I need to start asking myself that question all the time with building out businesses to keep aligning with that goal. Kind of that overall vision is, “Do I actually the life I’ve made” because I’m a little too busy right now and I need to figure out how to fix that.

David:
That’s the same question Rob asked about his haircuts, how he ended up with the [inaudible 01:01:04].

Sarah:
And we’re here. Yeah.

Rob:
This is my final form. I’ve done it. I don’t know if I can fix it. TikTok would disagree though.

Speaker 4:
Famous Four.

David:
All right, Sarah, we are going to move on to the last segment of our show. This is the Famous Four. In this segment of the show, we ask every guest the same four questions. And I will start with question number one. What is your favorite real estate book?

Sarah:
So from a real estate… Probably Set For Life because I feel like that was my pivotal book.

Rob:
Makes a lot of sense. Yeah. Okay. Question number two, favorite business book?

Sarah:
I still love The Simple Path to Wealth, even though it’s a little bit more of a finance book. It’s still a really good one because I feel like it’s important to keep the lifestyle design into the mix when you’re building out a business.

Rob:
Awesome. And when you’re not crushing the real estate and midterm rental game, what are some of your hobbies?

Sarah:
So spending time with my daughter definitely. We like to travel and go anywhere warm. Because I feel like when I’m not working all the time, I want to be on a beach. Our preferred location is somewhere near a body of water. But otherwise I’m like, how do you say that I like to go shopping and plan Instagram? I think there’s an audio that says this on TikTok that’s trending right now. So I’m a pretty basic in my needs in terms of just quality time with family and friends. I’m also not sporty, so that’s not something that appeals to me. So honestly, it’s a lot of time just spent on social media and just quality time with family.

Rob:
Are you saying that you’ll also never become a basketball pro either?

Sarah:
I have zero hand-eye coordination. It’s really embarrassing. My best friend’s primary hobby is like, “Throw something at Sarah, it’s hilarious to watch her try to catch it.” She was a D1 athlete and her number one pastime is throwing stuff at me. So to watch me [inaudible 01:02:51].

Rob:
My wife does that to me too. She does a thing where she pretends to throw it at me and watches me cringe really fast and she loves, loves doing that to me.

Sarah:
Yeah, I’m pretty sure she probably has a whole album of videos of watching Sarah catching things on-

David:
That sounds like a funny TikTok compilation.

Sarah:
I should work on that. I need to get the feed from her.

David:
All right, Sarah, in your opinion, what sets apart successful investors from those who give up, fail or never get started?

Sarah:
The boring consistency. There’s not a magic formula. I think avoiding the shiny… We hit briefly on the shiny object piece and it’s so important. I try very strategically to align with people that have been here a long time to just see what works. So I do a lot of networking with people that have been through a 2008 downturn and things and just kind of picking their brain on how they built their business and what parts of their business helped them make it through recessions. So that’s honestly why I focused a lot on long term and small single family, multi-family, was just because that seemed like a good stable piece of a lot of people’s portfolio.

Sarah:
And so slowly building consistently as boring as possible. Grandma’s cool way of investing is probably one of the best for the long term if you don’t want this really stressful life. And being really mindful about just constantly showing up all the time and constantly learning your craft. I don’t know. Kind of always picking up new skills in the space too. So taking people to lunch is probably my favorite way to just learn from people, to just learn what have they done consistently over time to get to where they are and crafting the lifestyle that way.

Rob:
Amazing. Well Sarah, thank you so much for sharing your story with us. Can you tell us where people can find out more about you?

Sarah:
Yeah, so I am on Instagram primarily. I kind of live on there. So in terms of hobbies, that’s definitely my number one. So I’m under nerdsguidetofi. I will probably rebrand at the end of the year. So depending on when this airs, I’ll probably rebrand under Sarah King just because that’s easier. So I started out in the financial independence space, but I feel like now it’s just kind of way easier in real estate to just have it be my name. So look up probably Sarah Elaine King or nerdsguidetofi on Instagram. I have a website that has the same-

Rob:
Snag that.

Sarah:
Yeah, I’m going to go snag it-

Rob:
Snag that now before it comes live. Yeah.

Sarah:
Yes, exactly.

David:
Also Snatch Can’t Catch King. That’s got a nice ring to it.

Sarah:
Yeah. And it’d be a good icebreaker too. “Where’d you get that handle from?” Like, “Because I literally can’t catch anything. So look at me under nerdsguidetofi. I have a website and a podcast under the same name and we’ll go from there.

David:
Wonderful. Well thank you Sarah. You have an awesome story and I appreciate you sharing it with us today. If you want to find out more about me, you can follow me @davidgreene 24. And now that YouTube has handles, I’m actually @davidgreene24 on YouTube as well. How about you, Rob?

Rob:
You can find me @Robuilt on YouTube. R-O-B-U-I-L-T. You can find me on Instagram @Robuilt as well. And while I’m here, I just wanted to say if you enjoy us talking about real estate, if we’ve ever helped you, if you’ve ever found our shows inspirational, I just ask consider leaving us a five star review on the Apple Podcasts platform and anywhere that you listen to your podcast. It would mean the world to us and it does actually help us with the podcast algorithm.

David:
Sarah, it was a pleasure. Thanks so much for being here. We will follow up with you in the future.

Sarah:
Sounds good. Thank you.

David:
This is David Greene for Rob, the real estate athlete Abasolo, signing off.

Rob:
Oh, that’s good. That’s really good.

Ashley:
This is Real Estate Rookie, episode 241.

Sahleem:
Our dreams were the confidence. We had dreams, we had dreams, we had no road blockages in front of us. Nothing could stop us from completing this property. There was something in our minds that say, “Hey, every obstacle that we faced, we’re going to jump over.” We did not care at all. And I believe that I still carry that to this day. I do carry that to this day actually. There’s nothing in my way that’s going to stop me from being myself.

Ashley:
My name is Ashley Kehr, and I am here with my co-host, Tony Robinson.

Tony:
And welcome to the Real Estate Rookie Podcast, where every week, twice a week, we give you the inspiration, information, and stories you need to hear to kickstart your investing journey. We’re here for those people that are new or looking to get started and expand and scale. So, before we jump into today’s amazing episode, I want to give a quick shout out to a person in the Rookie audience that left us a review on Apple Podcast. Their username is just a collection of letters and numbers. I’m not going to try and pronounce what that is, but it says, “BiggerPockets is a great resource, definitely worth listening to. Every episode has solid content, tangible stories from real rookie investors.” So, if you haven’t yet, please leave us an honest rating and review on whatever podcast platform it is you’re listening to. The more views we get, the more folks we can reach, and our goal is to reach as many people as we can. So, Ashley, we got a pretty good episode lineup for our listeners today, right?

Ashley:
Yeah, I mean, we could have gone on and on. We have Sahleem on today who goes into almost a James Dayner type story for those of you that listened to On The Market. Sahleem started out working at Chipotle and turned into a wholesaler. So, he goes through his journey, and my favorite part about the episode was that he tried real estate and then actually took kind of a brief pause from it from three years because he got into such a bad deal, and I think it just goes to show that even if you’re scared right now to get started because you’re afraid of having a bad deal, I love having people on that have this bad deal to show you that life goes on. You can overcome it. There’s different exit strategies. There’s different ways to pivot your business strategy. And so, I think Sahleem is a great example of that. And just his motivation, he’s just so cheerful, and he makes me want to get pumped up and go do something more.

Tony:
I know. I love Sahleem’s energy, and yeah, just his whole demeanor and his vibe. But Sahleem also I think in this episode provided a great example of how you can find a mentor, and there’s this phrase that we threw around called mutual mentorship near the end of the episode. So, if you’re a newer investor and your goal is to find that mentor to help you add skills or learn new things in the world of real estate investing, Sahleem is a perfect example for you to follow and model.

Sahleem:
I did. Yeah, I was a line cook. First, I started off as a line cook, then I was a kitchen apprentice. That didn’t work out too well. So, when I started off as a line cook, I was there for about two years before I actually got into the kitchen. The biggest thing for me was moving up. I always wanted to move up in Chipotle because everybody wanted the general manager spot. If you cooked well enough and you can wash dishes well enough and you can run a store, then hey, you can get a hundred thousand job at Chipotle. Most people don’t know that, but you can.

Ashley:
So, basically you have to do all the jobs in Chipotle and then become the general manager. Yeah, yeah.

Sahleem:
Yeah.

Tony:
Really? So, the general managers at Chipotle makes six figures?

Sahleem:
Yes. Yes.

Tony:
Wild. It’s the same thing for In-N-Out. There’s no In-N-Out where… Do you know what In-N-Out is?

Sahleem:
Burgers, a burger spot, right?

Tony:
Right, yeah, yeah, but In-N-Out’s like this-

Sahleem:
Like McDonald’s? Yeah.

Tony:
No, nothing like McDonald’s.

Sahleem:
I’ve only gone one time because we don’t have them New York either.

Tony:
No disrespecting In-N-Out like that. No, but In-N-Out, it’s like the White Castle of the West Coast, right? It’s all super fresh. Nothing’s frozen. But same thing, I have friends that have worked at In-N-Out. Even if you come into the base bottom level, you’re making pretty good money. Yeah, if you’re a manager for a location, it’s a pretty healthy six-figure salary for doing that. So, I do know people that have made a career out of In-N-Out Burger. It’s crazy.

Ashley:
Yes. So, Sahleem, what happened with Chipotle, and how did you get into real estate then? Where was that transition from wanting to be one of the chefs in the kitchen to now you’re buying property?

Sahleem:
Okay. So, interesting enough, I always wanted to be better. I always wanted better for somehow. I didn’t know how to make money, but I always heard about people buying and selling cars, always heard about the car auctions down in Philadelphia, Pennsylvania where I’m from. I’ve heard people say, “Hey, I just bought this car for $2,000.” And I say, “Hey, well, I work overtime all the time. My checks are maybe $1,300.” At that time, I probably had two to $3,000 bills. So, I say, “Hey, you know what? Let me save up some money to go buy me a car so I can go to the auction and make my own money.” So, I believe my first car was a Buick Century or a Buick Park Ave or something like that.
I went to the car auction. I had like $2,300, and from there I actually bought the vehicle. I knew how to fix cars all the time because I used to watch all my friends fix cars. So, it kind of led me to go into flipping cars. So, I bought one car, bought the Buick, next thing I bought a Pontiac, next thing I bought a Hyundai, a Honda. It just kind of tripled.
So, from me buying all these vehicles, I had a guy at my job, he said, “Hey, I always see you coming to work with new cars all the time.” He’s like, “How are you doing this?” I said, “Hey, I’m just going to the auction. I drive the cars for two weeks just to make sure that they’re good and stable, and then I go and post the car on Craigslist or OfferUp,” and I would sell the car and I would make almost like a 500 to a $1,000 profit depending on the vehicle it was. So, from there he said to me, he say, “Hey, why don’t you jump into real estate? I’ve heard about this real estate game. I’m going to this event.” I did not make the event because of work. I had to go to work. So, he told me, “Hey, come to this event next time.” I still didn’t make that event. I just wasn’t taking him serious. So, once he was like, “Hey, I have this thing called wholesaling,” and he was trying to tell me about wholesaling and I just wasn’t interested. I wasn’t interested at all.

Ashley:
Why do you think the reason was that you weren’t interested? Why do you think that was?

Sahleem:
I just don’t, it was too much. He was telling me about contracts and you have to assign it over to… It was too technical for me. The only thing I knew was HDTV. The only thing I knew was people on YouTube. All I knew was people on Facebook flipping houses, and that was my inspiration. I said, “Hey, I want to flip houses. I don’t want to wholesale.” So, we kind of brought our money together. We had a LLC together. I totally forgot the name of it because that was back in like 2015 or 2016, not too sure. Oh, actually I got it. It was called Growing Homes LLC. So, it was Growing Homes LLC. We were 50/50 on the LLC. We went to the Philadelphia sheriff’s auction and we purchased a property, and we didn’t know what we were getting into.

Ashley:
Before we even get into the property of what happened, how did you decide to partner with this person and did you… Being your first deal, because I know even for myself putting together my first partnership, it was very loosey-goosey, but can you talk about that? Did you guys have an operating agreement? Did you have your roles and responsibilities? What went good? What went wrong?

Sahleem:
So, I believe I rushed into that deal. I didn’t know anything about paperwork. I didn’t know anything about operating agreements. All I knew was LLC. That’s all I knew was limited liability company.

Ashley:
Did you set it up yourself?

Sahleem:
We set up ourselves.

Tony:
Yeah. If I can ask just one clarifying question, Sahleem. So, I mean, this is the same partner that was trying to get you to come out to this event and was trying to pull you into the world of real estate investing. So, I mean, you were hesitant at first, and it seems like you went from zero to a hundred because you went from I don’t want to do this wholesale thing to, okay, let’s form this partnership. So, what was that turning point where you finally said, “Okay, I think we should try and pursue this together”?

Sahleem:
We had a three-hour talk. He called me one night. I remember exactly where I was at. I was standing on the corner for three hours. He called me, and I was standing in the corner for literally three hours pacing back and forth talking to this guy, and he was just telling me just the world of real estate and just how we can change our wealth and just our mindsets. He said, “Hey, you already have the mindset. You buy broken down cars, you fix them up and then you sell them.” He said, “Do you know how much money you can make?” And at this time, I’m maybe 20, 21 at this time, and he’s telling me these things, and I’m not grasping all this stuff until the second hour of the conversation. He’s just telling me, “Hey, your Chipotle checks won’t have anything on real estate at all.” He said, “You want freedom in your life.” He said, “I know you hate coming to work sometimes.” He said, “I see you, you come in here, you drag. I know you don’t want to come to work sometimes, but if you do this stuff right here, you can set yourself up for the rest of your life.”
And once he kind of put that bug in my head, I continuously just pictured myself living the life that I wanted to live, living the life of having freedom, and doing all the things that I ever wanted to do in my life. At that time, I’m 20, 21, I’m thinking about material things at that time. I’m comparing my life with material things. That’s just what it is. So, from there, I took that bug and I said, “Hey, you know what? Let’s take this money. Let’s put this money together, and let’s go and buy this property.”

Tony:
Man. So, he was able to convince you, it sounds like, by pointing out, A, the skills that you had in yourself that you weren’t even really recognizing. He’s like, “You’re already doing this, you already have the ability,” but it sounds like what really kind of puts you over the edge was that he painted the picture of what your life could be like, and I think that, that, Sahleem, is the part that’s really interesting to me because… And, Ashley, we get this question all the time, right, how do I get my spouse on board, right, or how do I get my partner to want to come along with what I want to do, and it’s like maybe if you get really, really good at painting the picture of what your life could be like once you get there, that might be the key to actually unlocking that partnership.

Sahleem:
Yeah. Yeah, and that’s exactly what happened for me. I believe that key has switched and it never turned off. It never turned off. Even when I enlisted in the United States military, that never turned off. That stayed with me the whole time I was there. I always knew I wanted to rank up when I was in military, and even with ranking up, I always wanted to go to every duty station and do real estate. That was my goal.

Ashley:
Sahleem, thank you very much for your service. And what is the kind of timeframe that you served in the military? Was this before Chipotle? Was this after?

Sahleem:
This was after Chipotle.

Ashley:
So, I mean, we’ve got a lot to talk about here. We’re going to need longer than 40 minutes here. So, you’re at Chipotle and then you go and do your first deal in 2016, and then it was after that that you went into the military?

Sahleem:
Yes.

Ashley:
Do you want to continue to go into that auction deal, and maybe break down how you even buy a piece of property at auction?

Sahleem:
So, at that time, and in the Philadelphia auction, they have a book. So, they put out like a book every month. The beginning of the month, they put out a book. So, you have to go and pick the book up or sometimes they even mail them out if you’re on a mailing list.

Tony:
Like a physical book, like printed papers? That’s crazy.

Sahleem:
Printed paper book, yes. So, this is at that time. Now times have changed now. Technology’s a little bit more advanced. So, we opened a book, we found a property, and I forgot the exact price that… There wasn’t a starting price on the property, I believe. I don’t believe there was a starting price. But we looked at the property. We used to drive up and down the street just looking at the property. We would drive up and down the street just looking at it, and then one day we got out and we kind of walked because it’s a row home. In Philadelphia we have a lot of row homes, and they’re like two story, three story. So, we walked down the street, up the street again, checked the neighborhood out, and said, “Hey, oh, it’s a good deal. Hey, we got the money, so let’s go. So, let’s wait until auction date and let’s go to the auction.”
We went to the auction, we bidded on a house, and we won the bid. You have to put down 10% of the purchase price of the house and you have the next 30 days to come and you have to cover the rest of the bill. So, that’s what we did. I believe we were in the property within a week after putting down the 10%. We were in the property at the week. The property, it was a vacant property. It was trashed. So, this is a two-story property. You walk inside the front door, the beams were hanging down, there was trash everywhere. It was busted. The house was disgusting, I’m sorry. This is one of the worst houses I have ever encountered in my life, and I’ve been in so many old houses. There were raccoons everywhere.

Tony:
Raccoons inside the house?

Sahleem:
Yes. Yes, raccoons living inside the property.

Tony:
Did you have to evict them?

Sahleem:
They evicted themselves. They actually evicted themselves once we went there and sprayed some repellent in there. So, they actually left the property after that.

Tony:
It sounds like, Sahleem, once you guys purchased this property, it was a much bigger job than you had anticipated because had you seen inside prior to actually closing on the property or was it was just the outside view?

Sahleem:
No. It was just the outside, literally.

Tony:
Let me ask a couple questions here, Sahleem. So, what made you guys confident that this was a good deal, given that you weren’t able to inspect the inside of the property before buying it?

Sahleem:
I believe our dreams were the confidence. We had dreams, we had dreams. We had no road blockages in front of us. Nothing could stop us from completing this property. There was something in our minds that say “Hey, every obstacle that we face, we’re going to jump over it.” We did not care at all. And I believe that I still carry that to this day. I do carry that to this day actually. There’s nothing in my way that’s going to stop me from being myself, from me jumping into these properties or me doing anything in life. Me and my girlfriend were skydiving like a week, two weeks ago. I was so scared. I wanted to tell her, “Hey, I don’t want to get on this plane. I want to stay on the ground and you can go up.” But a switch flipped and I got on the plane and that was it, and I jumped. That’s how I lived my life from day to day. So, during the time that I had that property, I had the same mindset that I have today.

Ashley:
Sahleem, not to make you feel bad, but just the last guest that we interviewed last week, he actually has over a thousand skydives.

Tony:
Yeah. He was a professional skydiver.

Ashley:
Yeah. So, to go from a professional to being terrified.

Sahleem:
Oh my god. Yeah. I mean, when I hit the door, it was the most terrifying experience I could have. I don’t know how to-

Ashley:
Okay, but then after you did it, after you did it, what was the moment?

Sahleem:
I still was scared.

Ashley:
So, there never was a moment where it was like, “Actually this is awesome”?

Sahleem:
When the parachute actually opened, that was it.

Ashley:
Well, yeah, that’s what I mean, that relief, and then from there it was enjoyable?

Sahleem:
Yes, it was very enjoyable, very.

Ashley:
Kind of, or until your feet hit the ground?

Sahleem:
My feet hit the ground. Everybody else was on the ground before me because I don’t know why, I guess I was so heavy. I don’t know what went on, but everybody else was on the ground before me, and I’m just like, “Hey, y’all all jumped out after me. How are y’all on the ground after I jumped out? It doesn’t make any sense.” So, just having that mindset literally kind of channeled me to be the person I am today.

Ashley:
So, how do you think that kind of translate into getting deals and doing business?

Sahleem:
So, I believe that the one thing that may translate is overanalyzing. We can sometimes overanalyze some things and we overanalyze out of fear. I believe sometimes when we overanalyze, that’s a road blockage for us because some of us overanalyze and we never jump. We never jump out that plane. We never buy our first property because we overanalyze. So, I believe that me not overanalyzing things and me just taking action once I learn these types of things have translated into real estate.

Tony:
Yeah, Sahleem, I love that mindset, and I do think that fear is something that holds a lot of people back, and I’ve heard a bunch of other successful people say this, I think Brandon Turner’s even said it before, but there’s two types of fear. There’s real fear which poses an actual threat and then there’s perceived fear, right, and that perceived fear usually comes from a lack of knowledge or a lack of understanding. As a new investor, you have to be able to decipher between those two types of fear, right? If I jump out of an airplane without a parachute, that’s dangerous, right? But if I jump out of an airplane with someone who’s trained and that has done this a thousand times and he has not one but two parachutes, the level of perceived risk starts to decrease. So, as investors that are new, I think we want to try and break down or differentiate between the two types of fears.
Sahleem, I want to tie this back though to that first property that you guys purchased because I feel like what you guys did, it almost is jumping out of an airplane without a parachute, right?

Sahleem:
We jumped.

Tony:
You guys couldn’t see the property. And this is your first deal, right? So, you had no experience rehabbing properties. You had no experience managing crews. You had no experience. So, I guess just kind of take us through, once you guys actually closed on that property, what was that journey like and was there ever a moment where you felt that parachute open?

Sahleem:
So, parachute opening, no. But, okay, so the first week of actually having that property, me and my partner, we actually started to clean out the property ourselves. We walk around the neighborhood. We seen bunch of dumpsters, and we seen people throwing out trash, throwing out all types of wood, chairs, all types of stuff from vacant properties. So, we did exactly what they were doing. We cleaned out the property ourselves. We literally got all specks of dirt off the floor. That’s how I feel. We were literally in there with Clorox, bleach, doing all types of stuff, cleaning a vacant property. The walls were disgusting, we cleaned the walls. We literally had this image in our head that if we cleaned this property, that we would be able to complete this property ourselves.
Leading from us cleaning out the property, we didn’t know. We kind of had a few contractors come to the property, and this is when I was working at Chipotle, of course. So, I would leave Chipotle, drive all the way to the property in the car that I got from the auction, and walked through the property with a contractor, and these contract would tell us, “Hey, this is going to cost you about 60,000 to fix up.” We say, “Oh no, it’s not.” Of course, we didn’t know. So, we hired, not hired, excuse me, I guess pre-hired, or we had some inspectors come through and they all told us 60, 70 to fix this property up.
So, it was like, “Okay. Hey, we need a loan. We need a loan. We need to get a loan from somebody,” because we didn’t have the money to fix the property up. So, we actually got a loan from somebody. It was like $5,000 or something like that, and we came up with the rest because we had a framer who came to the property and he framed the property up, but he was only going to charge us $5,000 to frame this property. We gave him $11,000 to frame the property and to do the drywall. He frames the property up-

Ashley:
You say to do it. So, did you give it to him before he did it?

Sahleem:
Yes. The worst mistake ever.

Tony:
Yeah.

Ashley:
I mean, that is so common we hear that. I’ve made tons of mistakes. Even just last year, I paid a contractor hourly. They just dragged that out, and I eventually had to fire them. We all make these mistakes because we feel like these people are so trustworthy, like, “Oh, this is awesome. We found a contractor. It’s a great price,” blah, blah blah, and we all just put these blinders up. We know the red flags, we know them, but we just don’t follow them.

Sahleem:
I didn’t have any type of blinder, any type of parachute, any type of help at all. We literally gave this man $11,000 in cash. We didn’t have a checkbook. We didn’t have a business bank account. We didn’t have anything. We literally gave this guy $11,000 in cash. He said, “Hey, I’m going to charge you $5,000 to frame this whole house up, and I’m going to charge you another six to drywall the whole place.” The guy didn’t show up. We paid him the five, he framed the whole house up from top to bottom. Knowing what I know now, he framed the house up with the foundation messed up, that’s one, on the inside the bathroom. The bathroom floor was still kind of caved a little bit and the back windows were still… The brick in the back was kind of falling. The molding was falling. So, he framed the property and basically just didn’t show up.

Tony:
So, after that happened?

Ashley:
Yeah, what do you do after that?

Sahleem:
I quit. I quit real estate after that. I quit real estate after that. I did not want to get back into real estate at all. I didn’t want to touch anything with real estate. I hated it.

Ashley:
What happened with the property or with this guy? I mean, did ever see him again or he’s just gone in the wind?

Sahleem:
The contractor, we did not see again. My partner, we’re still good friends to this day. I let him keep the property and he went on. He sold the property, an as is condition as it was. I kind of got a few thousand back and that was it. I did not touch anything with real estate after that until 2018, 2019.

Tony:
So, how much time had elapsed, Sahleem, between when that deal-

Sahleem:
Three years.

Tony:
Okay. Wow. You were that kind of emotionally beat that you said, “I need a full three years off before I even think about investing again.” So, what was that moment then, Sahleem, where you said, “Let me see if I can give this real estate investing another shot”?

Sahleem:
So, enlisted into the military in January 2019. I went to Fort Sill, Oklahoma. I was there in my barracks room for I want to say a good four months, good four to five months I was in my barracks room. During the second month there, I ran across a YouTube video about wholesaling. Again, oddly, wholesaling pops up in my face three years later when I don’t have anything to do. Along with that, the next day, literally the next day, I saw a video about wholesaling. A guy I was talking to just about business, he handed me Rich Dad Poor Dad, and I’m telling you, this book was ripped up. I still have this book to this day. The book was ripped up. It had all types of drawings in the back. On the front page, it had all types of drawings. There was so many things that were there. I’m like, “I’m not reading this book.”
So, I went back into my barracks room and I opened up YouTube again and I started learning wholesaling. I don’t know the guy’s name exactly, but he had 20 videos in wholesaling from top to bottom. Literally the first video was step one, the last video was step 20. That was it. So, the guy basically, hey, he kind of gave me the juice of kind of wholesaling, and then he mentioned Rich Dad Poor Dad. He said, “Hey, you need to change your mindset,” and he mentioned Rich Dad Poor Dad while this ripped up book is sitting right on my desk.

Ashley:
Isn’t it funny how the universe works, that sometimes it just comes full circle, yeah.

Sahleem:
It’s amazing. So, I picked this book up, and I’m telling you, I’m reading this book in between lunch breaks, on the weekend, after class. I’m reading this book, I’m just so intrigued. This book is attracting, it’s taken so much of me not to read this book. I have to read this book. I got to read it from front to back. So, I completed this book front to back, and from there, I kind of got this bug. I’m like, “Hey, I have to do something with real estate. I have to do something that’s going to free me or that’s going to allow me to have some type of freedom in my life when I get older,” because when I first started, all I was thinking was, “Hey, get you a few rentals for when you retire so you don’t have to work anymore.”
I wasn’t thinking about using real estate at that point, even though the book was kind of telling me, “Hey, use real estate as freedom while you’re young, or in your ages, use this book as some type of freedom.” I did not pick that up until I start actually wholesaling. Until I actually start wholesaling and going to REI meetups and all types of things, I did not pick up what the book gave to me, but I always had it instilled in my mind that I’ve wanted some type of freedom at a age.

Ashley:
What do you think makes you different than people who are just working a nine to five and waiting for retirement? Why do you think that you decided, “I want financial freedom”?

Sahleem:
Because there was a point in time when an employer had a check coming to me and they cut it. They cut my check. They were in control of my income, and that, I didn’t want anymore.

Ashley:
I think that’s a great reason right there, and the fact that you can think of that moment, because I can think of that moment too. For me, it was I was working as an accountant and I was an intern through college, and then I got my first job offer with this company I’ve been interning for, for two years. I was just, I waited and waited for this day when I’d finally be making big money, I was graduating college, and I opened the letter and I was like, “Wait, what?” It was not even that much more that I was making as an intern, but now instead of working 10 hours a week, I had to work 50 hours a week, and I was just like…
It was that moment right there, and I remember when… So, I lasted six months on that new salary and I decided to quit, and I remember walking into the office of the partner at the CPA firm and I just said, “I’m putting in my two weeks’ notice, and I just, I thought it was going to be a lot more money than I thought it was going to be.” And she said, “Well, you know what? Look at me. I wish I was making a lot more money too, and I’m a partner.” I was like, “You literally just proved my point. I don’t want to be like you, I don’t want to be here for 20 more years and still not be happy with what I’m making.” That was kind of my aha moment there. Tony, what about you? Did you have one of those moments?

Tony:
I did. And it’s funny, I just got interviewed on one of my friend’s podcast and they asked me that same question, and it was very similar to your situation, Ashley, where it was my first big boy job after college, and it was my first review cycle in your reviews where you get your first raise and everything like that, and I remember I sat down with my boss at the time and she said, “Tony, you’ve done a fantastic job this last year. Everyone’s super thrilled to have you. We see you doing really big things with this company. We’re excited to give you your raise this year, and it’s a one and a half percent raise over what you made last year.” So, I think I went from making $60,000 a year to 61,500 or something crazy, something stupid small, right? After the taxes in the inflation, I was like, “I could buy myself an extra cup of coffee every month.” Right?
When that moment happened, I was like, “I gave so much of my mind, my time, my energy into this company,” and they felt, they determined that I was only worth an additional one and a half percent, and when that happened, I was like, “Man, I never want my value in the marketplace to be driven or determined by someone else. I want the amount of money that I’m able to make to be dependent on me and the value that I provide, not what someone else feels I should be worth.”

Sahleem:
I think that’s amazing that we all share the same mindset as real estate investors.

Ashley:
Yeah, it’s that time freedom, and having that moment can really trigger that motivation to… And even thinking back on that moment can even get you more amped up to be like, “Wow, I actually got out of the rat race. I got out of that nine to five. Look what I’m doing. I control my income now.” It can be so powerful.

Sahleem:
Yeah.

Ashley:
So, you were sitting in the barracks and you were researching wholesaling. When did you actually take action? Did you have some analysis paralysis as to how do I even get started in this, or did you just go ahead and jump both feet or jump right out of the airplane?

Sahleem:
So, I jumped out the airplane, but this time I had a parachute.

Tony:
There you go.

Sahleem:
So, I want to say during probably the 10th video, I literally downloaded an REI, REI Skip. I don’t know if it was REI Skip or Need to Skip or something. I downloaded a skip-tracing software.

Ashley:
Can you just explain what that is for anyone that doesn’t know?

Sahleem:
Yeah, so skip tracing is exactly what it sounds like. You’re going to trace the owner of that property. That’s all. Skip tracing actually comes from the court system. The courts used to use that when they couldn’t find people who were out on bond and they tried to change their number or change their address. That’s exactly where skip tracing came from. So, I actually skip traced somebody who had a house on the Philadelphia vacant list. I think they were going to put the property up for auction or something like that.

Ashley:
Okay, hold on. I want to break this down nitty-gritty, okay? So, where did you get that vacant list from?

Sahleem:
Okay, so the Philadelphia sheriff cell, they actually had, so this is different, I didn’t pull this from any records or something like that, from like Podio, not Podio, sorry, PropStream or something. I didn’t pull that from there. I pulled that directly from the Philadelphia, pa.org website. They had a list of vacant properties, properties that were overdue on water bills, electric bills, or anything that was overdue, they had judgment to all types of stuff. I actually went on that property and I kind of closed my eyes and I just picked the property literally, and from there, I entered his name. I forgot his name. Let’s call him T.J. I literally put his information into the software, and he had a number that popped up. I was so afraid to call this guy. I had his number for about two days before I called him because I didn’t know how to approach him.

Ashley:
That would be me too.

Sahleem:
He had three numbers. I didn’t know. He had three numbers, and I believe the third number was him. I got to him on the third number. The first two numbers, I kind of got cursed out because I guess people were calling, they kept calling trying to find this guy, and on the third try I got to him, and the guy had two other wholesalers or investors looking to purchase the property. But somehow, I took the script that the guy gave me from YouTube, YouTube University, I took that script, and he was ready to sell the property to me. I believe it was like two weeks. I was talking to him for a good two weeks.
Unfortunately, he didn’t contact me back after I kind of sent him over a contract. I think I had the purchase price was at $60,000. When I ran my numbers through my ARV, it was like 320,000. So, I’m like, “Hey, this is a home run deal. I need this deal. I need this house. I know people who are buying houses in this area just because of me being in Philadelphia. I know the real estate investors there. Let me try to see if I can buy this house.” So, the guy said, “Hey, yeah, he offered me 120, this guy offered me 120,000. You’re offering me 60,000.” So, after that day, I didn’t hear from him again. I kept calling back and kept calling back and I got nothing. That was it.

Tony:
So, I just want to before we go too far, you said you were nervous kind of reaching out to these sellers, but what did you actually say? So, this owner picks up the phone. How do you break the ice? How do you go from being a complete stranger to this person eventually being willing to sell you probably one of their most expensive assets that they own?

Sahleem:
So, I knew his hurt point from the video. From videos I was watching on YouTube University, I knew his pain points because his property was on the list to be up for auction. So, I kind of knew his pain points. I knew he was in a crunch time. He needed to sell this property. So, when I called him, I asked him, “Hey, are you the owner of 123 Main Street?” He proceeds to yes. And then from there, I don’t remember the conversation exactly, but what I do remember is because I’m from Philadelphia and he’s from Philadelphia, we start talking about sports.
I kind of made the conversation personable. I shied away from talking about business. I didn’t want to come to him, because I knew he was kind of going through something, I didn’t want to approach him talking about business because when somebody’s in that, it’s very emotional. Somebody’s going to lose their property and they don’t have the funds to cover the bills or whatever it is so they can keep their property. So, I kind of made that conversation personable. I’ve always been a very personable kind of person when it comes to business or just a conversation in general.
So, I took the conversation away from business and we start talking about other things and then from there, “Hey, how about those Eagles, right?” So, I come back, “How about those Eagles?” So, I come back in there, I’m say, “Hey, so what are your plans with the property?” After I ask him that and he say, “Hey, the Eagles won last night or something.” After that, I might come back and say, “Hey, what are your plans with the property?” I do remember this. He said, “Hey, I don’t have the money to cover this property. It’s going to go up for auction.” So, from there, he was still in conversation with two other wholesalers and somebody already offered him. At that time, I didn’t know the number that they offered him. So, he was okay with the 60,000 at first because he actually might have got that number after I gave him my number. He got that number after. That’s why he didn’t call me back. But I believe I approached the situation being very personable and taking it away from business.

Tony:
Got it. So, walk through how you ended up closing that deal then, Sahleem.

Sahleem:
So, I actually didn’t close that deal. That deal wasn’t closed.

Ashley:
But it was the learning experience.

Sahleem:
Yes.

Ashley:
It was like that first call that got you over that fear of making many more calls.

Sahleem:
Yes. So, I didn’t get my first deal until I got to Fort Campbell, Kentucky where I was stationed at. That’s where I got my first wholesale deal at.

Ashley:
Yeah. How long was that from that first call with this guy until you actually got your first deal?

Sahleem:
Okay, so that happened, so, I left Fort Campbell, Kentucky, I’m sorry, I left Fort Sill, Oklahoma in August of 2019. Literally, it took me to January of 2020 to get my first deal, to get my first wholesale deal, and I was fronting the whole time.

Ashley:
That’s what I was going to ask next is, okay, did you only have five calls in between that or continuously going?

Sahleem:
So, from August of 2019 to January 2020, I was driving for dollars. I was cold calling. I was literally writing out… I write so sloppy. I write so sloppy. So, I was actually, I was writing letters. I was sending letters out to people. I was reaching out to people on Facebook. I was doing so much marketing that my fingers would’ve burned off the amount of marketing I was doing every day. So, from August 2019 to January 2020, I probably spent most of my checks on marketing.

Ashley:
Was it worth it?

Sahleem:
It was very much worth it, very much worth it.

Ashley:
For somebody who’s maybe grinding it right now, has not got their first deal yet, what advice do you give them to keep going?

Sahleem:
So, I think a lot of us, well, just people in general, sometimes we expect instant gratification, and I knew that instant gratification wasn’t going to come. I used to be a track runner and literally I was doing a four by four, and I ran off the track because I was so out of breath. I thought I was going to pass out when I was in high school. And ever since that day when my track coach kind of got on me, I never quit anything else that I’ve ever done, except the real estate part because I lost a lot of money then.
But I knew I wasn’t going to get anywhere without continuous work. I knew I was going to be stuck somewhere if I didn’t continue to do this same thing over and over again. I listened to podcasts. I literally went on YouTube and listened to so many people who were doing what I wanted to do, and they all said, “Keep going, keep going, just keep going,” and I kept going. I was motivated by so many other people who were doing what I wanted to do that I just kept going. I even drove Uber and Lyft sometimes to fund my marketing campaign.

Ashley:
Sahleem, that first deal, that bad deal where you say that you quit, what was your reason for doing that? At that time, was that because you wanted the time freedom, you wanted financial freedom, or was it just because you wanted to flip a house? What was the motivating factor behind that one?

Sahleem:
So, two things. I wanted time freedom, but I also wanted, I was 20, 21 around that time, I wanted material things. I wanted material things around that time.

Ashley:
It wasn’t actually just flipping a house.

Sahleem:
It was also flipping a house.

Ashley:
But what you were striving for was something that you have now.

Sahleem:
Yes.

Ashley:
So, did you really actually quit? I don’t think so. You pivoted, you changed, you took a leave of absence, you did some more research, and you figured out what would actually suit you better, and then you ran off with it and did it. So, I think it’s very unfair to say that you quit because you didn’t quit. Look at where you are now. And so, what has happened since you got that first wholesale deal January 2020? 2020, right, it was?

Sahleem:
Yes.

Ashley:
What’s happened since then in that time period?

Sahleem:
Okay. So, January 2020, I get this property under contract. I reach out, I use one of my marketing strategies of reaching out to somebody on Facebook. The actual owner of the property, I couldn’t get through to him so I found his wife. I saw that she was married to this guy, and I messaged her and said, “Hey, 123 Main Street, do you guys own this property?” I knew it was vacant, high grass, broken windows, rails all busted up. So, I proceed to send her a message. I did not get a message back from her until like a week later. She messaged me back and she said, “Hey, what’s your number? My husband is interested in selling this property.” He said, “This property, we had it as a rental, but the tenant trashed the property and we never got back down to Kentucky to come fix this property.”
So, I literally gave the lady my number, I want to say 10 minutes after I gave her my number, her husband calls me. He was overseas somewhere. He was stationed in… I’m not sure exactly who he was stationed at, but I know it was somewhere in the eastern region. He was over there, and I walked through the property. I did not know anything about numbers around this time. I walked through the property. I think I got it under contract for like 45,000 or something like that, maybe like 50 I think it was at that time. I sent them over a contract. I had got a contract off Google. I got a purchase and sales agreement off of Google. It was a blank, hey, address, property, price, and just all the laws and stuff like that, that are incorporated.

Tony:
Bills, yeah.

Sahleem:
Yeah, just everything that was incorporated with the contract. So, I proceed to send him a contract, he sends it right back. I send it through DocuSign, he sends it right back, and I was so shocked. I was so amazed. So, now I’m like, “Hey, I got this property now. How am I going to get in it?” He had a property manager who still had the key, but the lady was trying to convince the guy to keep the property, but we were already under contract so it really didn’t matter at that point. She gave me the property, she gave me the key to the property, and I didn’t know what to do with the property after that. I did not know at all. So, I was stuck with this property for about a good four days before I actually got this property under contract.

Ashley:
Okay, the I was stuck with it, I thought you were going to say four months. Four days before you [inaudible 00:43:26] for it. Okay.

Tony:
That’s pretty fast.

Ashley:
That’s great.

Sahleem:
In my sleep, I couldn’t get any sleep at that point because I’m just like, “Hey,” I know in this contract I had to give him $500, earn this money deposit. So, I’m like, “Hey, I’m going to lose my $500 if I don’t get a buyer on this property.” So, I posted the property on Craigslist. I posted property on OfferUp and Craigslist, and at that time I didn’t know about, we had in Clarksville… So, actually, let me just explain this real quick. In Tennessee and Kentucky, they’re right on the border. So, where the base is, you can be in Kentucky if you step across the street, or you can be in Tennessee if you step across the street. So, Clarksville, Tennessee, they have a page, we have a CREIG page. It’s the Clarksville Real Estate Investors Group. I didn’t know about that page at the time. So, I only posted the property on Craigslist and OfferUp.
So, I posted the property on Craigslist and I was just waiting. I’m twiddling my fingers. I could not get any sleep at all because I’m like, “Hey, I’m going to lose my $500. This guy’s going to sue me. He’s going to think I’m a fraud. What did I get myself into?” So, at this time, on the fourth day, I was on lunch break and this guy, he called me out of nowhere. He said, “Hey, I saw your property on Craigslist.” So, I’m like, “All right, I got somebody. Finally.” My pictures were all messed up. I only had a picture of the front of the house, not a picture of the inside or nothing. So, he’s like, “Hey, I want to come by and take a look at your property.”
So, the next day on my lunch break, no, sorry, actually after work that day, I met this guy at the property and he’s like, “Hey, okay, I want it.” He walks through the property. There’s a big hole in the wall. The floors are all messed up. They were laminate floors or whatever and that was all peeled up. There were water stains on the ceiling. I’m like, “All right, this guy’s not going to buy this property.”

Tony:
That was like an investor’s dream.

Sahleem:
It was his dream. He made it his dream. So, from there, he walked and he said, “Hey, I’ll give you 50,000 for the property.” I said, “Okay, cool.” Well, actually, no, no. My assignment price was like 53 or something like that. I don’t know. I have to look back. I had like a $3,000 assignment fee.

Tony:
Yeah, you made a few thousand bucks on the thread.

Sahleem:
Right. But his thing was, “Hey, I’ll give you right now,” he said, “I’ll give you a $2,000 assignment fee now and then I’ll give you $1,000 once the actual deal was done. Once I flip this property, I’ll give you $1,000.” I was just like, “Okay.” I didn’t care at all. I’m like, “Hey, I’m about to make $2,000.” Well, actually, at that time, $1,500 because I had $500 owner’s money. So, I’m like, “I’m okay. I’m going to make some money.” So, we went under contract, and from there, one day I just drove past the property and his car was outside, and I was like, “You know what? Let me stop in here. Let me go say hi to him.” So, I stop in and I knock on the door. He has his dog in there. He has all his tools spread out all over the place. Next thing I know, I’m working in a property with him. I say, “Hey, do you mind if I come back and come learn some of these things?” I was just so intrigued by him. He had the whole place ripped out. I wanted the walls ripped out.

Tony:
So, Sahleem, I want to pause you for a second because I want to make sure our rookies are following along with what you’re explaining here. So, you found your first deal, you marketed it on online, you found your buyer. What your buyer said was, “I’ll give you a portion of your assignment fee today when we close, and I’ll give you the rest once I sell this property after the rehab is complete.” You said, “Okay.” After that first transaction closes, you stop by, check in on this guy, and then you end up working with him on the rehab. Man, what a tremendous way for you as a new investor to learn the skills of rehabbing a property, right? This guy’s invested in you because you brought him this deal which is a great way to build that relationship, and now you’re able to make it mutually beneficial because now you’re learning the part of his business. Did you learn a lot on that deal? Have you repeated that process with other folks?

Sahleem:
So, this guy’s still my partner to this day.

Tony:
Wow.

Sahleem:
He’s the one that I’ve been investing with for the last three years from, well, for the last two and a half years. From January 2020, he’s still my partner to this day. Everything I do within real estate now, me and him, we do together.

Tony:
I just want to say, Ashley, we get the question all the time, how do I provide value, or how can I find a mentor, or how can I pick someone’s brain, or how can I X, Y, Z, and I think most people almost go about it the wrong way, where it’s like they ask for value before providing any in return, where Sahleem, you did it the exact-

Ashley:
Or they ask what they can do.

Tony:
Right, which is also difficult.

Ashley:
They’ll just jump in and grab a tool and start hammering away.

Tony:
Yeah, and, Sahleem, you did it the other way where you provided value first. You brought this investor a great deal, you gave him a break on your assignment fee, so when you came around and then offered to work with him in exchange for him teaching you, there was already that rapport there. You’d already given him so much value that the law of reciprocity starts to kick in. So, I mean, what would your advice be, Sahleem, for our rookies that are listening, that are looking for mentors as they start down this path of real estate investing?

Sahleem:
I’m going to say first one, be willing to learn. Always be a student. Never learn something and feel like that’s the end-all, be-all. Never learn something and feel like you don’t have room to grow. That’s first and foremost. Always pick up a book. Always listen to podcasts. Always write down your goals. Always reach out to other investors or just other people who are doing things that you want to do in your life. Always reach out. That’s first and foremost starting. And I’m going to say the next thing is provide, like you said, provide some type of effort towards your goals. You have to be able to bring something to the table. Right? You can’t just come empty-handed because there a thousand other people who may want to come and work with you, Ashley, who may want to come and work with you, Tony, but you may not be missing what they’re offering.
You have to get to know the person and provide some type of value to them. You can’t just come to the table empty-handed because we’re all so busy, right? Sometimes we might get so busy that we don’t have time to sit down and talk to you for an hour, two hours, or even bring you along some walk-alongs. We don’t have time to do that type of stuff. So, if you were to come in a walk-along and hey, I want to build up a museum, right? You know how to find the deal. So, I want this land. Hey, I want to build a museum. You know how to find the deal. I know how to do the construction. Hey, let’s mesh. Let’s make our operation a thing. And that’s what I did with my partner to this day.

Tony:
We need to coin that phrase, Sahleem, where it’s a mutual mentorship, right, because you mentored that person in the art of finding a good deal and then he in turn mentored you in here’s how you manage rehab and flip a home, and I think if more rookies can kind of approach you with that mutual mentorship, they might find more success, but they can only do that if they first invest in a skill themselves. You spent the time to learn how to find off-market deals which then became a value that you could provide to other people.

Sahleem:
Yes.

Ashley:
Sahleem, before we wrap it up here and go into our segments, I just want to ask, how many wholesale deals have you actually done though?

Sahleem:
So, wholesale deals, I’ve done about 30, 32 wholesale deals I believe it was. I got to go back and look.

Ashley:
That’s awesome.

Sahleem:
About 32, 33.

Ashley:
I mean, yeah, you don’t have to tell us exactly. And then have you kept any of them to flip or to turn into long-term rentals? Okay, cool.

Sahleem:
Yes, so I have three long-term rentals now.

Ashley:
Are they still in the market?

Sahleem:
Yes. I have two in Clarksville, Tennessee, and then one in New London, Connecticut, and then also I have two and a half acres of land that I’m going to be building 22 units on.

Ashley:
Wow, awesome. Congratulations.

Sahleem:
Thank you.

Ashley:
We’ll have to have you come back on to talk about doing this new development.

Sahleem:
Yes, I’m so happy, so ready, but also so nervous because of the interest rates.

Ashley:
Yeah, yeah.

Sahleem:
But overall, we’re going to break ground pretty soon on the 22 units. We literally have all the plans approved. We have everything we need. The lot is already purchased. We purchased a lot first. That’s kind of a mistake that we made, but not really because we have everything else approved already. But yeah, that’s what I have now in my portfolio, three property, three single family homes, and two and a half acres of land.

Tony:
Well, Sahleem, congratulations.

Sahleem:
Thank you. Thank you.

Tony:
Well, Ash, should we head into our rookie request line, got anything else recently before we jump into that?

Ashley:
No, go ahead.

Tony:
All right. So, if you guys are listening, you guys can always give us a call at 8885-ROOKIE if you would like your question featured on the Real Estate Rookie podcast. But today’s question comes from Ladi in Brooklyn. So, Sahleem, are you ready for today’s question?

Ashley:
I’m ready.

Ladi Sonibare:
Good evening. My name is Ladi Sonibare from Brooklyn, New York, and my question is regarding wholesaling. I am trying to use wholesaling as a way of getting enough money together for my first cash purchase, and I’d like to know what the most cost effective way to wholesale properties would be. I’m not sure if it’d be necessary for me to have to hire a contractor to tour the property and give me a rehab estimate every time. I don’t know if that’d be wise or cost-effective. So, any help you could offer would be greatly appreciated. Also, if you can offer any book recommendations, I’d appreciate that as well. Thanks a lot for your help and take care.

Sahleem:
Okay. So, I started off by cold calling myself. I think it’s the most cost-effective way that you can do anything. You already pay for your phone every month. You can download Google Voice. You don’t have to use your phone number. You download Google Voice. You can get a dialer. If you don’t want to get a dialer, dialers are about like $99 a month, dialers will help you with a list of numbers. So, think about it this way, you’re already paying a hundred bucks for your cell phone bill every month and you’re going to pay another a hundred bucks for your cold calling software. You can use that and pay $200 a month so you can make an affinity amount. I believe that you should always start off with those types of things first, very low cost-effective, and you won’t pull a lot of money out of your pocket from then. What was the second half of that question?

Ashley:
What was a book recommendation?

Sahleem:
Okay. So, right now, I’m actually, so I’m going to start off, I think every real estate investor should read Rich Dad Poor Dad. That’s it. Plain and sample. That’s like our bible as real estate investors and as entrepreneurs, period. Right now, I’m actually reading Twelve and a Half. Twelve and a Half is a very good book. I’m reading that right now. I think I’m like on chapter two or three right now, and it’s a very good book for leaders. And I think that all of us should have some type, well, we all need some type of leadership to run our businesses, right? Because now you’re going to step up from you cold calling to you hiring a virtual assistant, to you having contractors, to you having lenders, to you having all types of people, you need some type of leadership skill to help you progress through your business. There’s not going to be much things that you can do without leadership. You need some type of leadership in your life so you can progress.

Ashley:
Okay. So, this week I actually called dibs on shouting out the Rookie Rockstar. So, our Rookie Rockstar is selected for us and each week we get the honor of kind of showcasing this rookie that has had this win or maybe is just sharing a lesson with us. So, this week, I started laughing when I saw who the Rookie Rockstar is because it is actually my friend Ryan Dossey who is far from an actual rookie. But the coolest thing is, is that these are mostly pulled from the Real Estate Rookie Facebook group, and Ryan has put kind of his deal in here to kind of showcase everyone five things that he wishes people would’ve told him before he started. This is just a prime example of why joining the Real estate Rookie Facebook group is so just motivating and inspirational, and you’re getting tons of advice from not only other rookie investors who are like-minded like you, but there are a ton of experienced investors in the Facebook group too sharing their journey.
So, Ryan said this one deal was three times what he made in a year as a W2 employee. So, five things he wishes people had told him before he started marketing for off-market deals. So, the first thing is, most of the people who’ve sold me houses over the years were unrealistic, unmotivated sellers who I motivated to sell. The sellers asking price is meaningless. Three, if they say no, follow up anyway. Four, do not give your max offer initially unless there is competition. And then number five, people will get offended by anything and everything. You’re not going to be for everyone.
So, he got his deal under contract in March, closed in April, and rented it back to himself while he found a place. So, all in for 141,000, sold for 215,000, and he netted 65,400. So, amazing, Ryan, as always. It’s awesome to have you share your experiences in the Real Estate Rookie, and especially that you’re not just saying your win, but you are actually providing tremendous value to all the rookies. So, thank you very much. So, Ryan Dossey is this week’s Rookie Rockstar. If you want to be featured as a Rookie Rockstar, makes sure you guys post in the Real Estate Rookie Facebook group, and you can also leave us messages on YouTube in the comments below, or send us a DM, @wealthfromrentals or @tonyjrobinson. Sahleem, thank you so much for joining us. Can you let everyone know where they can reach out to you and find out some more information about you?

Sahleem:
Yes. So, I’m on Instagram as invest.w.lee, invest.w.L-E-E, Lee, investwithlee on Instagram. You can find me on Facebook as Sahleem Lee, S-A-H-L-E-E-M, last name Lee, L-E-E, and on Facebook as well, invest.w.lee

Ashley:
Thank you so much for joining us. We really enjoyed recording with you and appreciate you taking the time to join us. I’m Ashley, @wealthfromrentals. He’s Tony, @tonyjrobinson, and we’ll be back on Saturday with a Rookie Reply.
(singing)