December 2023

Marcos Chan, head of research at CBRE Hong Kong, says demand for residential property will nevertheless pick up, and a “couple of percentage points up” in prices is possible.

Are you considering listing your property on Airbnb? Understanding how much an Airbnb host can make before listing your property as a short-term rental (STR) is crucial. Factors affecting profitability include Airbnb fees, property maintenance, occupancy rates, and location. With fierce competition in the Airbnb rental market, understanding these factors is crucial for increasing your rental income potential. 

Getting started as an Airbnb host can be a great way to earn passive income. While some hosts make substantial profits, regular rental income is not guaranteed.

What can you do to run a successful vacation rental business on Airbnb? Here are nine key factors that can impact your income potential. 

Understanding Airbnb Hosting

An Airbnb host is someone who rents space in their property to guests. The rental space can be a spare bedroom, part of their house, a boat, or an entire property. Earning extra income is the primary appeal of becoming an Airbnb host. Also, vacation rental owners enjoy various tax benefits, flexibility, and meeting new people. 

According to Airbnb, the average host makes around $1,150 per month. However, earnings from vacation rental properties depend on several factors. For example, dynamic pricing strategies can significantly increase income on holiday weekends. Also, Airbnb properties in popular travel destinations or near convention centers can make more money due to higher occupancy rates.

Nine Factors That Influence Airbnb Earnings

Earning passive income from vacation rental properties depends on several factors. Of course, daily rates, cleaning expenses, Airbnb fees, and seasonality impact your bottom line. However, location, pricing strategy, and user experience are other factors impacting your Airbnb profit. 

Let’s look in detail at nine Airbnb factors influencing your STR income. 

1. Pricing strategy

The daily rate you charge guests is one of the most crucial factors impacting your earnings. Charge too much, and you will scare off potential guests. However, if you charge too little, you won’t make enough as a vacation rental host to cover your expenses.

Rather than charging a flat rate, a dynamic pricing strategy can boost your profit potential. A pricing strategy should consider market fluctuations, competition, season, and local events. It’s also vital that the standard of accommodation and nightly rate meet guests’ expectations. 

2. Recurring expenses

Monthly expenses significantly impact Airbnb earnings. Operating expenses for a successful vacation rental include utilities, cleaning services, and maintenance. Therefore, knowing how your outgoing expenses will impact your profit potential is vital when setting a budget. 

Here is a list of the typical fixed and variable expenses you can expect as an Airbnb host:

• Housekeeping: Includes services like cleaning, laundry, toilet paper, toiletries, and supplies.
• Insurance: Monthly vacation rental insurance is a necessary expense for Airbnb hosts. Airbnb offers free comprehensive protection included in the booking fees. However, having additional insurance coverage for floods or other natural disasters is still a good idea.
• Maintenance: Regular repairs and preventative maintenance help keep your Airbnb property in good order. Depending on your vacation rental business model, you could hire a property management company or local professionals, or do repairs yourself. 
• Utilities: These are some of the highest variable expenses when operating an Airbnb. Utilities include gas, electricity, water, internet, heating, and lawn care. 

The good news is that many expenses associated with Airbnb rental accommodations are tax-deductible. 

3. Location

Choosing a suitable location for buying an Airbnb rental is vitally important. Location is a significant factor that impacts your earnings. Ideally, you want to purchase an investment property in a desirable, low-crime neighborhood. Remember, Airbnb guests will also leave reviews about how safe they felt. 

Researching the location is also vital to ensure Airbnb rentals are permitted. For example, San Francisco limits the number of properties a host can list. But in Dallas, short-term rentals are not allowed in certain neighborhoods. In many other cities, permits are necessary for STRs.

4. Seasonality

Seasonal demand greatly impacts Airbnb earnings. Peak seasons attract more guests, meaning you can charge premium rates. However, demand is lower in off-peak seasons, and it may be necessary to adjust nightly rates to attract more guests. However, seasonal demand gives you time to conduct necessary repairs and maintenance in the rental property. 

Fluctuating demand during the week also affects earnings. For example, it’s common for businesspeople to travel on Tuesdays and Wednesdays. Therefore, some Airbnb hosts increase nightly rates during these days and also on the weekends. 

5. Airbnb host fees

Airbnb fees also impact earnings. Most hosts pay a flat rate of 3% per booking. For example, say you charge $100 per night for a three-night stay, plus $50 for a cleaning fee. In that case, you would earn $339.50.

To keep your prices competitive and maximize earnings, it’s also possible to charge fees for extra guests and pets. These fees must be entirely transparent when guests book accommodations.

6. Occupancy rate

Occupancy rates directly impact the success of vacation rental businesses. More bookings mean increased revenue and a better return on investment. However, it’s vital to maintain competitive pricing to ensure you generate a healthy profit while offering an excellent experience. 

Here are two reasons why high occupancy rates are crucial: 

1. Airbnb guests tend to choose listings with higher occupancy rates when booking.

2. Airbnb’s search algorithm considers various factors, including the occupancy rate, in search listing results.

7. Reviews

Reviews indirectly impact earnings from rental properties. Reviews on Airbnb are important for both hosts and guests. They help to establish trust, improve reputation, and increase revenue through word of mouth. Some studies suggest that reviews and ratings impact listing prices.

For example, travelers typically use Airbnb reviews and ratings to find value-for-money accommodation. The higher the daily rate, the higher the rating guests expect. However, if the standard of accommodation doesn’t reflect reviews, guests will be inclined to leave poorer reviews.

8. User experience

Ensuring guests enjoy the experience of living in your vacation rental can significantly boost potential earnings.

Positive guest experiences result in favorable reviews and repeat bookings, boosting income. Conversely, a poor user experience can lead to negative reviews, decreased demand, and lower earnings. You can often enjoy higher occupancy rates and increased profitability by prioritizing guest satisfaction.

One study found that guests often blame themselves if the vacation rental doesn’t meet expectations. These feelings of regret and dissatisfaction often result in overly negative reviews due to their bad experience. The result is fewer subsequent bookings due to poor ratings. 

9. Amenities

Amenities play a pivotal role in vacation rental earnings. Of course, location, daily rates, and marketing are vital factors affecting Airbnb earnings. However, superfast Wi-Fi, fully equipped kitchens, comfortable lounge areas, and a barbecue can make listings stand out and let you command higher prices.

By investing in amenities, you enhance the overall guest experience. This factor also indirectly improves financial returns for hosts. You increase the chances of more satisfied customers, better reviews, and top-star ratings. 

Example Earnings (Annual)

The best way to learn how much you could make as an Airbnb host is to compare similar properties in the area. Work out the average daily rate and multiply it by the occupancy rate. This will give you an estimate of what average hosts make in your neighborhood. 

Of course, running a successful Airbnb business differs from traditional renting. Some recurring expenses are variable, while others are fixed. Also, occupancy rates and location can greatly impact your earnings. 

Here is a sample calculation of annual earnings based on per-stay expense assumptions: 

• Daily rate: $100
• Cleaning fee (if applicable): $20
• Host fees: $3.60 (3%)
• Utilities: $30 (calculate an average daily rate)

Adding the daily rate and cleaning fee minus the host fees and utilities means earning $106.40 per stay. 

To calculate annual earnings, multiply the per-stay figure by the target occupancy rate. A good Airbnb occupancy rate of 65% and above is ideal, although some cities have higher rates. That means you expect bookings for at least 237 days in the year. 

Therefore, your annual Airbnb earnings, for the example property, would be $25,216.80. However, you should also deduct income taxes and annual property maintenance. 

How much could you earn in your area as an Airbnb host? Why not check out the BiggerPockets Airbnb calculator to find out?

Tips on Maximizing Your Airbnb Earnings as a Host

Whether you’re a first-time Airbnb host or an experienced pro, a few key things can help to maximize your earnings. Here are tips on how to increase potential revenue: 

• Increase occupancy: You could offer additional sleeping space to increase earnings. For example, a sleeper sofa could accommodate two more people. You could also consider making your place kid- and pet-friendly and accessible for people with disabilities. 
• Use a dynamic pricing strategy: Track availability trends, competitor prices, seasonal demand, and special events. You can charge more during high-demand times, school vacations, and holiday seasons. An effective pricing strategy can help boost occupancy rates and earnings. 
• Optimize your listing: Make sure your listing stands out from competitors. Hire a professional photographer to showcase the best features of your property and the surrounding area. 
• Offer a super guest experience: Don’t be satisfied with offering basic amenities, like Wi-Fi, kitchen condiments, and a washer/dryer. Consider using small, thoughtful touches to impress your guests. A few ideas include a complimentary welcome basket, high-quality linens and towels, fancy soaps, board games, game consoles, and chargers. 
• Keep the place clean: Ensure the living space is always immaculately clean and welcoming. Guests typically pay a cleaning fee and don’t want to feel shortchanged. It’s also a good idea to reset kitchen cupboards and drawers after each guest. 
• Become an Airbnb Superhost: Do you want to attract more guests and boost earnings? If so, becoming a Superhost ensures your property stands out among the competition. To become and remain an Airbnb Superhost, you must maintain a 4.8-star rating.
• Embrace social media marketing: Use social media platforms like Instagram, Facebook, and X (formerly Twitter) to expand your reach and increase bookings. For example, create a social media account for your Airbnb. You could post high-quality photos, videos, and updates. Additionally, guests could share their experiences of their stay. 
• Partner with local businesses: You could collaborate with local businesses like restaurants, spas, and tour operators to offer deals and discounts. They also may be willing to cross-promote your services. 
• Offer add-on services: If you live near your vacation rental, consider offering add-on services. These can include airport transfers, home-cooked meals, tours, and bicycle rentals.
• Use local, organic, or sustainable products: You can increase the Airbnb experience by offering eco-friendly products. For example, are there local producers selling products like soaps or shampoos? You could use these toiletries in bathrooms and offer larger quantities for guests to buy. Or you could use natural cleaning products and install energy-efficient appliances. 

Final Thoughts

Becoming an Airbnb host can be a great way to earn passive income. You can boost occupancy rates and earnings by having a pricing strategy, keeping the property well maintained, and focusing on customer experience. At the same time, keeping an eye on expenses is crucial to ensure you enjoy healthy returns on your short-term rental investment.

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David:
This is the BiggerPockets podcast. What’s going on, everyone? This is David Greene, your host of the BiggerPockets Real Estate podcast, here as always with my co-host and good friend, Rob Abasolo. Rob, how are you doing today?

Rob:
Very good, my friend. Very good. My wife gets back from Paris today. I’ve been single daddying it up, watching both of my kids for the last five days, so I am excited to sleep again. Very excited.

David:
I can imagine. And thank you for joining me on today’s show with no sleep but tons of information and a good time.

Rob:
That’s right, yeah. We have a great show planned for everyone here today. We’re going to be talking to Kim Hopkins, who is a commercial real estate investor, cue the scary music, who is making deals work today in this market, yes, that’s right, in 2023. Today we’re going to be hearing about a deal that Kim is working on, what types of commercial real estate deals pencil today, the risks associated with this strategy and how not to get yourself into thy pickle.

David:
All that and more. This is a killer show. Let’s get to Kim.

Rob:
Kim, welcome to the show.

Kim:
Hey, Rob. Hey, David. Thanks for having me.

Rob:
Yeah, glad to have you. So if I understand it correctly, you’ve been investing in real estate for 10 years now and you own 15 properties through the real estate business you and your husband run together. A few quick questions to get our listeners a sense of who you are as an investor. First one here, how many markets are you in?

Kim:
Let’s see here. We have Oregon, Washington, Utah, Texas, Arizona, California and Florida, so seven.

Rob:
Okay, so just a few here.

Kim:
Some of those are short-term rentals that we abandoned as we moved from state to state.

David:
Now you’re investing in small commercial properties like mom and pop type situations. What is it about that that drew you into it?

Kim:
Really it was a process of elimination. So we didn’t want to be fixing toilets and having tenants that were individuals so we didn’t want multifamily. We didn’t want single tenant properties because that increases your risk. If a tenant goes out on a single tenant property, that’s it. No income. We didn’t want the tenant improvement, TI, expense that’s often associated with office. And so that left us with multi-tenant and from there, we chose multi-tenant industrial and small neighborhood retail.

Rob:
So what kind of commercial real estate deals do you think are actually working today for you? You mentioned at the beginning of this that there are no bad markets, there are just bad deals. So give us a little bit of what you look for in a property, what makes a good investment, all that good stuff.

Kim:
Yes. Our buy box is single story, of course, multi-tenant. We want the tenants to be on the smaller side, about 2,000 square feet for each tenant is our goal. No tenant occupies more than 30% of the space. We look for properties that don’t have too much auto because they’re dirty. We look for properties without too much restaurants because they’re dirty. And so that’s what we’re targeting right now. And then we are looking for about a 7% cap rate, although that really has to go up at this point because of where we are with interest rates. That really is closely tied to your terms of your loan at this point.

Rob:
Can I ask you a quick clarifying question? When you said that auto places and restaurants are dirty, do you mean they’re physically dirty and thus the wear and tear is just way worse on these types of spaces?

Kim:
Yes, that’s exactly what I mean. So auto tenants seem to come with a lot of environmental issues. They also tend to park a lot of non-functioning cars on the property. And then the restaurants, we can get into this later, it’s very relevant to the current deal we’re looking at, but same thing. The restaurants, especially if they’re frying food and things like that, can really mess up your property.

David:
I would also imagine that restaurants and auto repair shops would probably require more tenant improvements. They’re going to want you to bring in some money so they can put in a big car jack or move the floor plan around. Have you found that to be the case? Because you mentioned earlier you’re trying to avoid that by avoiding office.

Kim:
Yes, that’s exactly correct. That’s why I would definitely rank the multi-tenant industrial above the multi-tenant retail. They’re going to have more TI requests. With the multi-tenant industrial, we don’t even have to paint the thing. It’s like it’s already a low maintenance space, and then the tenants are also very low maintenance. They would never call you if their toilet isn’t working. They will just fix it.

Rob:
Which is why CrossFits never have an AC in them, even when it’s like a hundred degrees outside. It’s like, do you want me to just fry up in here? Is that the idea?

Kim:
That’s why they make the Big Ass Fan. Have you heard of that company?

David:
The only frying that will be done is going to be at a CrossFit when you’re hot, not at a restaurant because Kim does not allow frying in any of her units.

Rob:
No frying allowed.

David:
You do bring up a good point though, because investors will often just get greedy for the highest ROI they can get or in this space, they’ll be looking for the biggest cap rate that they can get. And when you’re only looking at those numbers, you don’t think about the fact that in order to get that higher cap rate, maybe you got to spend $200,000 to outfit this unit so that your new tenant could come in and then when their business fails after three years or they decide that they don’t want to lease the place from you anymore, they leave and now you have to spend money to get rid of the $200,000 you spent and spend more money to fix it up for the next tenant. And so that higher cap rate is being offered in order to entice somebody into where they’re actually going to make less money.
There’s a lot of things in real estate that will take your money. It’s more than just the mortgage, the taxes and the insurance. I like that you’re pointing that out. You’re actually looking in a sense how to run a lean business here as opposed to just being greedy and going for the biggest cap rate that you can get.
What are you looking at today when you’re trying to evaluate these deals? You’ve mentioned that you don’t want to get into office space, but is there a cap rate that you’re specifically targeting? Is there a unit size you’re looking for? What does your buy box look like?

Kim:
We’re really leading with the numbers. So you could have an advertised cap rate of 7.5%, but when you get into it, it doesn’t pencil. They’re using pro forma numbers. They don’t have a big enough vacancy. So we’re really leading with the numbers right now. We targeted multiple markets this last round. We didn’t pick a particular market. We’re looking for deals that pencil with the numbers. There is no speculation. We’re not looking for a deal that only makes sense with this value add. It only makes sense if you get to these market rents. It only makes sense if you can sell at this cap rate. None of that. We’ve seen a lot of where that’s getting people right now that did have that value add speculation. And so we’re looking for deals that pencil right now, cash on cash return of hopefully 7%.
But another comment I want to make is that we are also considering taxes. And I know that a lot of people say, “Oh, don’t do a deal for taxes.” And I agree. Never do a bad deal for taxes, but that is something that you can consider. So for example, if you’re going to be on the hook for several hundred thousand dollars of taxes and you have a deal this year in your hand that is only a 6% cash on cash return and you think, “Okay, maybe next year, I’ll find a deal with a 7% cash on cash return,” you need to take into account that you’ll have … Let’s say you had $300,000 tax bill. You’ll have $300,000 less to invest next year on that deal if you had to pay the taxes. Do you see what I’m saying? So the return next year has to be much higher in order to make sense. So we do take taxes into account too. So right now, we’re a little more lenient on a cash on cash return number than we might be next year because we have these taxes to consider.

Rob:
Well, that’s one thing that I always tell people because it does seem like in general … This is something that David has taught me over the past couple of years that cash on cash return is really just like one of those metrics. It’s one of the four big metrics when considering a real estate investment. You got your tax benefits. You got your debt pay down, your appreciation and cash on cash return. And so on the surface, a 7% cash on cash return might feel small to a lot of investors, but when you consider the actual tax benefits of cost segregation, bonus depreciation, accelerated depreciation, all that good stuff, it could really transform the return profile of any given investment.

Kim:
Yes. And also, I’ll just point out, to add to that, that our 7% cash on cash is that un-sexy no value add speculation number. That doesn’t mean that that’s where we hope to be in four years or three years or anything like that, but that’s how the deal makes sense now.

David:
That’s a great point. A lot of people make that mistake too. They just evaluate a deal in year one and they don’t look at, well, what is this going to look like in year five? You could buy something with a value add component or with lease bumps of five or 6% or something every single year and that measly 6% cash on cash return is now a 17% cash on cash return. And oftentimes when people say, “Well, how do you get these big returns,” the answer is well, buy it five years ago. And conversely, don’t buy properties that aren’t going to be improving over time because you got sucked into, oh, it’s an eight instead of a 6% return. That’s the best one and it stays an 8% return for the next 30 years.

Rob:
As we get into this a little bit, tell us a little bit about the biggest risks for commercial real estate and real estate at large that you’re seeing today because this is one that seems to be shifting quite a bit.

Kim:
Yeah. I think the risk right now is no one knows what the future is going to hold. And so we don’t know where the interest rates are going. If they go down, hopefully you can get a loan that has no prepayment penalty and refinance, but how do you know when to hit that button? And if they go up and you’ve gotten a short-term loan because you have a high interest rate, now you’re in trouble. So there’s a lot of risk around where we’re headed and how these tenants are going to do.
Our industrial properties did really well during COVID. They did well during recessions, that kind of thing. But multi-tenant retail, I’m not sure how well they will do. It really depends on the market you’re in and the nature of the business. If you have a Pilates studio as one of your tenants, do people need Pilates if time gets tough? I don’t know. It depends on the people. It depends on …

Rob:
What is the story on the industrial side? Because you said that was a little bit more, I guess, protected during the pandemic. Why is that? Is it because those services are just always needed? Is it just the types of businesses?

Kim:
Yeah. Actually, so the industrial and the neighborhood retail bolstered really well during the pandemic. So for industrial, yeah, we went through all our 130 business tenants and we marked which ones were essential. Do you remember that conversation about essential businesses, especially in Oregon and California?

David:
Oh, yes.

Rob:
Yeah.

Kim:
And they were all essential so they all kept operating. In fact, I think the only one that had trouble was our CrossFit, but they were covered too because typical CrossFit goer, pandemic doesn’t really bother us that much. So yeah, those tenants did really well during COVID. If they had problems, if they said they were going to have a hard time paying rent, we would just send them the paperwork for the PPP government stimulus fund application and tell them, “Fill this out and let us know once you filled this out.” And most of the time, they would never respond and just start paying rent again.
Now, neighborhood retail actually also did surprisingly well during the pandemic. If you look at reports on retail, you’ll see otherwise, but that’s because they group the small neighborhood retail in with the larger retail tenants and those are totally different product types. So your liquor store, your CPA, your insurance company, these guys all have to stay in business, and so they did well during the pandemic as well.

Rob:
So you mentioned that the industrial side of things maybe are a little bit more padded or I guess more solid businesses to endure tough times, but then you also mentioned on the retail space that maybe a Pilates studio wouldn’t be quite as insulated. Is there a type of tenant profile or a type of tenant that you like to take on in those spaces that make you feel a little bit safer about making sure that your place is always leased out?

Kim:
The type of tenant is going to be your hyper-local tenant, so you want someone that people are driving less than a mile to. I’m okay with nail salons because they’re hyper-local. So that’s the first thing, is the type of tenant is going to be a hyper-local tenant that’s not something that is one of a kind that people have to drive a long distance to.
And then the market in that case does matter. So if I have a Pilates studio that’s in a tertiary market, even if I have an industrial property in a tertiary market, that’s going to pose a lot of risk right now. You want something that’s infill, which means that it’s not out in the sticks. And if you have a Pilates studio, the property we’re looking at right now, the Pilates studio customers are driving nicer cars than I drive. Of course, there’s a real estate joke that we all drive used Toyotas, but still, they’re all driving nicer cars than I drive, so I feel more confident that during a recession, they’re going to be okay.

Rob:
Makes sense, makes sense. And is there any other things that you do to mitigate risk in terms of stabilization of your portfolio or going into a new deal?

Kim:
Yeah. So in terms of our existing portfolio, when we refi, we do not pull out all the equity. So we’re not brewing these suckers. We leave a lot of equity in the deal because on one hand, if you pull out all the equity, that’s fantastic, you can go reinvest that so I totally see that point of view. But on the other hand, now you have this high appraised price of your property and if the market dips, now you might have trouble because your debt payment has gone up if you pull out all your equity. And so we’ve refi’ed several of the properties, refinanced several of the properties in our portfolio a year or two ago when rates were great and we left a bunch in the deal. So our LTV across our portfolio is pretty low. It’s like 50, 60% our loan to value.
And then same thing with the deals we’re doing now. I wouldn’t say that this is totally our choice, but the loan to value, we’re using pretty low leverage right now, much lower than ever before, I think. We have 60% loan to value on this last property. And then of course, if you don’t want to do a low leverage, your other option is to try to go for seller financing. So that’s a really good option as well.

David:
Yeah. There is a method to the madness of actually taking on less debt with commercial property and it has to do with the financing architecture. So with residential property, you typically get a fixed rate loan for the life of the loan, usually 30 years. You don’t have to worry about having to refinance. You get to refinance if rates happen to drop to where it makes sense. But with commercial loans, they’re on balloon payment schedules and so you’re going to have to refinance it.
So if you have a high loan balance and you got a rate of 3%, that might make sense for you, but what happens if rates jump to 6% or 7% and you’re stuck at 80% loan of value? That could be catastrophic. So keeping a lower loan balance on commercial real estate, even when rates are low, is still a smart move and a defensive maneuver because you don’t know where rates are going to go. And if they go too high and you have a high loan balance, you can get stuck there.
I think a lot of people hear this with commercial property and they go, that’s stupid. Why would you ever do that? Why wouldn’t you want to maximize how much money you take out of the deal and buy the next one? It’s because the rates aren’t fixed.

Rob:
Yeah. You always hear them say, “It’s tax free. It’s tax-free debt.” And it’s like you want to keep some of your equity in there. That way, if you ever sold your property, you actually walk away with a paycheck, that’s how I always think about it. But now that we have an understanding of what Kim is seeing in the commercial real estate markets, we’re going to dive into a deal that she just completed. But before that, we’re going to take a quick break.

David:
Hello and welcome back to the BiggerPockets Real Estate podcast. We’re sitting with a boots on the ground investor, Kim Hopkins, and talking about all things commercial real estate. We’re about to jump into a deal that she’s doing right now. So let’s take a peek behind the curtain. Kim, where is this deal located?

Kim:
This deal is located in my current hometown of Phoenix, Arizona.

Rob:
And why did you choose this market?

Kim:
We chose this market because we found a deal, Rob.

Rob:
Nice. I love it.

Kim:
We looked in probably about 10 different markets every deal we could find, and this is where we found one.

Rob:
Good enough for me. What type of commercial real estate is this?

Kim:
This is a neighborhood retail center.

David:
And what was the purchase price on the property?

Kim:
The in contract purchase price is 5.4 million.

Rob:
How many tenants are in this property currently and are there any vacancies?

Kim:
So that’s a great question. It’s about 20 tenants in the property, and I would say that we were paying turnkey prices for this property. It was advertised to us as a hundred percent occupied with tenants at market rent. But as it happens, just as soon as we got into contract, we found out that two tenants were delinquent and one unit was vacant.

David:
It seems like they’re putting filters on everything these days, even the way that deals are being advertised. Would you say that this was a highly filtered pro forma that you were looking at? Yes.

Kim:
This pro forma was very Instagrammable until you got into the details.

Rob:
Okay. So I want to go back a little bit because we asked you why you found this deal. You said it’s because that’s where you found the deal, but why did you choose this deal specifically? What was it about it that attracted you to it?

Kim:
So first of all, it’s in a fantastic location. So it is infill, which means it’s not out in the sticks. It is in a very well-to-do, even better than well-to-do, an about to be extremely affluential area of phoenix, which is exactly what you want. You see the houses being flipped around it that are those big houses on the small lot that are white and black, the trend right now. So tons of houses being flipped around it. It’s next to a Dutch Bros, who I feel like is better at picking real estate than we are. And so it’s a great location. That was number one.
Number two is that it penciled. Always, always, always lead with the numbers. And so the cap rate was reasonable. The pro forma actually was pretty fair based on what we knew at the time, and so it had a solid return. So I would say those were the two main reasons.

David:
I love that we’re still seeing penciled. How long do you think we can get away with that before the next generation wonders, why do we keep saying that things pencil?

Rob:
For as long as we’re using pencils, I guess.

Kim:
Because Google sheeted sounds weird.

David:
Are they still using them though?

Rob:
AI’ed out.

Kim:
It spreadsheeted, that could come out wrong.

David:
All right. Now on this deal, Kim, did you stick to your buy box or was there any creative maneuvering that had to happen?

Kim:
Slightly painful at the moment. I think I said it at the beginning, but our buy box includes built on or after 1980. I might have forgotten that. But one of our buy box criteria is built on or after 1980. We made an exception. We made an exception. This building was built in the late 1970s, but the current owner bought it and added a ton of value. They did a ton of rehab. They redid the roof. They redid all the storefronts. They redid the parking lots. Anyone want to guess what I might be missing in those renovations?

Rob:
Oh, the toilet, the sewage, the pipes.

Kim:
Wow. You have not seen the things I’ve seen. Those sewer scope videos look like the worst colonoscopy you’ve ever seen.

David:
You do make a great point, Kim, because a lot of investors just don’t think about the fact that after something goes into the toilet, it has to go somewhere and there’s a way that it gets from your property into usually the city’s lines, and you’re supposed to put a camera through that and see what they look like. So I’ve seen tree roots growing into the actual pipes and creating clogs in there, and then some kid flushes a stuffed animal down the toilet and it gets stuck in there and it creates this blockade that can be incredibly expensive to fix, especially if you have to drill into the concrete or the asphalt of the parking lot, then you have to find what part of the pipe that it was at. Was this a problem with this specific deal for you?

Kim:
Yeah. So we went against one of our deal criteria. And the pipes are old. They have a finite life. They’re cast iron and they’re at the end of their life. So that is definitely a problem for us.

Rob:
Okay. I have lots of questions about this, but it’s okay. We can talk offline about the sewer on this.

Kim:
Oh, go for it. I would love to talk about this deal. I’m hoping this is secretly a private coaching call because I got questions on whether or not we should move forward.

Rob:
So when this happens, is it one of those things where you have to kick every … because usually, let’s say in an Airbnb or in a long-term rental if the water turns off, you got to put them up in a hotel or you got to figure it out. But this seems like a pretty massive underground renovation across the entire property. So do you have to shut down businesses while you make these repairs?

Kim:
Yes. I learned a ton about sewers that I didn’t really want to know and still don’t, but basically the pipes are doing what’s called channeling, which is where the bottom of it basically erodes. And so the bottom is the earth. And if you catch it soon enough, you can do what’s called pipelining where you blow epoxy through the pipes and you line it and you basically create PVC pipes inside the old cast iron pipes. And this is fantastic because you can do this in theory without disturbing any of the tenants. On the other hand, it’s for this property, like a hundred thousand dollar expense, so you really want to know that it needs to be done.
And I think you can guess. If you have someone who’s a pipe liner come out to scope your pipes, it’s just like having a roof inspector who does roofs, what do you think they’re going to say? Right. It needs to have been done yesterday. And so it’s a hard decision of whether or not to wait because if you wait too long, the pipes can collapse and then you do, like you said, have to dig through the ground, disturb tenants. It’s a big problem.

Rob:
Wow. So please tell me, were you able to negotiate any concession, the purchase price credits, anything with the seller?

Kim:
Yeah. So the two issues, just to recap, are these pipes, and then the other issue is these delinquent tenants. And usually, that’s not a big deal. I actually can’t remember the last property I bought where there weren’t a few delinquent tenants that just magically showed up as soon as we got into contract. The issue here is really we’re paying a turnkey price for this property. This does not have the same returns as the property we bought last year. We were told that it was in perfect shape and it was a hundred percent occupied and all the tenants are paying market rent. And so that lost income in year one, that’s not something that we should have to eat. This was advertised to us as turnkey, not value add.

David:
So once you uncovered the backed up colon of the property, how did you use that information to go back to the seller and try to negotiate a better position for yourself?

Kim:
Yeah. So we asked the seller for a phone call. I would be lying to you if I wasn’t scared, but all my friends who are like Cutco salesmen were like, “You got to ask for a phone call. You can’t do this email garbage. You got to ask for a phone call.” So I literally reread, never split the difference, and I asked him for a phone call and he said no.

Rob:
He knows that he has to make concessions. He’s probably scared to negotiate because he’s the one with no power.

Kim:
He did not want to talk with me. And so what we typically do, I don’t know if this is what you guys do on your end as well, but what we typically do is send a long email with lots of numbers that explains why we think we deserve this credit. And I just felt that wouldn’t hit home enough here. It wouldn’t be enough of an impact. So I did something new. I did a presentation, like a Google sheet presentation, and then I did a Loom video, walking through the presentation. And so I sent him a link to the Loom video, not even the presentation, so he had to listen to my voice, and I walked through showing exactly what these delinquencies would do to the income for us in the first year. And then I also walked through the cost of the sewer and showed him all the models, showed him the videos that we took of the sewer scope and asked for my credit request.

Rob:
I think that phone call solved like 90% of the problems in real estate, to be honest. I was actually thinking about this last night. Everyone is so dang scared to pick up the phone and actually negotiate like we used to back in the day, back in my day, and I had a situation where I was negotiating back and forth with the realtor who happened to be the wife of the seller. I presented a couple of options and then finally he just called me, he’s like, “All right. What are you trying to do?” And I was like, “Well, in your offer, it doesn’t actually cash flow, and I’m trying to put together a deal that actually cash flows for me.” And we actually struck a deal. So very good on you because I know it’s very nerve-racking to probably talk to a seller. It’s always a nerve-racking experience to break the realtor barrier, but I think it’s so important.

Kim:
Yeah. Well, I tried. I ended up sending the Loom video instead, but I tried for a phone call and I think the Loom video was second best.

Rob:
And so what happened? Did he say yes? Did he give you the money back?

Kim:
So he sat on it for a week and a half, and we finally followed up with him while we were on vacation and he said no. He said that he thought that he could fix the delinquencies himself. He didn’t think that the sewer was a big issue. And so he said he wouldn’t offer us any credit, so we ended up pulling out of the deal.

Rob:
Were you close to saying, “Let’s just do it anyways,” or were you resolute on it from the get-go?

Kim:
Well, it’s not exactly where the story ends. So we pulled out of the deal. We got back our earnest money. We told the lender all the things, completely done, off to moving the elf around the house and Christmas shopping, the important things this time of year. We pulled out of the deal. And then two days ago actually, the broker called us, the seller’s broker, and he said that he was willing to offer a hundred thousand dollar credit. I didn’t say initially, but we asked for $350,000 off.

Rob:
$350,000 off or $350,000 credit?

Kim:
$350,000 off the purchase price is what we asked for.

Rob:
So fast-forward to today, you get a phone call from the broker and they say, “Hey, the seller wants back in. He’s going to give you a hundred thousand dollars off the purchase price.” Great, okay. And then?

Kim:
So we said, “Thank you very much, but call us back if it’s 200.”

Rob:
And has he called you back? Has he called you back?

Kim:
So called an hour ago and it’s up to 130.

Rob:
Okay. Hey, that’s progress. Is this the final number? It keeps changing.

Kim:
Well, we could call him on speaker right now but …

Rob:
That would be a first in BiggerPockets’ history. I would love that actually, but okay. Okay, so 130. So where are you at? What do you want for this?

Kim:
I’m on the fence, to be honest with you.

David:
Even though we’re interviewing you, can we talk you through this?

Kim:
Yes, I would love that. Send me the bill later.

David:
Because I feel like we’re in the middle of the negotiation. We’re not hearing about a deal that was done for five years ago. Here’s what my thoughts are. If rates drop or stay lower, the seller is going to feel like I don’t have to give her money. I’m going to get another buyer. But if you see another rate bump, what someone is going to be willing to pay for that property is going to change because now all the numbers that you put into the Excel sheet change, and that means that he’s going to be more likely to come back and say, “Okay, you can have your 200,000,” but at that point, you don’t have the rate that you wanted so it’s probably going to be even more. Has that been communicated through the brokers like, “Hey, let the guy know that we’ll buy it for a $200,000 discount at this rate, but if rates go up, he’s either going to have to pay for me to get a lower rate or it’s going to be a bigger discount later.”

Kim:
Yeah. So our rate is locked, and one of our contingencies is that we close before the end of the year because we want to take advantage of the tax write-off that I was talking about earlier. But we have made the point to him-

Rob:
80%?

Kim:
Yeah. We have made the point to him that if rates go up, he’s going to have a hard time finding another buyer.

Rob:
I think he’s having a hard time finding the buyer now. He called you, right? If he called you and he is trying to strike this up again, you’re probably it.

Kim:
Yeah. I think the issue here I’ve realized is we are looking at two different properties. So the seller is looking at a property that he bought at a great price. This property was in bad shape. It was seriously in need of love. The property was practically vacant, it was dilapidated, all those things. And so he’s looking at this property that he bought at a great price. He also owns it in cash, so a lot less risk there. And so his point of view is what’s your problem? There’s a couple of vacancies. It’s part of doing business. You just fill it. Who cares if it’s $20,000 in TI to rehab this unit? Big deal. Because he’s sitting on a gravy train.
But us, we’re looking at this property where we paid a premium price. The returns weren’t great to begin with, but we were okay with it because it did meet the basic fundamentals. It wasn’t great returns, but basic fundamentals, fixes our tax problem, and we were thinking we were being handed something that was very low maintenance. Now we’re sitting somewhere where we’re going to rush to close on this deal before the end of the year. And honestly, that’s a big factor for us. We are interested in our quality of life. We’re about what’s your hourly rate? Not how much do you make per year? It’s a lot of work right now. So we’re going to close in the middle of the holidays on this property and then we’re going to inherit all these problems.

Rob:
Here’s my thought, and David, you can tell me if you disagree. I think he’s going to go up a little bit more than that 130 just based on where you’re at and the fact that they called you. But I don’t think you should take that hundred and let’s say 50 if that’s where you end up and subtract it off the purchase price because I don’t think that’s going to be significant in your overall monthly mortgage. I think what will be significant for you out the gate is getting $150,000 credit so long as that works out with the banking. There’s a limit to your credits. And David, you can chime in on this, but I would take that as a credit so that you can save that money in your down payment and use that to pay for that giant expense. And then at that point, you’re now looking at the deal that you were analyzing initially. That’s how I’d approach it. What do you think, David?

David:
Commercial financing may not allow that to happen, the same with residential financing, because you’re dealing with conforming loans. The rules are pretty clear of how much a seller can contribute to a buyer’s closing cost. It might not work the same in the commercial space. When they take it off the purchase price, it doesn’t really affect a whole lot. You just borrow a little bit less money.

Kim:
Well, we’re keeping our loan amount the same, so we would be saving that money as cash in the bank. We would be putting … If he gives us a $200,000 credit or off the purchase price, we’re going to be paying $200,000 less.

David:
Yeah. So it would be the same in your position. What if he goes in and makes the changes for you?

Kim:
I’d be very interested in that if he wants to deal with the sewer. The question is can he do that post-close? Do we trust him?

Rob:
It gets a little dicey because there are the sellers who won’t take that risk because the deal could always fall through. Case in point, this deal already fell through for that reason. And then you could always have some contract that makes him do it afterwards. But that always is a risk in and of itself. So it’s a hard one either way.

Kim:
Yeah. And I feel like I want to make sure I actually listen to the principles we talked about earlier in the show. I want to make sure I’m not speculating on getting tenants to market rent. And another issue is that we actually were planning to self-manage this property since it’s in our hometown. And do we want that headache? Do we want to take that on? We’re going to do the leasing as well. And just uncertainty with where the market is headed. Are we worried about the Pilates tenant? Are we worried about these tenants that are delinquent? Will we be able to re-let the space? So I’m getting cold feet.

David:
I don’t know that you’re wrong. I think in this position with the way the market is headed, it is more likely that things are going to soften in the commercial space then get tight. So you’ve got that on your side. And maybe Phoenix has been isolated from this a little bit and so the seller doesn’t realize that there’s going to be a lot of commercial properties that are going to start hitting the market with much more competitive prices than what we have seen because rates are so high. And as these balloon payments start coming due, refinancing will not be an option, and a lot of these properties were something that people put money in together to buy, so they have to sell it to pay back their investors.
I think we’re going to see more inventory hitting the market now than what we have before. And so time is on your side to find the deal. Time is not on your side for the tax part. So that’s really what you have to weigh. Is it worth taking the hit on taxes to buy the better deal or not? But I really appreciate you sharing the details of this story because this is real life real estate. This is exactly what happens. I was told this and then it turned out to be that, and then I said this and then they said that, and the story is always changing.

Rob:
Here’s what I would say. I think I would move forward, so long as I could get assurances that the owner was going to fix it beforehand or immediately after closing.

Kim:
Interesting. I like that idea.

Rob:
Because to me, it’s the same deal. If he’s going to pay for it through this concession, through this credit, however you want to slice it up, then it’s effectively the same deal. You just have to make sure that the repair gets made.

Kim:
Interesting. Yeah. And usually, we look for … What we say, we usually look for problems that go away with the seller. So give me an income statement that’s written on a napkin all day long. I have no problems that go away with the seller, but these are all problems that don’t go away with the seller. They stick with us as soon as we close. So that’s our hesitation.

David:
Well, I think you’re doing the right thing. Stick to your guns. If you have to take the hit on your taxes, and that makes more sense than buying the property, do it. But I’d also look at, if I was in your position, if I have to pay 70 grand more than what I wanted, would the tax benefit overall make up for that 70 grand? So even though the deal might not be what you wanted, big picture, this does make more sense. And if that’s the case, then you just ask yourself, let’s say your tax benefit was 40 grand but you’re going to have your 70 grand apart from where you want to be so you feel like you’re 30 grand in the whole, is this property in such a great location and such a great asset that that 30 grand is worth it? Or with your experience and your knowledge and what you do, Kim, could you just go find a better deal that you could make that money back somewhere else?

Rob:
All right, everyone. If you want to hear an update on this story and follow along in the process, be sure to follow Kim on all of her social medias. Kim, where can people find you and get the juicy update and conclusion to the saga?

Kim:
Yeah. So to learn more about what we do and get on our list for updates and opportunities, they can go to our website, which is ironpeakproperties.com. Follow me on LinkedIn under Kim Hopkins. And then lastly on Instagram as MoneyPlusHappy. And hey, maybe we should put this to a vote. If you guys hear this, go ahead and weigh in on what you think we should do with this deal.

Rob:
All right. Comment in the YouTube comments if you’re watching this on YouTube. Let us know what you think.

David:
All right, Kim, it’s been great having you here. Thanks so much for sharing your story with us. I’m sitting on pins and needles myself, waiting to hear how this story plays out, so I’ll be curious to hear myself. But we’ll let you get out of here for today. Thanks so much for being on the show.

Kim:
Thanks so much for having me guys.

David:
This is David Greene for Rob, shipped his pants from Kohl’s, Abasolo, signing out.

Bill Cobb, Frontdoor CEO, joins ‘Closing Bell Overtime’ to talk the housing sector and how it fits into the picture.

Ashley:
This is Real Estate Rookie, episode 351. My name is Ashley Kehr and I’m here with my co-host, Tony J. Robinson.

Tony:
Welcome to the Real Estate Rookie Podcast where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Today, Ash and I want to take a little trip down memory lane and give you some of the top moments from the Real Estate Rookie Podcast for this year.

Ashley:
If you want to listen to any of today’s full episodes that we recapped, you can go to our Real Estate Rookie YouTube. You can find a link to that in the show description, and we have a playlist for you for each episode that was covered today. Going into the new year can be hard to keep yourself motivated so we’re going to start off by sharing some stories to keep you motivated going into the new year and starting the year off fresh and ready to get your next deal. And hopefully this is something that you can find relatable as to why you want to start your journey too.

Tony:
Dani, what about for you? I mean, was your why aligned? Was it more so Brandon that kind of initially planted the seed? How did you get integrated into the business?

Speaker 3:
So my why was not aligned at all. We can’t even sugarcoat that. I was completely dead against it for a very long time. He had probably been talking to me for maybe a year, maybe a little longer about his desire to do real estate and I was like, “Nope, nope, nope.” And to me it was having to change the mindset of having money in your bank account versus investing. All I could see was the bank account going down and I couldn’t wrap my head around how this was going to make us successful. How is this going to give us financial freedom if we don’t have money in the bank account? It took a lot of long nighttime conversations and him also sharing the education with me.
I had to get into learning about it, running the numbers and diving in with him to understand what we were doing and why this was going to be beneficial before I really agreed to it. Our first property, I was still very much on the fence. I was supportive, but very much on the fence about what we were doing and why, and I just kept telling myself that I’ve trusted him all along. I just got to keep trusting him. And to this day, he’ll present a deal and I’m like [inaudible 00:02:29] I’m like, “But I trust you, so if you feel it’s a good deal, then we will roll with it.” And that’s just how it works for us.

Tony:
Dani, I appreciate the transparency there because I know one of the biggest questions that we get on this podcast is how do I get my spouse on board? How do I get my spouse to go on this journey with me? You said one word that I think is so critically important. You said, “I trust him and I’ve always trusted him.” I think that’s the baseline for getting your spouse on board is that the trust between you and your spouse has to be there. And if you don’t have that baseline of trust, then there’s nothing that Ashley and I can say on a podcast that’s going to create that trust. It has to start deeper within the relationship. But obviously Brandon has done something throughout your time together for you to say, okay, when Brandon puts his mind to something, it’s not a brash decision. It’s not him being irrational, it’s because he’s thought about it and it’s because he thinks it’s what’s best for our family.
So I just love hearing that from you because I think a lot of people overlook how important trust is. But something else you mentioned though was the sharing the education. So just from a real standpoint, were you guys just listening to podcasts together? Did Brandon just hand you a book and say, “Go read this?” What did your educational path look

Speaker 3:
So he started it. He would start talking to me about it, and I’m like, I’m clueless. I have no idea what you’re talking about. And so it took me downloading the BiggerPockets app and he had me join some Facebook groups, and then I kind of just started reading and things that caught my eye or my attention. And then the conversations kind of started from there. “Did you see that they posted this or did you see this?” And then that would kind of start those conversations.
I’ll never forget the day he taught me how to run numbers. We were driving and he’s like, “Get your phone out, I’m going to teach you how to do this.” And I’m like, “No, I’m not going to be able to do it.” He’s like, “Get your phone on. I’m going to teach you how to do this.” When we did, and I don’t remember where we were driving to, but he did. By the end of it, I was running numbers for him. I always say it’s like our little marriage hobby. We don’t have a lot that we do together because we both work so much, but this has allowed us to find something in common that we enjoy doing and has brought us closer that way. So it’s been kind of cool.

Ashley:
What is your why for all of this? Why are you grinding and hustling to become a real estate investor? What’s the purpose behind it?

Speaker 4:
Yeah. So my why is to break generational poverty in my family. So I was born in the housing projects of New Orleans. The Calliope Projects is probably one of the worst housing projects probably in America. And I was raised by a single mother who was not lazy. She worked about three jobs, but just with a barely high school education, maybe up to ninth grade. She had to become a janitor in hospitals. So what she did was, as a single mother, she tried to help me and my sisters. I’m one of seven, I have six sisters.
She didn’t have a financial literacy background. My work ethic comes from her, but she didn’t know you can’t just get wealthy from working. And my why is to break that curse because I’m the only one that’s mainly in my family who understands financial literacy and practice it. So it would be a full circle moment to be able to leave a legacy that’s beyond me. So my future nieces and nephews and great nieces and nephews and possible children wouldn’t have to be born into poverty. So that’s my why.

Ashley:
Lawrence, I’m so proud of you. Just stating that you’ve taken the initiative to educate yourself, and that’s very hard to change how you’ve kind of known everything for your whole life to change and to want to take action onto something else. I think that is a great why, and it seems like it’s definitely motivation enough for you to keep going and to really create that generational wealth.

Tony:
Lawrence, I love hearing the story and I think it’s proof that where you start obviously has a big impact on how far you can go, but it definitely doesn’t cap what you’re capable of.
Lyrva Sanchez is a registered nurse, single mother of two boys living in Southern California, actually not too far from where I live in SoCal. And after her separation, she spent two years chasing down the shiny object syndrome of wholesaling and a little bit of out-of-state investing. But then she doubled down on a real estate strategy that really worked for her kids and learned that one property could really change her life. What would you say drove you into the world of real estate investing?

Speaker 5:
So as you mentioned, I was newly separated. We have two young boys, and that was a really difficult time. Actually, there were a lot of good things going on and not so great things going on. I had just paid off all of my debt. I had school debt, I had car loan, just paid off everything.

Ashley:
That is amazing. Congratulations on that. That’s not typically an easy thing to do.

Speaker 5:
Thank you. Thank you. So I was on a Dave Ramsey trip and it was just full on saving and saving and putting everything towards the debt. So when we made this choice, this decision to separate, it was a really, really obviously difficult and challenging time in my life and it just made me shift towards working on myself. So I dove into personal development, self-help books, all of that. But part of that process, I also came across real estate investing, building wealth, how do I still carry on with my dreams and the life that I want for my kids now that I’ve pretty much lost my income, half of my income overnight basically.
So that’s how it just came to be. It was part of that whole process of going inward and just trying to do better, be better and have the same or better life for my kids regardless of my status.

Tony:
Just one other question. What would your advice be to someone that is maybe in a similar situation where they’re going through this big life change? A separation divorce is something that’s unfortunately common today, and there are a lot of folks that have these aspirations of becoming a real estate investor, but they might use this life event of a separation or divorce as an excuse as to why they can’t invest in real estate. So just what is your advice to someone who’s in a similar situation that’s looking to get started?

Speaker 5:
I think my advice is to keep hope. Somehow you can figure out a way. It’s not that you can’t, it’s just that you haven’t figured out how yet and finding a way to make it work for you and your lifestyle. I would say going through the motions, it took me a long time not giving up, trying to find information, reading things. You’ll come across random articles, things that help you. That’s how I found it play out for me. I was really tight on cash to purchase a property. Not for my expenses. These little clues would come up or opportunities.
There was an opportunity at work for me to get a promotion and I took it because I was thinking in the back of my head, “Real estate that’ll help me.” So just try to stay motivated and don’t lose sight. The shiny object syndrome is a really big thing and it really did impact me for a good two years.

Tony:
So you guys just heard some ways that some of our top rookie guests found their whys behind their real estate investing business, but obviously a lot of you guys have a goal of maybe doing this whole real estate thing full time, but in order to do that, you’ve got to be really solid on the fundamentals. So what you’re going to hear next is the foundation that some of our real estate rookie guests built that allowed them to take that step into doing this full time.

Speaker 6:
And I got started in my investing journey in 2020.

Tony:
It’s a great time to start.

Ashley:
Yeah. What made you start then? What was that kind of moment that happened for you?

Speaker 6:
I’m not sure if it was an epiphany or a come to Jesus talk with myself, but I hit that crossroad where I was like, “Okay, I can keep going down this path that I’ve been on and I’m going to get the same results.” Or I can change the game up and see if I can better my life. I was not somebody who was big into finances. I honestly was a day by day type of guy like paycheck to paycheck. I’ll figure it out eventually. And then 2020 happened. I think I can accredit a lot of it to a good buddy of mine, Caleb Kennedy. He was the first person that I ever had a finance talk with and he made being frugal look cool.
Instead of going out and on the weekends and stuff, he’s like, “Mike, nah.” He showed me, I believe it was his Robinhood account and it had a very significant amount of money in there. I knew at the time we made about the exact same money at year and my account didn’t look anything like his. So I was like, “Man, how did you do that?” He’s like, “I’m cheap. I don’t spend money.”

Tony:
Yeah. Mike, I love that story because you said he made being frugal look cool. And that is such an antithesis to what society promotes. Me and a friend were talking the other day and it’s like there’s so many people on social media who have these big followings and a big part of the reason that their followings are so big is because they’re posting wads of cash and I got this and I got that. And that’s just not my personality. I’m not a flashy person like that. But that’s what a lot of people are drawn to for whatever reason.
But I think if we can all do a better job of normalizing frugality and making that the cool thing, and exactly what you said where it wasn’t necessarily the car that he was driving. It wasn’t necessarily him going out on the weekends doing all these crazy things, what really impressed you the most about him was his Robinhood account.

Speaker 6:
100%. I mean, it was a game changer for me because I was one of those people. I drove a BMW and it was literally paycheck to paycheck. I never thought about my retirement. I never thought about, “Hey, if I have kids, it’s going to cost two, three, $4,000 a month. I’m not saving two, three, $4,000 a month, so what am I going to do?” And so that was in February of 2020. I was like, “Well, I’m going to be cheap.” I eliminated as many bills as possible. I started tracking every single penny that I spent.

Ashley:
How were you tracking that, Mike? Were you using Excel, an app or something like that?

Speaker 6:
The good old-fashioned way, pen and paper.

Ashley:
Yeah?

Tony:
No way.

Speaker 6:
Yes, sir. I have books now. So I literally just started writing down everything that I spent and each month I would try and improve it. I spent this much on gas, I spent this much on food. Let’s see if I can knock a little bit of this off. And at the time I was still bodybuilding, so my food was very basic. So I’d go and try and find the cheapest chicken, I’d try and find the cheapest rice. I’d buy it in bulk, 20, 40 pound bags of rice. I cut vegetables out. I was like, “Man, I just need protein and carbs and fats.” So sorry the greens ain’t working no more.
And just made it as cheap as possible when I started paying off debt, because I did have some credit card debt, had that car, which I ended up selling, getting rid of when the economy went crazy and used car values went up, I didn’t have to pay anything to get out of it because at the time, I think I owed 26, $27,000 on a car, which was, now I look back, I’m like, “Jesus, Mike, if you just had the money you spent back then, you’d never have to work a day in your life.”
So that was that February. I’d never even thought about buying a house. As bad as this seems, I didn’t think I’d ever be able to because I didn’t keep up with my credit. I used to be ashamed of all this, but now I look back and I’m proud of it because it led me to where I am today.

Tony:
And Mike, just really quick, I don’t think you should ever be ashamed of that, right? It’s like every person has a backstory and none of us would be who we are today without that backstory. So there is a high possibility that you wouldn’t be on this podcast with us right now having this conversation if it wasn’t for those decisions that you made and what you feel were mistakes if those mistakes didn’t happen. So I think there’s always a lesson to be learned.
But just one thing I just want to ask before we keep moving. So you went on this journey to radically reduce your monthly spend. You don’t have to tell us the exact numbers, but just were you able to cut it in half? Was it like a 25% decrease? How much were you able to bring down your expenses over that timeframe?

Speaker 6:
Probably a little over probably $2,500 a month.

Tony:
Wow.

Speaker 6:
Yeah, that’s what I was able to save per month after. So I reduced it by $2,500 a month.

Tony:
How did you make the transition from saving everything to now pouring that into building your income?

Speaker 6:
Well, I knew real estate was the way out. It was about that time in 2012… Actually, it hadn’t gotten until the end of the year because I set a goal that February, I said, “By the end of this year, I’m going to buy a house.” So I was eliminating debt, improving my credit score, saving money. I paid off all those credit cards, paid off a ton of debt. December 30th of 2020 is when I closed on my first ever house.

Ashley:
My cousin, she just got engaged yesterday actually. And when she started dating her boyfriend, he owned a duplex. And after a year dating, she moved in with him and she was just complaining, “We need a bigger place. I don’t have a closet, all this stuff.” And I said, “What are your plans this weekend?” And she named two places they were going on to dinner. They were going to, I don’t know, a concert something. I was like, “What trips do you have planned?” She’s planning all these trips and I was like, “Do you enjoy that? Do you love all that?” And she’s like, “Yeah, I do.”
I said, “Do you know why you can do that?” And she’s like, “Well, my boyfriend pays for me.” I said, “Yeah, do you think he could pay for that if he has this huge house mortgage now?” She was like, “Oh, yeah.” It clicked with her and now she just got engaged in Scotland and they just bought this beautiful huge house and everything. It was that delayed gratification that she had to suffer and live in a small little apartment and have a tenant downstairs for a couple years. But it is remarkable what can actually happen.
It may not seem like that much, but it actually can add up to a lot down the road. It’s almost like you think of compound interest. It’s all these compounding effects of house hacking and be able to cut those living expenses out can really add up in the long run to save for that big beautiful diamond ring she got.

Tony:
When I met you, you were still working your day job as an engineer. And for so many people in the country, you had already achieved a piece of the American dream. You went to college, got a technical degree. You had a very healthy salary. You had this position that probably you would’ve been employed for the rest of your life and you would’ve been able to retire and do all things the right way. So what was the impetus for you or the motivation for you to leave this very comfortable lifestyle you had built for yourself?

Speaker 7:
Basically when we started the return to office, my soul just died. I had basically spent the last two years during COVID being able to work from home. I got my real estate license as well. So I was already selling real estate on the side and my life just felt like enjoyable and I had more control over my time in my life. So the second we started going back into the office, I was commuting an hour each way to work, which was not fun. I just started getting so angry and frustrated. And if you know me, I’m not a very angry person. Having that taste of freedom really just kind of skyrocketed it for me. And that’s when all the gears started changing. And then I actually won tickets to Tony’s conference and went to the conference and came out, and put in my two weeks notice.

Ashley:
Oh my gosh. Wow. That’s incredible. Okay. So let’s start right there. So at the conference you decide you’re putting in your two weeks notice, what were the safety nets you had that you could go ahead and make that decision?

Speaker 7:
So buying my duplex was honestly step number one. I didn’t realize how much of a safety net it really was because especially… And I still don’t really take any money from it, but I was just building up this little nest egg. But the cool thing about my duplex is it covered all of my living expenses, so I knew that even if push came to shove, it’s literally me and my dog. That is my family right now and the only people I have to take care of. So I knew that if push came to shove, I would be able to survive off of ramen for the next few months and still be totally okay.
So that was the first step. And my duplex also cash flows too, so I have extra money coming in from that. But then I also have lots of other side gigs like my social media stuff. I knew I was going to be okay, I just needed the push. And then that’s also when I started our short-term rental business too. And I say are because literally after that conference I was on the flight home and I texted my best friend who we just literally talk every day, do everything together.
She’s heard me talk about real estate for years, and I’m like, “So I think I’m going to start this business. Do you want to join me?” That’s how everything just little started.

Tony:
So, Olivia, if we can, I just want to drill down a little bit on this a bit more. So at that moment you said that you were angry, you were upset about the idea of going back into the office, but I mean it has to be a really strong emotional reaction to say, “This is a big enough of an issue for me to want to leave my job.” So I guess just walk us through just not only the logical side of I want to leave, but just mentally, emotionally, what was going on for you to say, “This is enough. I’m going to leave because of this.”

Speaker 7:
So I really went through this emotional and mental breakthrough. It was like an identity change because for the last 10 years I’ve been an engineer and I’ve been advocating for women in engineering, Black people in engineering and all of that stuff. And suddenly I was just kind of letting it go. So that was really hard just personally to work through because it felt like I was letting a part of my identity go. But then I just saw how much upside there was to it.
I was so much happier when I got to do real estate things and when I was setting up properties and when I was doing all this stuff. So that kind of just pushed me over the edge. But also the way I won tickets to Tony’s conference is I don’t even actually remember signing up for this giveaway because tony was doing a social media giveaway and I was depressed basically on the couch and a little bit inebriated, but I don’t remember actually signing up. But I was in such a bad mental space. And then three days later I get this notification on Instagram from Tony being like, “Congratulations, Olivia, you have won tickets.” And I’m like, “Wait, what?”
I remember I was supposed to go offshore during the conference in the middle of the Gulf of Mexico, and I was like, “Nope, I am putting in vacation days. I’m going to this conference. This is a sign.” And so that kind of just spearheaded everything. And then I went offshore the next day when I got back.

Tony:
Ashley, I just want to point out, me, you and Olivia all have that same identity crisis type thing after college. I initially went to school to be an engineer. I was actually working at Chevron. Isn’t that where you work too, Olivia, at Chevron?

Speaker 7:
Yep.

Tony:
Yeah. So I was also working at Chevron as an engineer. Ashley, I know you went the accounting route. And it’s like it is difficult because you go to school for all these years and you pour into this identity of who you are. And to come to this realization that it’s not who you want to be anymore. It is a difficult pill for a lot of people to swallow, but I think we should all give ourselves some… I don’t know. We should be proud of ourselves for, A, being so young and making that decision. But second, just having the courage to do that because there are people who feel that feeling inside of them for years, decades for their entire life sometimes, but they’re never able to really pull that trigger and make that change happen.
One of the things that I always thought and fall back on is if I make this decision and say things don’t work out, I always know I can go back out and get another job.

Ashley:
That was great motivation. I loved hearing from Lawrence’s why, Mike’s money mindset, and how Olivia was able to quit her six-figure job. We always learn a lot from our rookie guests and I want to continue with hearing some great tips that rookies have shared with us throughout the year. Did you think having your real estate license was a huge advantage in getting started?

Speaker 8:
So having my real estate license has helped us on one of the five properties that we have bought now. I’ve only taken a commission once, so it has helped, but what we normally wind up doing, and if you’re debating getting your real estate license and trying to figure out if it’s worth it or not, you can get your license and it does help. I think it’s beneficial to be able to run numbers and to MLS access and different things, but you don’t necessarily need it because what we wound up doing is I would call the listing agent and say, “Hey, I’m willing to waive my commission if you’ll accept our offer on this property.”
Or in the case of our first property because our down payment was a limiting factor for us. I said, “Hey, I’ll waive my commission if you can just give us this money in closing cost credits. So you’ll pay for part of our loan fees and make some upgrades to the house for us.” And that helped us more than just getting a commission. So I think it’s 50-50 if you want to be entrenched in real estate or you think that you’re going to be buying a lot of properties. It doesn’t hurt. It could cost 600 bucks a year, a thousand bucks a year to maintain your license, but you don’t have to have it to get started or to build a massive real estate portfolio. It’s really a personal preference thing.

Ashley:
I love that answer though, just getting your perspective on it and your opinion because we get that question so often.

Speaker 9:
Yeah. So I mean I was newer to real estate, but what I did is I started with finding the deal. So I found the deal, I ran the numbers, I learned how to comp properties so I knew what this property would be worth after the repair. I knew what it would take to go into it just with my background in general contracting, had some people look into it. So I started with finding the deal and then we go, “Okay, how are we going to fund this? Who’s going to buy this?”
And even though I didn’t really have real estate experience at the time, I had life experience. And so back from my home in Southern California, my husband and I were very involved in multiple circles. We were coaches in different aspects and sports and things like that. So this connection was someone who we had worked with for years. They had trusted us with their kids.
So I was like, “Well, if they trust us with their kids, they’re going to trust us with their money.” And so we just called him and we said, “Hey, Bob, I know this is crazy, but this is the deal. This is what it’s looking at. Here’s the numbers. I’ll show you. I’ll send you the comps. Here’s what I think it can do.” And because they had that trust aspect I think already with us, they trusted us in the opportunity. So because we had already built that relationship with them, they felt comfortable to take that leap into partnering with us. And so since then, they actually are one of our main partners. They partner with us on a lot of deals now and we’re very grateful for them.

Tony:
McKenzie, you just did a phenomenal breakdown of a lot of what Ash and I talk about when it comes to finding partnerships. So I’m just going to break down what you said here for a second. So bear with me. So first you identified what your unique skillset was, and that was finding the deal. You leveraged your strengths, you leveraged your skills to find a really good deal. Then you said, “Okay, if I’m looking at the puzzle pieces of making this transaction happen, I’ve got the deal finding, I’ve got even the property or the project management side, but I’m missing the capital side. So okay, let me go out and find a partner to fill that void.”
So you go out there and you find someone that has those resources that you’re lacking. Now, this person had never really done real estate before, but you said the reason that they were willing to work with you is because there was that level of trust there. One of the things that Ash and I say in the book is that when you’re looking for a partner, people typically partner with people that they know, like, and trust. So you need all three of those. So even though this person had never invested in real estate before because you had that foundation of know, like, and trust, when you presented them with an opportunity, they were willing to jump at it because you guys had built that foundation.
Ash talks a lot about her first partnership where that partner invested his life savings into a deal and it’s because him and Ashley had that know, like, and trust. So I just love that story because you really exemplify all of the critical elements of putting a partnership together.

Speaker 9:
I think a lot of people think, “Oh, I can’t get started until I have all this real estate experience.” Well, you’re never going to get started if… Because it takes deals and capital and things to get that experience. So I completely agree, and I think if people open their eyes to, “Oh, maybe this person,” I hear that all the time, “I don’t know anyone with money.” I actually really doubt that’s true. So really look and it never hurts to ask, and I always say, “If you find a deal, I feel like the money and the capital will follow.” You just got to start with the deal. So yeah, I agree.

Ashley:
Where are you getting this data from that you’re pulling to use for your numbers, for your expenses so that you know it’s the most accurate data that you can get?

Speaker 10:
Yeah. Okay. So as far as expenses are concerned, the upfront expense is going to be the down payment that we make. We usually make 25% down payment risk of it refinance. So that part is fixed, which is the upfront expense. Then after that expense is the interest, which is a mortgage payment. For that, I have close relationships with the lenders and I try to stay on top of the market so that I know, “Okay, what is the rate for a 30-year fixed mortgage? What is the rate for 7/1 ARM? What is the rate for 5/1 ARM?

Ashley:
Is that just you emailing them and asking them or are you going to a website to look for that? Where could somebody else find that information?

Speaker 10:
I actually call them up to get that information, yes. So I call them up and that’s how I get that information because every scenario is so different, and since I’m not looking at only a long-term rental, it could be even a midterm rental. I could buy a second home, use it as an investment property. I could buy a duplex or a triplex or a quadruplex. And financing does vary depending upon the type of the property. So that’s why it is so important not to just rely on one number from a website, but to actually share the detailed scenario and then get the rates so that information I’m getting from my lender and I’m not just calling up one lender, I’m calling up at least three so that I’m doing my shopping before I decide to go with one

Tony:
Puja, one follow-up question to that, I know a lot of rookies, they get nervous about either having their credit run a bunch of times or maybe building a bad rapport with the lender because they’re always telling them these deals, they never actually end up buying. What are your thoughts or how do you navigate that? Are they running your credit every single time or are they just giving you preliminary numbers? Do they know that these are properties you’re just looking at or are they expecting you to purchase all of these? How do you work that dynamic?

Speaker 10:
Yeah, so regarding being worried about what the lenders are going to think that, “Oh, you’re just asking them to give you the rates and just keep calling them up.” And you don’t know when you would be able to pull that deal off. It could take three months, four months. I’ve been calling up my lender for the last seven months, so it’s a long time. And then after that, as far as the credit check is concerned, no, they don’t run my credit check. I agree. I don’t want a hit on my credit every time I’m trying to shop, every time I’m trying to analyze a deal.
They don’t even run a soft check and it just varies. Let’s say if I’m working with the lender who I have already worked with in the past, they would ask me the questions, “Hey, has anything changed with respect to your situation in terms of the new debt that you have taken in terms of your income?” They would ask those questions on the basis of the information that they already have about me, they are able to run that scenario for me.
So no, the hard credit check is not a mandatory step. A good lender who wants your business, who knows what they’re doing should always be willing to give you that pricing.

Tony:
Puja, I want to follow up because one of the other things you mentioned that I thought was interesting, and you’ve led into it a little bit, is that in these four or five steps that you listed out here that you focus on the expenses first and you say, “Hey, I don’t want my expenses to exceed X dollars per month.” Can you walk me through why that’s one of your first steps? Because I think most people start on the other end where they say, “Hey, I want my cashflow to be X.” But you’re looking at it from the opposite side where you’re focusing on the expenses first. What do you feel has been the benefit of you flipping it around and going at the expenses versus the cashflow?

Speaker 10:
The reason I start with expenses is also to account for the unforeseen scenarios, to account for the vacancies. Let’s say the house is vacant for a month or two months. Let’s say the tenant is not able to pay their rent for a month or two months. You have to go through the eviction process so that monthly outflow will decide whether or not I would be able to pay that mortgage even if nobody’s paying that mortgage for me. So if it is $10,000 a month then I have to pay those $20,000 for two months. That’s a lot of money. I don’t want to take that risk.
So depending upon my own reserves, depending upon my own income, I decide that threshold. So that $5,000 is I’m okay. So one month I could pay $5,000 if there was a vacancy or somebody didn’t pay the rent on time. So that’s the reason I start with the expenses because… And this is my personal opinion. If I stay focused on generating a cashflow of let’s say $500 and I’m buying a property which is like 1.5 million and the monthly cost is like $8,000, and if I have to pay that $8,000 one time, $500 does not make sense. So that’s the reason I have this process where I actually look at the expenses first.

Ashley:
What made you start with flipping?

Speaker 11:
Because one thing I love about real estate, and once I got further into it, I realized how diverse there was. I was having a little analysis paralysis because it was like, “Do I want to find a storage unit? Do I want to flip a house? Do I want to do Airbnb and do more of the hospitality side? Do I want to do just buy and holds?” I really got more into flipping first just because a lot of the investors I was working with were doing flips, and so I really was able to learn a lot from that process. I would go walk the properties with them.
There would be investor list and wholesaler list that would send out, “Hey, we’re having an open house one to three this day, all you investors come to this house.” I would go to the house, really not the intent of purchasing it, but I would go to just walk the property, work on trying to get my rehab costs. I’d have my own little spreadsheet that I was working off of. Then maybe I got lucky a couple of times and I had a contractor actually walk some places with me that they would give me their idea of what it thought it would take.
I would just go to some of these open houses and just listen to what other people were saying too because a lot of these were some of the bigger investors in Houston and they would be walking around pointing out things. I would just listen and I would hear what they would say, “Oh, this is going to cost 1,500 to do this toilet thing or whatever like that.” And I was just mentally taking notes.
I went to 20, 30 of these in the first few months with no intention really of buying, didn’t have the financial means to buy anything, but I was just getting all this information to really learn rehab costs and what was really going to make me comfortable going to that next level of actually putting in an offer and putting up my hard-earned money that I’ve been working for so long that I was so nervous of deploying.
But once I actually started putting out offers, all that stress kind of went away because I saw the ability of what it would actually generate if something went through with a well deal and just trying things.

Tony:
Garrett, we’ve interviewed your episode 289, so we’ve had 288 conversations up until this point, and I don’t think a single person has ever said that they’ve gone to open houses just to hear what other potential investors are saying the house might need when it comes to rehab. Dude, what a simple yet super effective way to estimate your rehab costs because I feel like for a lot of new investors, that’s one of the things that really gets them stuck is that if you’ve never done this before, it’s hard for you to ballpark what amount of money you might spend to buy and renovate a home.
Obviously, once you’ve done it a few times, and if you’re buying with inside your buy box, you know exactly what it’s going to cost. Ash, I’m sure you know exactly what it costs to renovate a duplex in buffalo. I know exactly what it costs to renovate a three bed, two bath and Joshua tree, but if it’s your first time doing it, there’s a lot of question marks there. You also mentioned about getting the GC to walk with you, but one other follow-up question on this listening.
So I guess first, how long were you at these open houses? Were you just there the entire time and just letting people come through and then were you actually having conversations with the other investors or were you just kind of a fly on the wall and taking notes? Just walk us through the tactical side of how you actually got information out of that open house.

Speaker 11:
At first I was a little more nervous. I wasn’t trying to be obvious that I didn’t know what I was doing and things, even though looking back, that’s so naive to think that way. But I would go maybe 30 minutes, 45 minutes. I would just walk around and act like I knew what I was doing. I wouldn’t really talk to many people. Every once in a while I may kind of get into it, but a lot of these people were looking at whoever was in the house as their competition and things like that.
But it blew my mind. I noticed this from doing residential retail sales that people go into houses and they just talk out loud and they don’t realize that I may be listening or buyers are walking in saying all these things. And the opposite side is you got to be real careful. And I tell my buyers, when we walk into houses, you need to be real careful what you say out loud. It was similar on the investor side. People were just kind of like, they would be walking in a bathroom, they would look up and be like, “Oh man, you see that? Oh, there’s a leak right there. Oh, that’s going to be a good $5,000.”
I was just taking this all into account. And after I got a little more comfortable with different investors and the terminology and all my own research through BiggerPockets and just trying different spreadsheets people put online, there’s a ton online that… And especially in Texas, there’s different contractors or people that do rehabs that will put out a free spreadsheet of what they estimate this cost for a new window here.
There may not be the exact answer, but it gave me a good guideline to where I was going to go when I started walking properties on my own that I was actually considering buying. I would always add that extra cushion on top knowing that everything is always more. I saw this from helping investors that everything always goes more expensive than you. Very rarely does a flip or anything go under budget.

Tony:
No way.

Speaker 11:
Yeah. Once I realized that, I was like, “Oh, I probably need to add a 20% buffer on top of this too while I’m doing it.” So it was just really getting bits of information and I had analysis paralysis probably for the first year or two because I was just so nervous like, “Oh, these guys, they’ve been doing it. They got cash funds to do it. Even if they fail, they’ll be fine. And if I fail, my cash funds are gone.” But once I do it and I saw regular Joe’s and Jill’s doing whatever, doing the same things I wanted to do, I knew that there was a way I could make it happen, and I really just needed to put my feet in the fire and probably start making offers and have a few failed deals, which is what happened to kind of learn, “Okay, this isn’t going to work, but I learned a lot from it.”
Nothing like that is a failure. You can’t fail until you quit. You can only take these as lessons from all your losses or all your tribulations that the next one, eventually you’re not going to make that mistake again. When you start making consecutive mistakes, that’s when there’s an issue that needed to be corrected. If you make one mistake and you can nix that in the bud from the beginning, then that is how your journey should be going from what I’ve seen from the outside.

Tony:
One question I want to ask was because you’ve got these systems dialed in to really high level of detail, and I think one belief, maybe a limiting belief that a lot of people have when it comes to flipping homes is that you got to be there to walk the properties. You got to be there to shake the contractor’s hands and make sure that you’re checking on their work. Is that true or is it possible to do this remotely as well?

Speaker 12:
It’s totally possible to do it remotely as long as you have boots on the ground that are driving the properties at least once a week. So even if nothing changes in the rehab, say it’s sitting there, we’re waiting for permits to get processed, we will still drive it every week because you never know if squatters are going to show up, all of a sudden a pipe is going to burst, it’s going to, whatever, you want to make sure that you also have pictures if anything happens that you need to go to court for.
Not to scare you guys, but if someone breaks in and you need to file an insurance claim or something like that, you now have a record trail. And so the biggest blessing for being efficient in our business was the fact that both Tara and I lived over an hour away from all of the projects that we did. So there was no way we’re going to drive to maybe three hours in traffic to and from those projects every day or every other day.
So we created these systems to be able to manage them afar. We’ll go down once a week and we’ll take pictures once a week, and then we trained our contractors that if they had a question, they text us a few pictures, they send us a video or we FaceTime them and we’ll get them the information that they need.
And then we also made sure that we had boots on the ground in that area, networking, maybe newer investors that wanted to learn where if we really needed something, then they would help us out because we’re also contributing and helping them grow their business. The other thing is we’d also have a handyman on call where, say, a basement all of a sudden starts flooding and our contractor can’t get there that’s on the job, or it’s not part of a scope, we need it clean up something after hours and they’re just going to be too expensive to do it. They’ll go and put bags and [inaudible 00:43:31] it out or something like that.
So in the beginning when we didn’t have systems set up, I was working six and a half days a week. Long, long fricking days, but mainly on the computer. I’d only drive the properties once a week. And as you start setting up these systems, these templates and getting really good at the planning in the beginning to get the contractors all of the information that they need upfront, then you’re really just monitoring the construction as it goes along and problem solving little things that come up that were unforeseen in the beginning.
So within the last few years I’ve gone to South Africa for two months at a time while I have seven projects going on, for example, or I travel a ton at least once a month. And so-

Ashley:
You’re not even home right now as you’re doing this podcast.

Speaker 12:
I’m not home right now. Yeah, exactly. And so having that freedom, and honestly, that’s why we got into real estate. And so start today in building those systems, building those templates. Like I said, they’re not scary. Just start putting information down on paper and then figuring out how you want to organize that. And if you’re not the best at that, then hire a VA that is good at organization and then eventually lead up to hiring a team member that is.

Tony:
I guess first if you can define what midterm rental is because there might be some folks who aren’t familiar with that phrase. And then second, how are you sourcing people to put into your midterm rentals?

Speaker 13:
Absolutely, yeah. So medium term rental, at least in my definition is anything that’s a 30-day stay that’s furnished where you’re paying the utilities. And so it’s basically that you have an Airbnb that instead of renting it out for a weekend or three, four nights, whatever, you’re renting it out for at least 30 days plus. And the main reason for that was because Fort Wayne’s not a vacation market. People aren’t coming here for leisure. They’re coming here for work.
And me being in healthcare, whenever I went and I walked through the hospital once we were allowed to come back after, I think it was like six weeks, they had us, NP stay at home and try and do video visits. And then once I got back in the hospital, I didn’t recognize anybody in the hospital. I didn’t recognize any of the nurses. And I was like, “What is going on?” And so I started talking to people and everybody was a travel nurse. And I was like, “Where are you guys staying?” And they’re like, “Oh, I’m staying at the Super 8 down the way.”
I’m like, “How much are you paying for that?” “Oh, like 60 bucks a night.” I’m like, “Are you kidding me? That sounds horrible.” And so it got my wheels turning. I was like, “Surely there has to be a market for this.” And that’s how we got started. We started renting out the carriage house. So we furnished it. It’s 600 square feet. It’s a little brick. It looks kind of cool. My wife did a wonderful job of making sure that it looked really, really good.
And within the first 24 hours of us going live on Airbnb, we had a nine-month booking. And the nine-month booking was not even for a nurse, which is what I expected our bread and butter to be. It was somebody that was coming to town with his wife and he was a lineman like power lines. He was working on them for Indiana Michigan Power, the power company. And so not even somebody that was on my radar, they booked it for nine months. And so that just really opened my eyes that, “Hey, there’s a huge industry for this, not just travel nurses.”
And so then we expanded. We’ve got now our main house that was with the carriage house. We moved out of that, and that’s now a medium term rental. That’s a two bed, one bath. And then we have a town home that’s a three bed, two and a half bath. That’s a medium term. We did an arbitrage of a one bed, one bath that’s near the hospital that I worked at, that is a medium term. And then I’m co-hosting for a friend of mine that’s a medium term.

Ashley:
Can you explain what arbitrage is?

Speaker 13:
Absolutely. Yeah. So I just gave them a call. I was like, “Hey, my name is David. I do medium term rentals for travel nurses. I work at the hospital. There’s not enough housing. Would you guys be willing to do a corporate lease with me so that I can rent out to some travel nurses?” So basically you go in there, you sign a lease saying, I will pay X amount, which is whatever the market rent is. And then we furnish the building, put all the utilities in our name, and then we’re re-renting it to travel nurses, and then we make the spread.

Ashley:
Did they do a whole tenant screening on you, do the credit and background check on you-

Speaker 13:
No.

Ashley:
… as the renter? No?

Speaker 13:
They didn’t do anything.

Ashley:
Wow.

Speaker 13:
I made sure that I walked in with my scrubs on, with my badge on, so maybe that helps.

Ashley:
I liked how you used the word when you approach them, you want to do it as a corporate rental because that has been… That’s actually done for a really long time is corporate rentals where this medium term stay is new where more people may not know what it is. So I really like the way that you kind of worded that and pitched that and that’s really awesome.

Speaker 13:
I made sure that I never once mentioned the word Airbnb. I was like, “Then they’re going to freak out.” But it was, yeah, I think it was that I’m going to be having nurses that are coming into town that are working at the hospital. And so it’s pretty hard to try and turn somebody down with that whenever they’re coming to the community to help out with the sick people that we have.

Ashley:
I think one of the key points that you touched on there is the operations piece. And even if you are seeing yourself as an investor and you’re buying multifamily, single family or whatever asset you are buying into, there is some piece of asset management and that is part of the operations. I think that’s actually where a lot of money is left on the table too because everybody’s so focused on, “I need more, I need more. I need more units. That’s how I’m successful.” Instead of going back and looking at your properties and being, “How can I restabilize them? How can I cut my insurance costs by quoting my insurance? Doing all of these big picture items and then getting into the details of the actual property and then how you have your systems and process.
You go in and you’re like, “This is the operation method we have. This is the process we’re using.” And that is part of why you have been so successful, been able to keep a strong portfolio is because as you mentioned in the beginning, there was those three things. The quality, just answering the phone, even making sure people know you are there, that is a huge part of a lot of strategies. And Tony, even more for short-term rentals, like customer service is a huge thing. And having those operations put together. And if you can really take the time to put out those systems and processes that is going to bring you more money than just buying, buying, buying.

Speaker 14:
A hundred percent.

Ashley:
We had a guest recently on that did short-term rentals, and she said, “We’re not buying anymore right now. We’re going back to the current rentals we have. We’re adding a hot tub. We’re adding a sauna. We’re seeing how we can add value to the current properties we have already because we’re going to see a larger… We take 20 grand, we put it into our current property. We’re going to see a larger increase in revenue than if we went and bought a whole nother property where we have to set up another whole set of operations. We have more overhead now.
And I think that’s a big piece that’s forgotten. Everybody just talks about the acquisitions, acquiring and the operations is almost kind of set aside sometimes.

Speaker 14:
Well, and it did because the market was so good, nobody had to do it. And two, frankly, everybody got lucky. So everybody, all these capital allocators and everything, they were just like, “Oh my gosh, we’re just getting the benefit of this upside.” Nobody thought about actually running it. Why? Because you didn’t need to. Occupancies were so high. Rental rates were just going up regardless of what you did. And that’s great in the moment, but that’s never a long-term trend. That will always reset. Always.
The market will get rid of bad performers and owners, and bad assets. That’s an actual inefficiency in the market if it doesn’t do that. So when we look at it’s really important. I love what you said, Ashley, because the goal is not to have doors. The goal is to have money. And so I’m not trying to have the most doors, I’m trying to have the most money. And most people think that just because someone has a lot of doors that they actually own those things, which actually is most of the time completely not true.
I would rather buy something at 30 bucks a square foot and have it be worth in 10 years, 300 bucks a square foot, as opposed to just having that much more doors but not getting that lift. You’ll make more money.

Ashley:
That much more of a headache too.

Speaker 14:
That much more of a headache. And a not profitable one. Then you’re burn out, everybody. I talk about this a lot. Most people buy themselves a job. That’s what they do. They buy themselves a job. And two, it doesn’t actually create them financial freedom. That’s not how it works. Right? You can’t just buy something and it just works and it doesn’t have… You’ve got to build a structure on it. You have to build a business. Even if that’s one property, everyone, one property. And two, I’m not saying you build anything. You don’t have to property manage. You don’t have to do anything. You still have to build a business.
So I’m my property manager. I have my broker, I have my bank. I’ve got maybe even an asset manager, or maybe you’re the asset manager. I got my insurance guys, you’ve got your whole team. What are the processes? What are the reports asset or that property manager. I need to know what they’re doing and I need to know if they’re doing a bad job or a good job. So I need to learn how to operate a real estate asset. Not because I have to do it, but because I need to know the right questions to ask or I’m going to get reports and I’m not even going to know what they mean.
So you are running a business even with one property, and even if you’re doing zero of the work. It’s still a business and you’ve got to treat it like that. And then from there you can also figure out how to grow more because a lot of people aren’t going to like this guys, but one duplex isn’t going to make you financially free. It’s just not going to. Right? You’ve got to have more than one.

Ashley:
I mean, maybe if you want to live in your mom’s basement and she cooks all your meals.

Speaker 14:
I like ramen noodles, so I’m okay with that. But you need to buy more than one. So you need to figure out, understand what you’re doing, take your time. You don’t need to do the work, but then you need to figure out how to repeat that, right? It’s not about owning a thousand, right? It’s about owning enough to hit your goals and having a good way that you’re operating it and that those things are building wealth and income for you. That’s what it’s about. You need to do that good and right and take your time. So many people, you guys are just in a rush because so many people made so much money in the short term and now they think that they need to do it.
They saw all these guys that just went and raised a bunch of money and put it to work and now they’re saying that they own a thousand doors and they’re just like, “Wow, I suck at life because I’m not doing any of these things.” Meanwhile, they actually make more money at their W2 than that guy does with his thousand doors. That’s actually quite a comment. And so I think bring it down to earth. Don’t beat up on yourself. Focus on the long term and build correctly, even if you’re not doing it. Do it right.

Tony:
Something else you mentioned was using the 0% interest credit card to help fund some of the rehab. I just posted on my social a couple days ago that me and Sarah took this amazing, amazing, almost week long vacation in Mexico. I want to say the trip was probably worth about $12,000 once you add up our flights, the place that we stayed at, and we literally only spent $200 to go there because everything else was covered with our points.
It was like several hundred thousand points that we had. But we run a lot of our flips through our credit cards when we’re buying materials and stuff as well. We host our events in person. Pretty much all of our events are run through our credit cards. We run ads for our events, just like all the different things we have in our business we run through our credit card as much as we can. We get to take some pretty cool vacations a couple times a year.
So we spent five days in Playa del Carmen at the super, super luxurious resort right there on the beach front. We got private airport transfer and a Tesla that picked us up and dropped us back off. We got free access to all the parks. So anyway, it was a fantastic trip. So for all of the real estate investors that are out there, I think a common thing that people overlook is the ability to use credit card points to help fund your vacations. Sarah and I, most of the time when we travel now, we don’t pay for our vacations.

Ashley:
Honestly, not even if you’re a real estate investor because a lot of the credit cards have the signup bonuses and there are people out there that are amazing at doing this where they go and open new credit cards, close them out or whatever, and they’re just racking up all of these points because credit cards will have like, if you spend $5,000 within the first three months, then we’ll give you a hundred thousand points to use for travel or whatever. And so I actually have done this for probably four or five years now.
I started out with doing the signup bonuses and now with doing my rehabs and everything, it definitely helps accumulate the points. But if I fly Southwest for the last four years, I’ve been able to take somebody with me for free. I’ve had their companion pass. And so it’s like bittersweet because if I fly Delta, I have enough points that I’ve accumulated status there from the points from their credit card. And so it’s like I usually get upgraded to first class.
But if somebody comes with me, they fly for free on Southwest, which doesn’t have any upgrades. So it’s like hmm, [inaudible 00:56:56] I get to go… Yes, you get to come with me, this is great, but now we’re flying Southwest.

Tony:
Make them pay for themselves.

Ashley:
Sorry five-year-olds. You have to scrape up money for your ticket to come with me

Tony:
Wait. What’s been your favorite credit card? Which one do you like the most for the points?

Ashley:
I think the Chase Sapphire.

Tony:
Yeah, the same what I was going to say.

Ashley:
Especially if you’re first starting out, do that one because they have the five rule. It’s some five rule thing where you can only have… It’s five credit cards open by Chase over four years or something. It’s something like that or I don’t know, but they cap you out as to how many credit cards you collect for the points. And if you can open the cards in your personal name, if you have businesses, you can open them in your business names, but you can combine all those points for your personal Marriott rewards number or Delta or whatever that is.

Tony:
And not to go too far off the rails on this, but what I’ve realized because we have the Chase Sapphire too, and I have one in my name, Sarah has one in her name. And even though they’re personal cards, we only use them for business stuff as well. And then we have the Chase Business Inc card and you’re able to do all these cool things. But what I’ve noticed is that it’s actually the points at Chase are worth more than the miles that I get with United.
I could have a hundred thousand miles and I could have a hundred thousand points and the points with Chase go further than the miles do even if I’m booking on United. Anyway, point of this whole conversation is everyone listening, you should be leveraging debt the right way to help you fund the vacation of your dreams.

Ashley:
If you do have a history of maxing out credit cards, not accumulating debt on your credit cards and not paying them monthly, this may not be the strategy for you to try right now to travel hack. But if you have been very diligent and you pay your credit card off every single month, you’ve never accumulated a balance, then you might as well take advantage of these points. And the travel point guys is like thepointsguys.com I think it is, is a big website. There’s a whole bunch of people. I think it’s aunt.kara or Aunt Kara, something like that. She talks a lot about travel hacking, so lots of different places you can try to learn about it.

Tony:
I’m glad you mentioned that because I don’t want anyone to think that me and Ashley are just racking up six figures of credit card debt. My assistant goes in and probably pays on our credit card every other day. So we very rarely carry an actual balance on our credit cards as well. So you want to make sure you have the cash.

Ashley:
If I didn’t pay it off every week… Usually, it’s a week to every two weeks. First of all, I can’t stand having high balance, but it would probably… Daryl would be at Lowe’s. It would be like, “Sorry, it’s declined. You maxed out. The limit is at Lowe’s already these last two weeks.”

Tony:
Hey, so we hope you guys enjoyed listening to this best of show. We’ve obviously covered a lot of ground in 2023 and our hope is that you guys can take these stories, take these tips, take these little pieces of motivation and use them to kickstart your investing journey because that’s really what we’re all about here at the Rookie Podcast. So cheers to 2023 coming to a close. But here’s to 2024 being your year. Let 2024 be the year you get that first deal. And when you do, come back to us and let us know because we want to hear your story on the show next.

Ashley:
We would love to have you a part of the 2024 rookie episode crew. So you can go to biggerpockets.com/guest and apply to be a guest on the show. But before you go, if you want to listen to any of today’s full episodes that we recapped, you can go to our Real Estate Rookie YouTube. You can find a link to that in the show description and we have a playlist for you for each episode that was covered today. Thank you guys so much for being a part of our journey on the Real Estate Rookie Podcast and we have loved every minute of it. We’ll see you guys in 2024.

Speaker 16:
(singing)

Tyler Batory, analyst at Oppenheimer, joins ‘Squawk on the Street’ to discuss what the new rate environment does for the homebuilder stocks, what could make the Federal Reserve worried again, and more.

Kathy:
Hello and welcome to the On the Market Podcast. I’m one of your hosts, Kathy Fettke, and I am joined today by Henry Washington and James Dainard.

James:
I am excited for this episode to be coming out on Christmas because who doesn’t love the holidays? At Heaton Dainard Real Estate, we are throwing a raging holiday party in 10 days. So I hope everyone is also doing the same, get out there, enjoy your people. Also, we want to wish a happy holidays to all of our listeners. We really thank you guys for tuning in and supporting the On the Market Podcast, and we promise to make 2024 even better.

Henry:
Man, I might have to be a party crasher. For research purposes only because I am also trying to plan a holiday party, and who else better to learn from about throwing a raging party than James Dainard? So if you see me hanging out in the back by the punch bowl trying to look incognito, don’t call me out, James.

James:
What you want to do is get your name on top salesperson because they win a Rolex at our company every year.

Kathy:
Of course, they do.

Henry:
Well, today we have a very special show. We have an article from US News & World Report. Now they released a report about the 150 best places to live in the United States for 2023 and 2024. So we thought we would take a look at the top four and determine if we think these are good markets to actually invest in.
Before we get into all that, I did want to take a moment and just be a little sentimental here. I just want to say thank you to our audience. On the Market has just developed this really great audience of people and investors. The support that we get when I’m out and about, and I see people about this show is super great. We wouldn’t have such a great show if it wasn’t for you guys.
So thank you so much to our listeners for continuing to support us, continuing to listen to this show. We couldn’t do this show without you, and you’re the reason why we do this podcast twice a week.

Kathy:
Oh my gosh, I agree so much. Everywhere I go, I get stopped with people saying … Not everywhere I go, but when it’s a real estate event like I just went to yesterday in Scottsdale. People come up and say how much they love the show, and we just really appreciate that. I want to take a moment before we start to read a review that I thought was really fun.
This one is called Not Boring. It’s a five-star review, so thank you so much. It says, “The only,” it does say. “The only fun, not boring, engaging real estate podcast. These guys,” it should say also gals, “are not squares.” So, good to know. “It’s actually entertaining and so educational.”

Henry:
They’re correct. I am not a square, I’m more round. I’m more like an oval, I would say, is a better term to describe me. No, that’s a super cool review. I’d also like to share one. So this review is called On the Market is Where It’s At. Another five-star review, it says, “I love the combination of real estate and economic data in conjunction with the focus on different geographical areas of the country. Clever name for the podcast as well.” So, I’m sure Dave would appreciate that because it has to do with data and that guy is the data deli. Perfect.

James:
We don’t make data boring, which is a talent in itself.

Henry:
That is a challenge.

James:
It can’t be unless you’re a real estate nerd like me, and then you just love the data. Thank you guys so much for those reviews. They’re great. They actually just made my whole day. I’m going to just go on and read our reviews every morning now to get me going on the day.
So up next, we’re going to review the best places to live and whether we think they’re actually investible or are they just a really good place to live, kind of like what people tell me all the time in SoCal. Before that, we’re going to take a quick break.

Kathy:
Welcome back. As we said, we’re going to be reviewing the best places to live according to the US News & World Report, and discussing if we believe that it’s a good market to invest in because a great place to live may not necessarily be the best place to invest. So coming in at number four, we have Boulder, Colorado. James, can you tell us a little bit about this market?

James:
Well, first and foremost, I could live in Boulder, Colorado because it gets 300 days of sunshine a year and I am a sun-

Kathy:
It does?

James:
Yeah, Kathy. So it gets the sunshine that we get in SoCal, and we could be paying way less taxes and have a little bit more affordable place to live. So, Boulder all around is just ranked all over the board as one of the top metro places to live. You get sunshine. You get quality of life. You get outdoor spaces. You get fresh air. Overall, people just really, really want to live there.
For me, it’s still a very expensive market. Quality of living versus whether I’m going to invest there is going to be … So I’m always going to pick the market that can make the highest return. Sometimes picking the place that you can live in doesn’t mean that that’s where you should invest.
I actually personally split my time in SoCal and don’t really invest much there because it’s expensive, and I invest all in Seattle. I moved out of there for a reason. They don’t sometimes go hand in hand, but the key metrics at Boulder, it does have some very good metrics that are going to make it attractive for the certain type of investors. So I think it really comes, what are you trying to accomplish?
The metro population is 328,000, so very large. It’s inside one of the 150 most populated metro cities nationwide. Median age is 37 years old. A lot of Gen Z, millennials have moved out there because they want that quality of living and we’ve seen that over the past three years with the pandemic. A lot of younger population, a lot of the tech population or work from home population has moved into this kind of areas.
The thing I don’t like about this city though is the annual salary is 73,000, whereas the median home price is 881,000. That’s where my big concern about investing in this market is because if you compare it to another expensive market like Seattle. Seattle’s median home price is almost the same. It’s about 881 for that metro city. It’s in the 800s, but the median income in that city is 106,000. So, it’s a lot more affordable. Even though Seattle’s a lot, it’s ranked as one of the most unaffordable cities compared to a place like Boulder, it has a lot more growth and it can cover a lot more. So, that is my big concern with Boulder, Colorado.
It’s a great place to live. You have lots of different growth. You have a huge college campus there, which is really good for the investor targeting student housing. I really think that that is the biggest platform and angle to play in Boulder, Colorado because other than that, you really can’t make things pencil.
When I did a little bit of market research in there, I was looking at the average cost of four units in the area. The average cost I was seeing was 1.5 to $2 million, and the rent income that was going to be projected was going to be nine to 10,000. So, that’s just not going to cover really well. So a great place to live, but not a great place to grow your bank account.
Kathy, I know you work a lot in SoCal and expensive markets. Would this be an expensive market? I know you’re all about quality living, quality place.

Kathy:
Boulder is not a cheap place to live. It’s funny, Denver isn’t really anymore either. My daughter’s moving there, and she’s getting a one bedroom in downtown that’s over 2,000 a month. That’s kind of LA prices. So no, it’s not affordable, but it’s super cool. I would live in Boulder too. I didn’t know it was a sunny place. I’m a California girl. I need my sunshine, so that’s amazing.
I assume you could really make the numbers work, if you bought the property 20 years ago. You’d be in great shape. That’s some good cashflow in Boulder. If you’re really creative, if you’re renting by the room or having two or three students per room, there’s ways to make college towns work. I know people that own properties in San Diego, New York colleges. Kids, they’ll squish in and make a dining room, a bedroom, or whatever.
So if you can rent by the room, or be creative, or maybe short-term rental, you could possibly make it work and hope that maybe you also get appreciation. I probably would not invest there.

Henry:
Yeah, Kathy. I am in agreeance with you For the most part. I think this market with just looking at the two metrics James called out. If the median home price is 881,000, but the average annual salary is only 73,000, you’re going to have a lot of people that can’t afford housing. It’s hard to make those numbers work.
As an investor, knowing that the median home price is 881 and that salary is that low, people aren’t going to be able to pay the rent that you need them to pay in order for the properties you’re buying to cashflow. So if you were going to invest in a market like Boulder, you would want to have a superpower of really understanding that market in extreme detail and where, what pockets of the city deals make sense in, or you have to really specialize in student housing so that you know how to go and buy something that you can maybe turn into a deal.
You probably have to go buy something that’s a single, and then break that down into a boarding house of some kind that you can rent by the room. Then being creative, there’s probably ways that you can make a deal work. It’s going to take some extreme understanding of the market, and you’re going to have to have a lot of boots on the ground. It’s not just something where you’re going to say, “Hey, I’m going to pick Boulder. I’m going to go buy a couple of deals, and I’m going to make some money.” The numbers aren’t telling me that.
So, you’re going to need a little more help in that scenario. It’s not one I’d pick to say, “Yes, you can invest here. It’s a great place to live, and you’re just going to make a bunch of money.”

James:
The cashflow is not great, but it depends on the investor and what your goals are at the time. For those who want to subsidize cost, and they got to pay for room and housing for their child and maybe they’re going out there, it is not a bad place to look at because quality of living, we’ve seen has made a stable market for steady growth, and so you can get steady growth out of it.
The one thing to point out is their room and board cost has gone up quite a bit. It’s like 5% a year right now, and the average cost is 17 to $20,000 room and board for a student in that market. So if you do have a child going there, it’s a good way to reduce your cost. So it depends on what kind of investment strategy you’re going with, there’s nothing wrong. If your child’s there for four years, I mean who knows? They could do the Van Wilder and go for eight years.

Henry:
Or the Henry.

James:
The Henry, right? That’s 80 to $160,000 that could be rolled into your investment. So it really depends on what the strategy is, but I can’t make a pencil unless it’s a rooming house. One thing that is happening though is primetime. Deion Sanders has made an impact in this campus, and now out of state applications for colleges has gone up 40%. So those parents that their child wants to go hang out with Deion, because who doesn’t want to hang out with Deion Sanders?

Henry:
I would hang out with Deion.

James:
So 300 days of sunshine, Deion Sanders, who knows? Maybe you want to still invest in Boulder even though your return’s not great. Kathy, what market did you bring in for number three?

Kathy:
Mine’s actually three. It’s the Triangle in North Carolina at the Raleigh-Durham and Chapel Hill area. Again, this is a very young market, 37 years old, makes me feel so old. What I like about the Triangle area is it’s over 2 million people. So, that’s a whole big pool of renters there. These are generally highly educated people. There’s a big tech industry research.
Things I love about North Carolina from an investor perspective is low property taxes. That’s always a good thing. Again, this whole Triangle area was named third in the top best places to live. I know some friends from California who moved there. Absolutely love it for the affordable lifestyle compared to California and still near pretty close driving distance to beaches, nice weather.
It’s gotten a little bit more expensive there. I have been wanting to invest in this area for years, but it just didn’t quite cashflow the way I wanted. Prices have been higher than say Charlotte nearby, so we focused more on Charlotte. Although I wanted to invest here, I just again couldn’t make the numbers work. I think if you were living there, like US News & World Report is saying, it would be pretty affordable compared to other similar tech markets.
For investing, I think you can do better in terms of cashflow because the price point’s high. The median home price is 434,000, monthly median rent is 1,100, about $1,200 a month. So those numbers don’t work for me. You’re really hoping for appreciation in that kind of scenario, which is not something I like to depend on or rely on, although it certainly has been reliable. There’s been a lot of appreciation in the area.
So again great place to live, might be a good place to be an investor, maybe if you’re flipping. Again always depends on your strategy, maybe wholesaling. For what I do, buy and hold, I think I can do better elsewhere.

James:
I love the Carolinas. I spent a lot of time out there this last, as I was doing some market research on possibly moving out that way. It is an amazing place to live. The people are nice. The climate’s great. It’s got a lot of greenery, good place to live. Overall metrics-wise, I actually would invest in this area if you can find the right kind of product and value adds going to work.
The reason I believe that is because there’s still growth. Because it’s a great place to live, it’s getting a lot of migration. A lot of people moving into the area and the overall cost of living, it’s a great place to live. The cost of living is 4% lower than the national average. So anytime that someone can live somewhere really special that has a high quality living and it’s more affordable than the average, it has some extra runway and growth. So, this would be a market that I do see could continue to get some appreciation in it.
I think that all matters with the median home price at 400 and change, and the median salary at 62,000. That’s a good metrics. People can afford to live there. That means people will still come into the market, and there could be some really good growth. So I would personally, I would live in the Carolinas, and I would actually invest there.

Henry:
I am bullish on this one. I really like this market. There’s four big reasons why I like this market and those four reasons are Duke, North Carolina, North Carolina State, and Wake Forest. All four of those campuses are very close to each other within this area. That’s going to bring a lot of people to the area, a lot of jobs to the area, a lot of students, a lot of renters. So what I like, not just because of the universities, but they also have a growing tech industry in this area. As well, you have hospital systems. So, you’ve got lots of medical jobs in this area.
So the economy, I think is solid. Market numbers are also pretty solid to me. So when you look at the average annual salary of 61,000, but you have the median home price of 434, just on face value that doesn’t sound great. What that tells me is the median home price is pretty solid. So if you’re going to go buy something on the market, those numbers aren’t going to work.
If I can dive into this market and get good at deal hunting and going direct to seller or implementing some other type of method that’s going to help me find those deeper discounted deals, I bet you can make those numbers work and you are going to have a rent base. You could implement some college type strategies like renting by the room, carriage type housing.
I think you can both get equity appreciation and cashflow. It’s going to take a little more work. You’re not just going to be able to go buy something you see on the market and make it work right away, but with a little bit of effort in a market like this with strong numbers and a strong economy, I think it’d be a great place to invest.

Kathy:
Maybe we should go deal hunting. Go on a little trip to the Triangle.

Henry:
That’s my love language, Kathy. Let’s do it.

Kathy:
Well, before we get to our other two markets, we are going to take a quick break to hear from our sponsors.
Welcome back to On the Market. So we talked about the two markets that are in third and fourth place, that being Boulder, Colorado in fourth place, and Raleigh-Durham in third place on US News & World Reports’ best places to live list. We’ve been talking about, yeah, we know they’re great places to live. Are they great places to invest? We would love to hear your comments on that in the notes. So let us know, do you invest in these markets? If so, what’s your strategy? What are you doing that works? Hey, do you want to go on a deal hunting mission with us? So we’d love to learn more.
All right, so now we’re going to go to the top two places to live, again according to US News & World Report. Henry, what’s number two?

Henry:
Well, before we get to number two, if anybody is in the Boulder, Colorado market and you have a house sightseeing tour and we can go see Coach Prime’s house. I’m in for that. So, send me a DM. I’d love to go see Coach Prime’s house. The number two market on the list is Huntsville, Alabama.
So Huntsville, Alabama, what I like about this market? It’s got a great metro population. The median age in Huntsville, Alabama, what do you guys think it is? Let’s take a guess. James, what do you think the median age of people in Huntsville, Alabama are? Don’t cheat.

James:
You know what? I would think it’s an older population personally. I would think it’s going to be about 45, 50 years old.

Henry:
Kathy, what do you think?

Kathy:
Well, I cheated, so I know.

Henry:
Okay. You’re a big cheater. This caught me off guard. The median age in Huntsville, Alabama is only 39 years old. So that’s pretty solid, these people. The average annual salary is 61,000, and the median home price is 349,000. So I think those are some pretty great numbers in terms of places to invest.
What a lot of people don’t know about Huntsville, Alabama is the strong economy. So if you’re looking at Huntsville, Alabama, they call it The Rocket City because it’s got history in rocket development. That means there’s aerospace and defense work, and aerospace and defense contract work in this area. So, it’s a big technology hub. There’s lots of manufacturing. Toyota has a plant out there in Huntsville, Alabama. So you’ve got a lot of economic growth. You have a reasonably young core of people who are living and working in this area.
You’ve also got other development projects, especially in the sports world. So you’ve got Toyota Field is under renovation. Joe Davis Stadium is going to have some work done. So it’s going to be lots of things contributing to people wanting to either move here and relocate for work and live here where you have a fairly low cost of living. The people who live there are able to afford homes. So, all that to me says positivity. What do you guys think about Huntsville, Alabama?

Kathy:
Oh my gosh, I’ve been a fan of Huntsville for probably 20 years now. You may or may not know it. At my company, RealWealth, that’s what I do. I would go and search the country for good places to invest. I found out about Huntsville and learned that you can rent to a rocket scientist. They’re full of them. They’re everywhere. That’s a pretty good tenant.
Yet when we started investing there, it was, oh my gosh, $150,000 for homes that again you could rent to somebody that brilliant. Obviously, prices have gone up dramatically. I think they’ll continue to do so. That’s not an industry going away. We need to consistently be developing the military, and the space programs, and so forth. So, that’s almost guaranteed tenant-employee base. So, I think it’s a great place to invest and apparently also a great place to live.

James:
Huntsville is on our dream buy list. So me and my wife sit around and we talk about, okay, if we wanted to do a full redo and transition to a simpler lifestyle where we’re not running a million miles an hour, Huntsville is on the top of the list because it’s like a fairytale city. It really is. The quality of living there is so good.
This is why I like this market. Huntsville was named the second-best place to live in the United States by the News & World Report 2023 to 2024. Quality of living’s good. The overall metrics behind it, those are not bad numbers. Average annual salary is 61,000. That brings in, there’s a wide range on that too because the demographics vary quite a bit in Huntsville.
You have a lot of quality people. In the space industry, they’re making good money. With an average median home price at 350, I feel like that is really good metrics for growth. With the median monthly rents at 912, there’s a lot of growth inside those numbers. As salaries increase, the rent should be going up as well. The median home price is affordable that you can trade around in.
With the median home price at around 350,000, for a value add investor, I think that’s a good target. Like what Henry said, is you can get a deal in any market. So at 350 at the median home price and we’re buying these at 270, 280, where you’re getting that instant value add, it’s going to actually break even with some growth on there. That growth is where you can trade that equity out.
So, I like this market. It’s a great place to live. Me and my wife have it on our list if we ever just want to do full restart. It’s got growth and people want to live there. Actually, I was shocked on that population number 39. That means there’s a lot of young working force, working remote that are going to have careers that are growing. This is going to become a more expensive market.

Henry:
I couldn’t agree with you guys more. Huntsville’s got great market dynamics. You can definitely find yourself a deal. If you live there, you got an advantage, man. I’d definitely be taking a look. You don’t want to miss out on an opportunity there. Now, we get to move to the number one market on the list. So James, tell us what the number one market is, you big cheese head.

James:
I brought this market up about six months ago. It’s Green Bay, Wisconsin. It has a very high quality of living, and it’s really because it’s affordable. Now personally, I do not like cheese and I do not like really cold weather, so Green Bay, and it doesn’t have an ocean around it. So it’s not the place for me, but I would definitely invest there.
What I like about investing there, it has a very low cost of living. The median home price is 278,000 with the average salary at 51,000, and the median rent is $851. So it’s a very, very affordable market and this is a great cash flow market. Now would I live there? Absolutely not. I will visit there to watch the Seahawks beat the Packers sometime in the future, but it’s a little too cold for me. It’s not really my kind of vibe.
Then again, I like to invest where I don’t need to live there to invest. That’s not what I’m going for. I’m always going for math. What appreciation play can I get? Which I don’t know if Green Bay is really going to give me those high equity gains, but for stable rent growth where you can buy a property below market. Again, value add investing.
If the median home price is 270, you’re buying them for 200 and you can rent these properties out, you’re going to cashflow. It’s very, very affordable. I do feel like as the economy has been shifting and we’ve seen these markets that are affordable are still growing. That’s what we’ve seen in trend, even with high interest rates. So, I think it’s a great place to invest. You can get some really good cashflow out of it, but if you want to go check on your properties, bring your warm coats. I just like being warm, so it is not for me to live in.

Henry:
Don’t birds fly south for the winter? Are you sure your Seahawks would make it all right if you had an away game in Green Bay? They all going to be okay over there?

James:
I think the last one, it was six degrees. It was when their field goal kicker missed a 10-yard field goal. We went to the next round of the playoffs.

Henry:
Yes, because he was kicking a brick. That thing is cold.

James:
Oh, I will point out. I opted to not go to Green Bay for that game, but I went to North Carolina for that game because it’s a way better place to hang out in my opinion.

Henry:
I agree with you. I think the dynamics in terms of cashflow are there. I am not a big fan of cold weather either, and so I probably would not invest in this market just because of that alone. Don’t let my hatred for cold weather stop you guys from going out there and making money. I think great dynamics, population’s good. The only other concern I would have, is the economy going to be there long-term to support continued growth long term? If that’s there, I think you’ve got great market dynamics in a place like Green Bay.
I was really surprised to see, again the median age is only 38 years old. I would’ve thought it was an older market there as well, but goes to show what I know about cold weather places.

Kathy:
Well, I can say this is a place I want to visit because I do love cheese. I’ve been dying to go to Wisconsin for the cheese. James, I think you would like it in the summer. Just from everything I’ve read, it sounds like a really fun college town, and then at the sporting events. Just go in the summer, they have water there. It’s probably freezing that you won’t swim in it, but you’re not going to swim in California water either, I’m guessing.
Anyway, I would invest there too. Maybe a short-term rental because of all the visitors that come for, again, parents to come visit their kids in school or for the sporting events. Short-term rental could work possibly, but boy, I’d need to understand the market a little bit better in the rental market. It sounds like low rent for buy and hold. I don’t know if this is correct, but median monthly rent at 851, even though the home price is lower, so is the rent. So it may or may not make sense from a buy and hold perspective.

James:
Well, and the cost of cheese is going up too.

Henry:
So we shouldn’t invest in housing, we should invest in cheese.

James:
I mean it is going up. So there’s this economic stronghold, but I don’t know. I just can’t go to a football game and wear a cheese hat on my head. I just can’t. I’d have to become a Packer fan. I just can’t do it. I don’t look good in yellow.

Kathy:
I don’t look good in yellow, cool for the day. All right. That town’s not going to work for you, James. All right, well thank you all so much for joining us here On the Market. I hope you’re having a wonderful holiday. We look forward, so forward to seeing you in 2024.

Dave Meyer:
On the Market was created by me, Dave Meyer, and Kailyn Bennett. The show is produced by Kailyn Bennett with editing by Exodus Media. Copywriting is by Calico Content. We want to extend a big thank you to everyone at BiggerPockets for making this show possible.

Andrea Enria, chair of the European Central Bank’s Supervisory Board, discusses the banking sector, the economic environment and the risks to commercial real estate with loans due to mature in early 2024.

David:
Welcome to the BiggerPockets Podcast, holiday edition. I am your host, the Grinch of Real Estate, and I’m being joined today by my favorite elf. He’s an angry elf. Rob Abasolo.

Rob:
Call me angry one more time.

David:
If you’re listening to this when it’s airing, then we’re wrapping up 2023, and a lot of us are spending time with loved ones. So today we’re bringing you one of the most beloved episodes of this past year, our interview with Yamu Camara.

Rob:
Yeah, we’ve heard a lot of inspiring stories over the years on this show, but Yamu’s story really struck a chord with people and with myself personally. I remember choking up during the interview and you guys were like, “What’s the question?” And I was like, “yes, that’s right. What happened next in your story?” And it was a really just inspirational story. It’s one of my favorite that we’ve ever heard on the show specifically because it just shows you what’s possible in the world of real estate, no matter what’s holding you down.

David:
But it’s not just her story that’s impressive. It’s also her results. Yamu is making over $80,000 a month from her real estate portfolio, and she breaks down exactly how she did it in just two years. All with strategies that are still relevant today, like house hacking and medium-term rentals.

Rob:
And by the way, to everyone listening, we so appreciate you being a part of the BiggerPockets community. We love you. We thank you. We’re grateful for everything you do for us. So please, from the bottom of our hearts, enjoy this episode.

David:
Welcome, Yamu to the BiggerPockets podcast. How are you this morning?

Yamundow:
I’m doing great. Thank you for having me.

David:
Yes. Let’s jump right into this thing. I want to hear about your story. So tell me where are you originally from and can you give us an idea how you grew up?

Yamundow:
Sure. So my name is Yamundow Camara, but I go by Yamu for short. I’m from West Africa, a small country called The Gambia, West Coast. It’s by Senegal, it’s little country inside Senegal, literally. So it’s about two point something million. I’m the seven child of my family, and yeah, I grew up in that small village. I lost my mom when I was two, and I lost my dad when I was 11. So I was raised by my elder sister. And yeah, that’s a little background about me.

David:
So what was it like growing up there? Most of us have not traveled to the continent of Africa, much less where you’re from. Tell us a little bit about what daily life was like.

Yamundow:
Yeah, so it’s more of we live in extended family. So when my mom passed, I was two, when my dad passed, before my dad passed, he was really sick, so my sister was forced to get married. So she took me with her and my brother, my elder brother was like four or five years older than me, so I grew up as an orphan in her in-laws house.
It was hard growing up in an extended family that you don’t belong in because usually we live in family. So let’s say a family member, like a husband has maybe four wives or five wives, and they have kids. So that household is all, let’s say the last name is Greene. It’s like Greene Kundamini. Everybody in the house is called is Greene. So you coming in with a different last name, it’ like you don’t belong. There’s some activities that you will not participate in because you’re not a child of that household.

David:
So it was clear growing up from an emotional standpoint, you were a stranger in a sense, in the house. I mean, they knew who you were, but you were not welcome with open arms as if you were one of the kids. There was preferential treatment. At a very young age, you had to experience a lack of control in the pain that comes from not really having control over the outcome of your own life.

Yamundow:
Yes, basically.

David:
So I mean, you were thrown into a situation, you had very little control. Sounds like there was a lot of pain. Did you have your own room? Were you sharing a room with other people? What was that like?

Yamundow:
No. So sometimes I would come and as a child just playing with other kids outside and I just run in to go drink water and there’s a meeting about us, about me and my brother being returned. So I always thought, “Oh, so we don’t belong here.” And it really hurts as a child. I saw this meme on saying on TikTok the other day, and it clicked to me. I was like, “This is how it feels like. You don’t know what pain is until you live in somebody’s house who doesn’t really want you there.” And I was like, “That was me. That clearly explains my life.”
So I wasn’t allowed to sleep on the bed, so I would lay on the floor. When I say floor, I mean like sand floor, not cement, not like carpet or anything. So me sleeping on the floor, an eight-year-old, nine-year-old girl, I’ll have bed bugs. Sometimes worms will come and they will touch me and I’ll just wake up. So my brother made me this torch light. Flashlight, you guys call here, and I’ll just use batteries there. And that night I would just wake up and I’ll kill the bed bugs on the wall.
So I guess from there I was always obsessed with houses because I never really have. My father’s house sometimes when I visit for holidays, we would not eat sometimes. Sometimes we eat once a day. And sometimes when I go one time it was the rainy season, the summer holidays, and we would have to get up because the water was coming inside the house. That’s how poor we were.
So me laying down there as a girl, I always say I’m obsessed with houses. So when I see friends whose houses after school, I like to go to their houses and I always wondered one day, I’m going to get this house, one day I’m going to buy a house. But I didn’t think buying multiple houses, I would just say just the idea of having a house.

Rob:
You mentioned in that TikTok… Well, first of all, thank you so much Yamu for sharing.

Yamundow:
I’m sorry.

Rob:
No, no, no. You mentioned in that TikTok that when you’re not wanted in the home, I think that’s when you experienced the pain, right?

Yamundow:
Yeah, yeah.

Rob:
And so I’m wanting to know, was that really the moment, that inspiration where you’re like, I am going to find my own place one day, I’m going to have my own bed. Was that the beginning of your real estate dreams or did it come later on in life?

Yamundow:
Yes, that’s where it started. I always knew one day I’m going to make it and one day I’m going to buy a home. That was my dream to say one day I also have a home and a bed, so I’m like a house of my own.

Rob:
Is that your why? Is that today your why is the reason you do all this is basically to fulfill that dream?

Yamundow:
I have multiple whys, but that’s one of them.

Rob:
What else you got? I want to know.

Yamundow:
Poverty. I don’t want my child to go through any of those things that I went through ever.

David:
That’s something as you were talking Yammu that I thought of for you growing up in a house, I’m sure the genesis of why people felt like they didn’t want you guys there, they talked about you leaving was there was not enough money to go around. If you were not eating maybe one time a day they were incredibly financially stressed, and so you’re a burden in a financial sense you and your brother on this other family and they’re thinking from their flesh is what’s the easiest way to lighten my own load? And the emotional pain that has on someone else as you experienced was intense.
Now, fast forwarding to where you are now, you have 90 units that you own and more under contract, you’re making $80,000 a month. You’ve come a long way from sleeping on a floor, having to wake up to kill bed bugs that were looking to crawl into where you were. I know I just give a spoiler alert to everybody listening to this, but it is a fantastic story. This is something right out of a comic book. Do you know that you’re a superhero?

Yamundow:
I wish I was. Thank you.

David:
Okay. Well, we’re going to find out how you did this, right? What happened where you went from just wanting a bed to owning multiple, multiple, almost 100 units at this point? So let’s go back a little bit again. We understand that life was challenging in other ways other than just financial, especially as a woman in a male-dominated society. Can you list some of the things that you were not supposed to accomplish?

Yamundow:
Yes. So this is not how the life of a girl from my village supposed to be. I’m the only one that went to college in my village where growing up a girl is supposed to just go to all the way to maybe middle school and then you’re supposed to get married. For me, it was hard for my aunties to push and my sister to push, for my uncles because the male have more say in the woman’s life, especially when you’re getting married, your uncles take care of it.
So by the time I’m like 16, 17, they already thinking of arranged marriage. They’re already thinking of who are you going to get married to, it’s already arranged for you. So for me, for them to even let me to go to high school, to college was a big deal. Talk less of coming to America by myself, I had not been married. So by the time I was in high school, most of my friends that I grew up, they already had two kids already married and everything.

Rob:
Yamu. Did you have to fight to go to high school? Was that a really big battle with I guess your family or your extended family in the household? I mean, I got to imagine that probably didn’t come easy.

Yamundow:
Oh no. I didn’t have to fight. My aunties had to fight. I had to go through my aunties. I don’t have the audacity to stand up to my uncles. So my aunties would say, “At least she’s smart at school. The principal says she’s really good. She has a scholarship, we’re not spending any money, just let her go.” The same thing with college. It was like, “She has a scholarship, let her go.” They begged.
Okay. After this, they already had the person I’m going to get married to. I already knew who I was going to get a married since I was a young girl. So it’s pre-arranged marriage. So I already knew. They were like, okay, she knew she’s going to marry this guy when she’s done. So it was like I’d go to my auntie, my mother’s sister. My mother’s elder sister, who’s passed now, rest in peace, but she was fighting for me a lot and my sister.

Rob:
Wow. So you mentioned that obviously your why was the ability to eventually go on and have your own bed and own your home, and you said you don’t want to go back to poverty, and that was a big motivation for you. Was that the same with school? Because you mentioned you’re very good at school. This was something that you worked hard at. Did you work hard? Was school in your mind, your ticket out at that moment? Did you know, okay, if I really crush it in school, if I study and I get good grades, this could be my ticket out of this life?

Yamundow:
So for me, I was like, “Okay, if I do so great and every exam on top of my school, I’ll always have scholarships.” So where I’m from is nepotism. For you to get scholarship, you have to have connection to the government or something. I have none of those connections. So the only way to get through is be to the best from my school, the best outstanding one. So I was hoping if I can get to that top, they will not say, “Oh, we don’t have money for her to go, or we don’t have this.” It would just be, “Oh, she has a scholarship. What are you losing? It’s nothing. She’s just going to go.” And that’s how it happened.

Rob:
Wow. Okay. This is an amazing story, Yamu. Again, I thank you for the vulnerability here. Tell us a little bit about your first entry point into real estate. Was that here in the States? Was that back in Africa?

Yamundow:
No. So it started in the States here. With Africa, I just knew that one day I’m going to make it and buy a house, but at some point I just wanted to get out because the more I go on my education, the more I know this is now what I want more. So from high school, I know I want to go to college. I was like, “This is going to be a big deal for me to beg them to go to. So I have to do really good for me to get a scholarship to get it.”
So I made it to college because they eventually allowed me go to college. It was more like, “Okay, you have to be a doctor.” African families, they dictate your life, especially you’re a woman. So it was like, “You’re going to be a doctor.” I have good grades in chemistry, but I don’t like biology and chemistry at all, and I don’t like blood. So I was like, I have to figure a way. So there was this program, computer science that was introduced. Because I was good at math, it kind of clicked for me and I said, “This is what I want to do.” So I did a bachelor’s in computer science and a minor in mathematics.
So during my final semester at this point, there was just few girls or maybe two of us, I think two or one of us in computer science class. So I’ll go to some class, it’s all boys, right? So I was like, “You know what? Let me start a nonprofit organization that’s going to teach girls how to program, how to code, just basic IT skills.”
So I started this nonprofit organization. At that time I already to have an internship at a software company in the country there. So I would use their computers and we would travel with my colleagues in the organization and teach girls basic IT skills, like how to create a calculator, how to create folders and stuff like that. So it took off and then different regions were doing it.
So at that time there was this program called Mandela Washington Fellowship, and it’s for Young African Leaders that are doing amazing things in their communities, like fighting wars, helping women, violence, crime, all that stuff. So a lot of people would send me these link and say, “You need to apply because you’re doing amazing things.” I’m like, “I can’t compare to what these people are doing, but okay, I’ll just apply.”
And I applied and I keep going. First interview at the U.S. Embassy, I was selected. Second one, I moved on to the third one, and then they email me from D.C. and say, “You got it. You come to the U.S. You’re going to come to the U.S. and we’re going to place you at Northwestern, and after your fellowship you meet President Obama in D.C. So that’s how I came to the U.S.

Rob:
Wow.

Yamundow:
Yeah.

Rob:
That is amazing. I mean, was that a dream come true or was that so far out? Because for me, I have imagine your dream was to go to college, but maybe I’m sure you never imagined this, right? So what did that feel like?

Yamundow:
I was like a celebrity. My auntie was so happy. So that was also a ticket. At that time, I was like, “I’m not coming back to marry this guy.” I mean, there’s so many other things for me. There’s more for me to accomplish than just come back and get married and that’s it. And that’s what happened. But then I was already applying for other scholarship at that time.
So by the time the U.S. Embassy was processing and doing the orientation of how it’s going to be when I meet the president, all that stuff, I was already applying for schools here in the U.S., and I got a full scholarship to study at the University of Illinois, and I was like, “When I come back, I’m not going back.”

Rob:
That’s amazing. So you were studying, I guess computer science in Africa, and then you come to Northwestern and what are you studying At this point?

Yamundow:
It was business. Business and entrepreneurship. Yep.

Rob:
Okay. And so obviously you crush it, you make it, you finish the program and you go into these respective careers, or is this when your real estate journey begins?

Yamundow:
Yes. So I had to find roommates. So what happened was my whole class, mostly what their parents will do is get them a place and then they will rent out the rooms, more like rent out the spaces in the room. So in one room you can have, so let’s say the rent is $800 or $1000, they will rent out each room. They’ll rent up to 80 residential students to sleep on there.
So the whole concept of renting a room is more like renting a space. So you get your mattress and you share one room with three other girls. So we were paying rent to them while they take the money, make profit and take them money and pay their American chief.

David:
We call that arbitrage.

Rob:
I was going to say it’s the ultimate house hack. House hack arbitrage.

Yamundow:
Yeah.

David:
Okay. So it sounds like you saw that happening and instead of thinking, well, I’m being ripped off, or that’s not fair, they’re charging more than they have to. You thought, oh, I want to be in that person’s position. I want to own the asset, and I want to be renting out to people, right?

Yamundow:
Oh yeah. I was like, “This is amazing idea.” I was like, “I’m going to do this one day.” So I always had even when I was starting searching for my first property, I was looking for a property that has more than one unit, so that way I could do more rooms to rent.

David:
I love that. See your data scientists brain was like, okay, the pattern that I need to catch on is a property with more than one unit, more than one bedroom. A lot of spaces that can be rented as opposed to a pretty kitchen or a nice backyard or the things that everybody else is, “Oh, I love the oak tree in the front yard.” You’re like, “No, no, no. There’s no space in an Excel spreadsheet for an oak tree. I need to see the place that I could get the most beds into this unit. I love that.” When did you start trying to invest in real estate yourself?

Yamundow:
Yes. So after I graduated, of course I don’t have any savings, but I don’t have student debt, right? And of course coming as an international student, you get a social security, but I never knew anything about credit. Because I lived in a school setting. I worked for the school. I go home study, come back, work for school, go home study, come back, go to class. That’s all I knew. So there was no introduction to credit or anything, credit score.
So I have a debit card that the bank gave me that I get my thousand dollars from. That’s it. So I don’t have any credit. But again, when I graduated, I had a job to work for the CDC in Atlanta. So I moved from Illinois to Atlanta, Georgia to work for the CDC as a data scientist. First couple of months I started September 2019, just few months later, COVID happened. But before COVID happened, I’ve already started doing my research. Because I was like, “I’ve ever made that much money that I had.”
At that time, I have saved up 8,000. I’m like, “I’m ready.” By then because I love reading. So I went and said, “Okay, my first paycheck, of course, I have to send money back home.” And as an immigrant, you can ask any immigrant, especially from Africa, if you travel to the U.S. or travel abroad, you’re like the ticket. So everybody depends on you. Every morning you have a ticket of your family and stuff.
I’m like, “This is not going to work out where I just work and send money and that’s it, but when does it stop and when do I save?” So I said, “This is what I’m here to do, and I’m going to take all what I save and then start investing in real estate.” And of course, before thinking of, I already knew I would do real estate, but I don’t have the knowledge. So what I did was I Googled, went on YouTube and I see BiggerPockets coming up a lot. So this is me, of course.
And David and Brandon, every Wednesday you guys have this event that you do. That’s me in there every day listening. At work, I’m listening to the podcast. I’m cooking, I’m listening to the podcast. I’m in the train going to work, I’m listening to the podcast. So by the time I was already had so much information, I said, “Okay, they said the best way to get funding, of course funding number one is to go and work with local banks.”
I was like, “Okay, I cannot afford Georgia. Of course at the time, it’s like, let me start with where I saw what I wanted to do, which is Illinois.” So I looked at properties in that area, the same city that I went to college in Springfield, and I wasn’t finding properties. So I called different cities, different banks in the city, made a list, and I call each of them every day. I’ll make different calls and I get a lot of no’s, but I’m used to getting no’s. I didn’t let that stop me.
So I finally got one bank to listen to me and I said, “I just started working at CDC. This is how much I make. This is just my base salary, but I’m going to get more as I go. And this is how much 8,000 is what I saved up. I’m ready. I’m buying, looking for properties in this private area.” So I already have my document and my speech ready for when I call what I saved.

Rob:
And how many banks did you call, Yamu?

Yamundow:
It’s a lot of banks. I think I listed all of that. I just went on Google and I listed all the banks.

Rob:
And then finally you got one that would hear your story.

Yamundow:
Yeah. Well, she’s the vice president of the bank now, but before she wasn’t. So she was like, “Well, I know you got all these great things and you know how to analyze properties and you know what you want, what expert you want to go to. However, you don’t have any credit score. What you can do is go get a discover credit card, Capital One Credit Card and build your credit score, and then you can come back in six months or in one year.”
So I was like, “Okay, at least she get to listen to me.” And then I was like, “You know what?” Because every day I’m analyzing this. I was doing a project analyzing this every day. I was like, “I got this. This took my chest.” So what I did was I was like, “This is what I would do.”
I found a property that was listed for 52,000. The owners were going through a divorce and they were desperate to sell. They wanted to get rid of it. They wanted to separate and do all of that stuff. So I was like, “Okay.” Found this property. I went under contract even before approaching the lady. So I approach her back and say, “I found this property, it’s 52,000, it’s three units, two bedrooms at least are rented for 750, one bedrooms, are rented for this much.”
Even if only one unit is rented, I have still cash flow. So I wrote the numbers down because I run it and the calculator and everything makes sense. So I submitted to her, and then I called her. I submitted via email first, and then I called her. She was like, “You know what” we’ll give you a chance.” And they were like, “We’ll finance it.” And that’s how it happened.

Rob:
Okay. So you go down a list of basically every bank in the city, you keep hearing, no, no, no, but not a big deal because you’re used to hearing. So you just keep going. Finally, someone is willing to hear you out, and before you actually get the pre-approval or the approval from them, you find this house and you say, “I’m just going to make an offer. I’m going to get it under contract and I’ll figure out the financing later.”
And so you get it under contract and then you go to your banker, you’re like, “Hey, I got it. Hello, can you approve me?” And they’re like, “All right, we’re going to make an exception for you.” And then they basically fund the loan?

Yamundow:
Yeah, they funded it. They were like, “Well, the reason why we did, it’s because it’s not like your credit score is bad. You just don’t have history.”

Rob:
Right.

Yamundow:
So because my credit is fresh so it doesn’t have history, but it’s not bad. And I don’t have any other debt. I don’t have any other expenses. I don’t own a car at that time. I’m not paying anything except those two credit cards she told me. And I was already paying those off for two months before. She was like, “Okay, we’ll do it.”

Rob:
Wow, that’s amazing. So you buy this property and you said, “All right, even if I just rent one, I’m going to cash flow.” What ended up happening? Did that property end up filling up more than that? How many units was it?

Yamundow:
It’s three units and it’s a two bedroom. It’s a mix of two bedroom, one bedroom. Everything that could go wrong in a deal went wrong in the property. Turned out the property manager, the numbers that the agents sent me were wrong. The tenants were not actually paid because it’s a COVID at this time. I closed on that property April 17th. It was already shut down already. This is COVID time.
The one tenant that was about to leave, and there’s another tenant that hasn’t paid for like one year, and then there was one unit that was vacant. So them telling me they fully occupied and was bringing this much was all a lot. So what I did was the unit the tenant was about to leave was in a better shape. So I just painted that, just basic cleaning and painting and then rented that out.
So while all that was rented, the rent was coming in. After there was an announcement that the city were giving out to people that were behind on rent. So remember that the landlord and everyone has lied to me already at that point. So the tenant that was supposed to get that amount of money, about eight months worth of rent was sent to me directly because it was supposed to be an application between the landlord and the tenant. So we applied together and she got 8,000. So I took that 8,000 and I put it to renovate the other units, and now it’s cash flow for 2,000 a month and my mortgage’s only $300.

Rob:
Wow, that’s amazing. Okay. So a bit of a rocky start, but then you’re able to work it out. And out of curiosity, because you said at this time you were working for the CDC, right?

Yamundow:
Yeah.

Rob:
Okay. So was this particularly a difficult time? Because obviously you’re working for the CDC, COVID is happening. I’m sure you’re busy doing your actual job and then you’re also getting into real estate. Everything is going wrong. So obviously you have to balance everything. Was that overwhelming or was it like no big deal?

Yamundow:
It was overwhelming, but it taught me so much. So at that time in my team, well, everyone in my team is a lab scientist. So we work in the lab. I’m the data scientist. So every time a lab scientist go into the lab, let’s say they go at 2:00 AM, I have to be up by 4:00 AM to run the data so they can get the report to send it to a particular state. So imagine all the data that’s coming on all 50 states about COVID.

Rob:
A lot.

Yamundow:
Yeah, it was a lot. So I will be up at 4:00 AM. I’ll have my laptop waiting to analyze data while I’m also checking my real estate and trying to figure out what the numbers and everything. So it was not easy at all, but I was still listening to podcasts as I never get, I was already in. I had to figure it out, but it was not an easy time. Yep, it wasn’t.

Rob:
Right. And so you go on to buy more properties, but you said that you were struggling, you were saving and maybe you had to send a little money to your family back home and then you had to renovate this property. So how did you keep saving money or how did you save money to keep buying more property? Was there a specific skill or strategy that you developed?

Yamundow:
Yeah, so when I got that first property stabilized, I was like, “Okay, what next thing I need to know is move on because I’m not having any much cash flow coming in at that time.” So the property was actually cash flowing a lot, like 2,000 a month, but however, I’m not getting the money like it’s going back to the property manager. So the property manager was stealing from me.
Every time I talked to him, he said he uses his card to pay his contractor because most property managers come with their own team. So he said he paid his contractor. For example, let’s say he said, “I paid a contractor 5,000 to do the flooring and paid for this unit.” And I would just do my calculation. The numbers are not making sense, but I know that it’s cash flowing, right? Because the tenants are paying at this point, and my property manager always say, “Oh, Chester this or Chester that.”
So I know the contractor’s name is Chester. Of course I’m a data scientist if I want to find data anyway, I would find it. So I went and researched on him. It’s a small town. I researched on him, I found him, and I was like, “Hey, my name is Yamu. I know that you don’t have to answer these questions, but I have this property in this place and this is the address and I know you worked on it.” So he responded back and said, “Yes.” I was like, “Can we jump on a call?” And he was like, “Yeah, sure.”
So I asked him, I was like, “Does this receipt make sense? Did you charge me this much?” He said, Well, I don’t know.” He’s an honest guy, older guy. He was like, “I don’t know how much you guys talked about, about your contract, but I will never charge this price and this other receipt is not even for your property, this is for another property.”
So it turns out that he was charging me, sending me receipts because I’m out of state investor, right? He was sending me receipts of all the properties that he was working on, and I was just paying for that. So I fired him, and of course I stayed with the contractor and he’s a full-time contractor for me now. We have an amazing relationship. So even though everything went wrong, I got my team from there and he’s made me millions.

Rob:
Wow.

Yamundow:
I learned and I have been with him ever since, worked on all my properties.

Rob:
It must’ve been actually great though, that he ended up being a lot cheaper than you thought, right? So whenever you used him again, it was actually more affordable. So how was it working with him? I mean, because you said you worked with him to this day. Was he a large part of a lot of the projects that you went on to go and work on?

Yamundow:
Oh, yeah. He worked on all my properties in Illinois. So I invested in Midwest, Illinois, Cleveland, Ohio, Illinois and Georgia here. So all my properties, majority of my properties are in Illinois. He worked on all of them.

Rob:
Wow.

Yamundow:
But that’s how I scaled. And then, yeah, so scaling from that property after finding him, I was like, “Okay, I’m not going to find a deal that’s as amazing as the 52 units. $52,000 property, that’s three units that I placed for almost 90,000 after few months of fixing it.” So I was like, “Okay, where else could I invest in?”
Of course, I went back to BiggerPockets, and this time I was so active. So I was like, “What do I do next?” So a lot of investors were talking about, but especially California investors those who are buying Cleveland. So I reached out to them, “Hey, my name is Yamu, I’m a new investor. I’m looking to invest in Cleveland.” So I get a lot of responses. Some will say, “Don’t invest here. This is the A area, this is B, this is C area.” But the areas that they’re recommending for me to invest in, I can’t afford that. So I said, “I’ll stick with the C, D area and then grow up from there. And that’s what I did.
So I found this new place in Cleveland that’s listed for 68,000. So the owner has listed two of them actually. So I wanted both of them because at this time my cash flow and my property is Section 8, all three units cash flows come in. The bank is impressed with that. So again, I bid the documentation, put all the numbers together, and I sent it to them. They were like, “Yep, we’ll finance it.”

Rob:
And this was your second deal, right? Your second and third deal-

Yamundow:
Second deal, yeah.

Rob:
… with two duplex. Okay, cool.

Yamundow:
Yep, yep, yep. So the bank was like, “Yeah, we’ll finance it even if it’s out of state. The numbers look great.” 68,000, mortgage was 250 something, it’s two units, one was seven something so the other one was six something, so I was getting 1,345 or 1,350 or something like that. And the tenant pay all the utilities, I only pay water and sewer.

Rob:
Okay, so walk us through this really fast. Your first property, you said you bought it for like 55,000, you fixed it up, it appraises for 90,000. So you’ve built in $40,000 of equity. You’re like, “Okay, I think I experienced probably the worst part of it. I’m going to do it again.” And then you go and buy two duplexes and the bank finances those. And then just for reference, how many units did you actually end up adding to your whole portfolio in year one?

Yamundow:
In year one, I think about maybe at least seven.

Rob:
Wow.

Yamundow:
I think seven or eight. Yeah.

Rob:
First year of real estate investing with no foundation other than listening to BiggerPockets and doing research and everything like that, listening to the great David Greene and Brandon Turner and you’re like, “Okay, I’m going to do this.” And then you go out and you buy seven properties. So you get that first one, two duplexes. Tell us about the next four really fast.

Yamundow:
So the next one I was like, “Okay, at this point I’m getting cashflow, I’m getting a lot of cashflow, and I just got promoted my job.” So I was like, “Okay, from this I want to scale more. What can I do?” So at this point I’m looking at, I was like, “How about I take the cashflow with few months and buy a really cheap house?” So I’ve already built a relationship with that contractor.
So what I did was I found this property for 15,000. It was also a foreclosed property, so I got it for cheap. They probably got it for less than that, but I got it for cheap and it was a five bedroom, two bath. My contractor charged me 9,000 to fix it up.
Even at that point, I don’t have 9,000. I think I have like 3,000 at that point that I have in my savings and the rest, I was expecting it to come from the cashflow because I’m getting 2,000 here and 1,300 over there, so I was going to pay him in installment. So that’s how I got that. Once I fixed it up, I rented it on Section 8 as well, and then I had equity in that property. So the bank was like, “You can pull out equity from your property if you want to scale.” That’s how I did that.

Rob:
David, there’s a term for doing that, right? When you fix up a property and then you take the money out.

David:
Yeah. And there’s also a method to scaling, both of which can be found at biggerpockets.com/store by checking for the BRRRR book or the SCALE book. Yamu, I wanted to ask, did you get these ideas because you’re tinkering with different real estate investing strategies, you’ve got the arbitrage thing. You talked about rent by the room, Section 8, a little bit of long distance investing as well. You’ve been working into this, right? Did all of this come from BiggerPockets?

Yamundow:
Yes, it did. And I know you’re going to ask me in the end what’s my favorite book and I have it here. So this made sense to me because I live in Atlanta, at the time, there’s no way I can afford property at Atlanta at that time especially with a credit score, so I could only afford outside. It does have to be your background.
And me learning that from BiggerPockets, I was like, “Whoa, a light bulb went.” I was like, “of course I can do it at State.” But a lot of people that I talked to, even at work, my colleagues, they were like, “There’s no way you can, being a landlord is hard. You cannot fix a toilet while you out of State.” And I’m like, “There is the method. I’ve already read and then I’ve listened to multiple people do it. Why can’t I do it?”

David:
Well, when you mentioned that you found the better property manager that allowed you to scale. That’s what I thought of was sometimes we just kick around trying to figure out, this is going wrong, that’s going wrong, and it affects your emotions. You’re not excited about buying more real estate because it feels like just nothing but problems.
You got ripped off by the first contractor that would make anybody want to quit, right? Once you get your heart broke, you don’t want to love again. You don’t want to put yourself out there and find somebody else, so you just quit. But when you found the right person, it changed your process to be emotionally excited instead of emotionally discouraged. And so the Labcorp for I’m sure really helped. Can you remind me where were you at with passive income at the end of year two?

Yamundow:
By year two by 80,000 because I’m list April. This last April is my third year of investing. So by 2022, I was making like 80,000.

David:
That’s gross rents, correct? That’s not your profit?

Yamundow:
No, no, that’s profit.

Rob:
Wow.

David:
You’re making 80,000 profit after your second year?

Yamundow:
Yeah, that’s profit.

Rob:
Wow. After your second year. What was your first year? Do you know off the top of your head?

Yamundow:
I think the first year I was close to like six, 7,000. But then what happened was I got a package deal, so it escalated fast. With the package deal some of the units turnover was like two weeks, three weeks. So my contractors will actually go into the unit and to the property and live there. So they would stay there for that two weeks while they’re fixing it. So I was renovating houses faster.
So what happened was the reason why it scale faster, so I took that second job as a statistical programmer for Labcorp. It’s a six-figure job. I did the interview. I didn’t think I was going to get it. The next day they called me, they were like, “You’re amazing, you can start on one day.” I was like, “Okay.” So I got that six-figure job so I was dumping all that money into buying more real estate. So I was buying packages at this point and just turning them on Section 8.

Rob:
You’re working a full-time job for the CDC. You have a mastermind with people from the BiggerPockets community. They’re like, “We all have two jobs. You should have one too.” And you’re like, “All right, sure.” You go, you apply, you get a six-figure job. And then they’re like, “Yeah.” So now you’re making really good W-2 income, and instead of spending it going out and just having fun, you’re like, “I’m just going to put it all into houses.”

Yamundow:
Everything, everything into houses. So I’ll buy package deals, five units package deals, six unit here, five single properties. So I was just doing and sleeping with them.

Rob:
Okay. All right. So you said your first year of passive income six, 7,000 or something like that, year two, it goes from six, $7,000 of passive income a year, and then year two it’s $80,000 of passive income. are those numbers right?

Yamundow:
Yes.

Rob:
Okay.

Yamundow:
The reason why it got to 80,000 is because at this time COVID had happened, 2021/2022 everybody’s talking about Airbnb short-term rentals. So in Atlanta everybody was talking about especially social media. So my social media page, what I did was I created a new page and I followed just real estate, everything that has to do with real estate. So I get a lot of people advertising about you can get a property, you can do Airbnb without owning a property. I was like, “Okay.”
So I looked into buy a few courses here and $100 here, 150 here, and I joined this masterminds. I was like, “I’m just going to jump in and do it.” I credit an LLC just like the courses would say, and I approached apartment complex here. So I was like, “How about I get these in my LLC name and I can arbitrage it?”
So I got one unit, I arbitraged it. And two weeks, three weeks into it or three months into it, I got a booking for $40,000. So the company booked for this guy.

Rob:
Nice.

Yamundow:
Yeah, the company booked for him from New York. He’s going to be working in Atlanta a whole year. So it was like $44,000. I was like, “This is a double brainer.” So I got multiple. Now I have eight units in Atlanta.

Rob:
That’s really cool. Let me just clarify something. When you said year two, your passive income was 80,000, was that 80,000 per month or per year?

Yamundow:
It’s per month.

Rob:
Oh my gosh.

Yamundow:
Yeah. So my Section 8s were bringing in about 15, 16,000 and then I was making about 40 something thousand on Airbnb with the multiple properties.

Rob:
Wow, okay. So year two is 80,000 per month I thought was per year, and I was like, “Oh, 80,000 bucks a month. I mean, most people work for 10 years to get to that level, just $8,000 a month.” So you’re getting $80,000 per month. And so you get into the Section 8 game, you get into medium term rentals and you do arbitrage. Were any of those your favorite or were they all just like fun because it’s all just new?

Yamundow:
Section 8 was more of a dream to give a family a home. The midterm rentals were more of me buying and scaling. In 2021 when I was doing the arbitrage, I was like, “okay, I already have bad run real estate where I had my own properties. How about I take this money instead of renting from apartment complex here, how about I buy my own apartment complex?” That’s how the 80,000 came about for month.
So what I did was I was like, “Okay, I’m going to take this method in Atlanta the arbitrage, but use the money to buy my own apartment complex.” There’s a single family and rented on Section 8. So I found this property that’s listed for the same city that I invest in Section 8. I found this property that was listed for 145. It was abandoned for two years and the landlord just wanted to sell and get rid of it.
So there was a fire incident that happened and he was going through a lot of violations. So he had the city removed most of the violations, but it was almost the aim. So when I came in, I offered 10 and 120 and he accepted at closing, I got about 5,000. Again, I approached the bank and I told them the method that I’m doing. So I always had this relationship with the bank already. I always make sure they know what I’m doing.
So I told them about the short term rental, big term rental, and they were like, “That’s not going to work in a small city like this.” What they don’t know is that property works for me because at this point I have experience with travel nurses. So that property was between two hospital, 1.6 miles from another one hospital and 1.2 miles from another house. So it’s perfect for me. I did the analysis, the market research, and most of the people that were renting to travel nurses there were like a month’s have passed.
So let’s say a family has a basement and they would rent it to travelers a shared room or something. I would say, well, if I have this property which is eight units and multiple mixture of single one bedrooms and studios, I could do that too. So that’s how I ended. The bank was like, “We thought you were crazy, but this is amazing number.”
So with that property that helped me scale to 20,000 because when I had my contractor going there and he leaves one hour from that city, he came in there and he gave me a code for 85,000. I gave it to the bank. They were like, “Okay, we’ll finance it.” Of course I put 20% down. And my contractors, they gave me, they were like, “It’s a lot of work that he needs. What we can do is give you a grace period of three months, so you only pay interest.” That was amazing.
So my contractor was like, “We will move it. I’ll fix it from up and move our way down.” So while they were fixing, but let’s say they fix two units, I’ll furnish it and have nurses on it. I’ll list it to have nurses already coming in. So by the time it was almost complete, I was only paid interest, no mortgage. That property alone brings me 22,000. That’s how I scale to the 80.

Rob:
Wow. 22,000 a month?

Yamundow:
A month, 22, 23, 24 here.

Rob:
Yeah, just 22 to 24,000. Like no real big deal.

David:
Be conservative.

Yamundow:
Yeah. So my mortgage was just 1,200 and then each unit, I pay my utilities for 1,200 worth my mortgage, and each unit utilities is like $100, $110, 120, something like that.

David:
Okay. I got two questions I want to ask. The first is, do you have one person managing all these assets in different locations or are you doing that yourself?

Yamundow:
No, so Cleveland I have a property manager. Cleveland Properties, remember when they came in with tenant occupied already. So I was managing for a while, but when I was scaling with mid-term rentals here, I have to find somebody to manage it. So I have a property manager in Cleveland, and of course in each of the cities, the closest cities will have one property manager.

David:
Yeah, you really are following the long distance real estate and then you manage those individual property managers, right?

Yamundow:
Oh, yes.

David:
Okay. Next question. How are you running your numbers? You’ve got a different approach to this, and I’m curious if your data scientist background led to you looking at things differently, but can you share what your system looks like when a property comes your way and a bank thinks, well, this is all the income in would generate, you’re able to generate more than that. What are you doing differently?

Yamundow:
Yes, so this is how I run my numbers, right? If the numbers not make sense, I’m not going to push it just to say I have this unit. For Section 8, I want to get at least 800 to a 1,000 profit because it comes with more work, more attention and everything. With short term rentals, I was just looking to scale. So it depends on how much I furnish it. If I’m going to put 2,000, $3,000 or up to $5,000 per unit, I want to get at least $1,000.
So with Atlanta, I could get all the way profit to 2,000, especially at the peak season, per profit, per door. So that’s how I run it. Depending on how the property. With Section 8, I’m looking at at least $1,000 because it needs more work and I have to have pay the property manager maintenance of course. So I include all of that. So that’s how I run the numbers.

David:
And I’m going to assume you’re also factoring in they need the cashflow more because in some of these areas you’re buying in, you mentioned C to D areas, they’re not going to appreciate as much and the headache factor is higher. So you have to make up for that by getting more cashflow to make the juice worth the squeeze, so to speak. And that’s where you came up with these numbers, right?

Yamundow:
Yes.

David:
For people who hear this and they think, I want to do what she’s doing, which I’m sure everybody’s going to be thinking, what are some of the challenges that people need to be aware of if you want to grow a portfolio, the way you grew yours?

Yamundow:
There’s so many challenges. You’re going to go through property contractors. There’s no investor that’s going to tell you, oh yeah, Mike, I have one contractor from day one never stole from me, nothing. I went through crappy contractors to get there.
Property managers, even though you have a property manager, doesn’t mean you don’t manage. You still have to run the numbers to make sure this makes sense because if I didn’t do that, I wouldn’t know that a property manager was stealing from me or even sending me receipts of all the properties. It’s not an easy day, easy way out. You have to figure it out. You have to run the numbers, and of course you have to always analyze deals for it to make sense. If it doesn’t make sense, you can’t force it.

David:
There’s also, I’m hearing you mention there’s a lot of management that goes into the properties once you have them, you have to look very close, which I think you learned at a relatively early stage because in one of your first deals or the first deal you were taken advantage of.

Yamundow:
Yes.

David:
That separated you from this idea of passive income that you just bought it, forgot it, and there’s nothing more to it that rhyme. Maybe we need to start saying that, but you have to pay attention to your investments that it’s not a thing that runs itself. It’s often described that you buy a property, it’s turnkey, it makes money, and you just go have fun on the beach or vacation everywhere, and your real estate pays for all of it. You don’t have to still work. Has that been your experience or has it been more like it’s a second job?

Rob:
Or a third job for Yamu.

David:
Yeah, yeah.

Yamundow:
Yeah. Well, now that I’ve, well not mastered it, but now that I’ve learned, I’ve gone through so much mistakes and I’ve learned, I could say I could go chill at the beach now. So I’ve got everything in place. I have a property managers in place. I have systems in place, I’ve automated things. But the beginning, no, you have to actually work the business to actually make it work. You can’t just buy and just forget it.
There’s so many things that is involved with it. Yeah. So now I do day-to-day stuff, like I have a VA that go through my funds, find the messages. I have property managers that do. All I do now is sign leases and analyze this.

Rob:
So Yamu, obviously you came from Africa. I got to imagine that the tax code is very different there than it is here. So you can come here, you’re crushing it, you’re making $80,000 a month. You have two full-time jobs. You’re making six figures on the W-2 side of things. Tell me a little bit about your tax situation once you actually started really making money. Was this a big shakeup for you where you’re like, oh my gosh, I have to pay the government money? What was that whole situation?

Yamundow:
That’s a really good question. It’s so shock coming from Africa where we don’t pay taxes like that. So the beginning, I already had my salary and because I wasn’t making a much, I actually get to get a tax reform and I was like, “This is amazing. America is nice. At the end of the tax, you get money.” Then I started invest real estate, and then when CPA tells me you’re going to be paying the IRS $30,000, I was like, “What?” I was like, “No, but in real estate, when you invest, you get to save.” It was like, “No, but not when you make millions.” And I was like, “What?” That’s when I realized what my tax bracket worse.
And then he said, “And also your W-2 is not helping because you have two W-2s that are paying you six figure now.” And I was like, “Oh my God.” He’s like, “If it wasn’t for real estate, you would be paying way more to IRS than what you’re, so the real estate is actually saving you.” And then I was like, “Yeah, this is going to continue. I can’t pay the IRS this much.”
So of course, four months ago, I let the Labcorp job go and I just stick with the CDC one because now it doesn’t really make sense having that kind of cash flow. It’s just that when I added my Savannah Properties here that are bringing me about 15, 16,000 a month in just Savannah, Georgia, I was like, it doesn’t make sense for me to get two jobs now. So I let it go.

Rob:
Well, it’s also probably really hard to achieve real estate professional status with two full-time jobs and being the real estate thing. I know that there’s always conflicting stuff on that. So this always reminds me of that. There’s a meme out there that’s like, “It’s the U.S. government.” They’re like, “All right, you have to pay us taxes.” And then you’re like, “How much?” And they’re like, “We don’t know.”
And it’s like, “Okay, what happens if I pay you too little?” And they’re like, “Oh, you owe us a lot of money, if you do, we’ll, fine you.” And it’s like, “What if I pay too much?” And it’s like, “We won’t tell you. You have to figure that out for yourself.” And that really is exactly what the tax system is. It’s like you don’t know until your CPA is like, “Here you go. You owe 30, $40,000.”
So you quit your job. And did you figure out tax strategies or anything that was saving you money in the long run? Were you doing any kind of cost segregation or any depreciation to knock down your tax bill?

Yamundow:
Yeah, so my CPA that I hire does all of that for me. And then we have meetings every quarter. So he tells me and project how much I’m going to be having. I remember one time it was like, “You have about 40, $60,000 that you need to spend before November.” And I was like, “Oh, okay.” So I just dumped it on a property. I bought a property for 40,000 more house. I fixed it up. It pays for 200,000.

David:
It sounds like Rob’s tax strategy. He’s just like that. I owe how much? I’m going to go buy something right now.

Rob:
Yeah, exactly. I’m like, all right, let’s write it off baby. It’s a write-off. You guys ever seen that Schitt’s Creek? Where he’s like buying everything and they’re like, “You can’t just keep buying it and saying it’s a write-off.” I’m like, “It’s a write-off.”

Yamundow:
It’s a write-off. Who pays for it? The government.

Rob:
The government.

Yamundow:
They write-off people.

Rob:
The write-off people. I don’t know.

David:
So let me get a recap of your overall portfolio Yamu, you have Cleveland properties and those are mostly Section 8, correct?

Rob:
Mm-hmm.

David:
Okay. You have Savannah, Georgia properties. How are those being operated?

Yamundow:
So those are mid-term rentals.

David:
And then where else other than Savannah and Cleveland?

Yamundow:
So I have Illinois, I have Springfield, I have Champaign, Urbana-Champaign, all that sub-areas in Illinois. So I have eight units here and there, five units. So since I got the eight unit, it makes sense. Since I was getting so many inquiries for travel nurses and I’m not able to get them a place because it’s all booked out. I was like, “I need another one.” So I got another apartment complex. I got another one that, I got another one, I kept going.

David:
That’s so cool. So I have a mix of mid-term Rentals and Section 8.

Rob:
Okay. And how many units total are we at now?

Yamundow:
So I have 33 doors, including the one that I just bought here, so that’s 34.

Rob:
Wow. So you have about 34 doors now I think is what you said. When you were a kid sleeping on the floor, all you wanted was a bed of your own in a house.

Yamundow:
Yes.

Rob:
How does it feel to achieve what you’ve achieved?

Yamundow:
It’s unreal. Sometimes like this is me? And this is why I give a lot, especially when it comes to my team, so I know where I started, right? It’s just so real for me. But I always knew that I wanted just one house. I wanted a nice bed. I wanted to experience what other kids experience that I didn’t, but I never knew beyond my imagination, this is all God’s work.
God put me in this place to actually buy houses, fix them up and give it to families. That’s why I said earlier mentioned with Section 8 is more of me housing kids like me or someone who could not buy their own home. And then the short term rentals just came into play, but it’s so fulfilling for me.

Rob:
That’s really cool. As eight-year-old are you proud of Yamu?

Yamundow:
Yes. I’m very proud of myself. I’m so grateful to God.

Rob:
Well, you mentioned the tips with keeping your contractor happy. I’d love to end with that. If you have anything you can share with the audience about strengthening that relationship with your contractor and keeping them happy, I’d love to hear it.

Yamundow:
Just to say this, my husband says, “When my contractor calls, my phone rings, I’m so eager to take the call than anyone else, including him.” I was like, “Well, he made me millions, you didn’t.” When they’re working, I buy lunch. When they send me pictures and I’m so happy with the work and I’m like, “Dinner’s on me. So they’re staying there.” And also I stock their fridges, buy groceries and send it because they stay there when they’re fixing the properties with his guys. So those are nice things. And I upgrade his phone. He’s an older guy, doesn’t like technology and just little things like that.

Rob:
That’s really cool. Yeah, you got to take care of your contractors. I mean, finding a contractor that you click with is hard already, but finding a contractor that you can click with for five years is even harder. And I think, yeah, got to keep them happy so that you can keep a lifelong of home building and home renovation going.

David:
Well, Yamu, I think that we’re all flawed after listening to what you’ve done. I mean, you talk about it so nonchalant that you’re doing this well. I mean the collective jaws of the BiggerPocket sphere have dropped as they were listening to this. We will definitely need to have you back to dive deeper into some of this because there’s so many elements from the power of your story to the way that you’ve scaled to the passive income you’re making, to the systems that you’ve set up, to how BiggerPockets helped you learn all this.
I think so many of us listened to this and we only see the reasons that it can’t work. And you came in and said, wait, you’re going to give me all this information for free, and you went and put it to play. And what do you know? You’re one of the most successful investors that we have ever interviewed. And how many years has it been?

Rob:
It’s going to be three years April 17.

David:
Yeah, there’s people that take three years and can’t finish one of the books. I don’t even know how to put into words what this has been like. It’s just fantastic and I really appreciate you sharing your story. Are there any last tips that you’d like to leave with our audience who are struggling to get started?

Yamundow:
It’s just to start, and like BiggerPockets said, analysis by analysis. If you stay there, you don’t actually jump and do execution, it’s not going to work out. You can listen to all the podcasts, you can read all the books, you can go to all the networking events, you can do all of that, but if you aren’t actually execute, it’s not going to happen. And I know it’s scary, but you have to do it. Yeah.

David:
Well, when you grow up without a bed, I don’t think you’re as scared of failure as somebody who has never faced that level of adversity. And the littlest amount of rejection seems overwhelming. So I mean, who would’ve thought that those bed bugs would someday be a blessing? But maybe that could be the title of your book, how Bed Bugs Become Blessings when you write it because you definitely need to. Rob any last minute thoughts from you?

Rob:
No, just wanted to thank, Yamu. I appreciate the vulnerability and the openness that you had with us. I know it’s like probably hard to talk about sometimes, especially coming out to BiggerPockets, but I think there will be hundreds of thousands of people that listen to this podcast and their life will change because of your story. So I just want to thank you.

Yamundow:
Thank you so much.

David:
And thank you again to Yamu for sharing her story and her success with us. One other happy note to add here, Yamu welcomed a new baby girl to her family shortly after this interview. She and her family are growing and are all doing well.

Rob:
Well, I can tell you firsthand that this angry elf is now a warm and cheery elf. And thanks to all of you for listening and for making the BiggerPockets community what it is. We’re excited to bring you more new shows coming up and throughout 2024. And for everyone listening, have a wonderful rest of the year.

David:
This is David Greene. For Rob the no longer angry elf Abasolo signing off.